<PAGE>
As filed with the Securities and Exchange Commission on April 14, 1998.
File No. 333-19607
811-7426
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. 1 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 19 [X]
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT ONE
(Exact Name of Registrant)
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Name of Depositor)
P. O. BOX 2999
HARTFORD, CT 06104-2999
(Address of Depositor's Principal Offices)
(860) 843-6731
(Depositor's Telephone Number, Including Area Code)
LESLIE T. SOLER, ESQ.
HARTFORD LIFE
P. O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
-----
X on May 1, 1998 pursuant to paragraph (b) of Rule 485
-----
60 days after filing pursuant to paragraph (a)(1) of Rule 485
-----
on May 1, 1998 pursuant to paragraph (a)(1) of Rule 485
-----
this post-effective amendment designates a new effective date for
----- a previously filed post-effective amendment.
PURSUANT TO RULE 24F-2(a)(1) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 Item No. Prospectus Heading
------------------------------------------------
1. Cover Page Hartford Life and Annuity Insurance
Company, Separate Account One
2. Definitions Definitions
3. Condensed Financial Information None
4. Synopsis or Highlights Summary
5. General Description of Hartford, the Separate Account
Registrant and the Funds
6. Deductions Contract Fees and Charges
7 General Description of Annuity Description of the Contracts,
Contracts Contract Fees and Charges
and Additional Contract Information
8. Annuity Period Selecting an Annuity Payment
Option
9. Death Benefit Description of the Contracts
10. Purchases and Contract Value Description of the Contracts
11. Redemptions Surrenders
12. Taxes Federal Tax Considerations
13. Legal Proceedings Legal Proceedings
14. Table of Contents of the Statement Table of Contents to Statement
Additional Information of Additional Information
15. Cover Page Part B; Statement of Additional
16. Table of Contents Table of Contents
<PAGE>
17. General Information and History Description of Hartford Life
Insurance Company
18. Services None
19. Purchase of Securities Distribution of the Contracts
being Offered
20. Underwriters Distribution of the Contracts
21. Calculation of Performance Data Calculation of Yield and Return
22. Annuity Payments Payments Under the Contract,
Selecting an Annuity Payment
Option
23. Financial Statements Experts
24. Financial Statements and Exhibits Financial Statements and Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Common Control with the
Depositor 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>
PART A
<PAGE>
INDIVIDUAL SINGLE PREMIUM PAYMENT
DIRECTOR IMMEDIATE VARIABLE ANNUITY CONTRACT
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
200 HOPMEADOW STREET
SIMSBURY, CONNECTICUT 06070
TELEPHONE: 1-800-862-6668 (CONTRACT
OWNERS)
[LOGO] 1-800-862-7155 (INVESTMENT REPRESENTATIVES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This prospectus ("Prospectus") describes the individual variable immediate
annuity contract (the "Contract") offered by Hartford Life and Annuity Insurance
Company ("Hartford"). The Contract may be sold to or issued in connection with
retirement plans, including plans that qualify for special federal income tax
treatment under the Internal Revenue Code.
Contract Owner(s) may allocate the Premium Payment and transfer Contract Value
to one or more Sub-Accounts of Hartford Life and Annuity Insurance Company
Separate Account One (the "Separate Account"). The assets of each Sub-Account
are invested solely in a corresponding mutual fund (the "Funds"). The Funds are:
<TABLE>
<S> <C> <C>
Advisers Fund Sub-Account -- shares of Class IA of Hartford Advisers HLS Fund, Inc.
("Hartford Advisers Fund")
Bond Fund Sub-Account -- shares of Class IA of Hartford Bond HLS Fund, Inc.
("Hartford Bond Fund")
Capital Appreciation Fund Sub-Account -- shares of Class IA of Hartford Capital Appreciation HLS
Fund, Inc. ("Hartford Capital Appreciation Fund")
Dividend and Growth Fund Sub-Account -- shares of Class IA of Hartford Dividend and Growth HLS
Fund, Inc. ("Hartford Dividend and Growth Fund")
Index Fund Sub-Account -- shares of Class IA of Hartford Index HLS Fund, Inc.
("Hartford Index Fund")
International Advisers Fund Sub-Account -- shares of Class IA of Hartford International Advisers HLS
Fund, Inc. ("Hartford International Advisers Fund")
International Opportunities Fund Sub-Account -- shares of Class IA of Hartford International Opportunities
HLS Fund, Inc. ("Hartford International Opportunities
Fund")
MidCap Fund Sub-Account -- shares of Class IA of Hartford MidCap HLS Fund, Inc.
("Hartford MidCap Fund")
Money Market Fund Sub-Account -- shares of Class IA of Hartford Money Market HLS Fund, Inc.
("Hartford Money Market Fund")
Mortgage Securities Fund Sub-Account -- shares of Class IA of Hartford Mortgage Securities HLS
Fund, Inc. ("Hartford Mortgage Securities Fund")
Small Company Fund Sub-Account -- shares of Class IA of Hartford Small Company HLS Fund,
Inc. ("Hartford Small Company Fund")
Stock Fund Sub-Account -- shares of Class IA of Hartford Stock HLS Fund, Inc.
("Hartford Stock Fund")
</TABLE>
Under the Contract, Hartford makes periodic Annuity Payments to the Contract
Owner(s) (or other designated Payee). The dollar amount of each Annuity Payment
varies according to the investment performance of the Funds in which the
selected Sub-Accounts are invested. The Contract Owner(s) bear the investment
risk of amounts invested in the Separate Account.
This Prospectus sets forth the basic information regarding the Contract and the
Separate Account that a prospective investor should know before purchasing a
Contract. The prospectus for the Funds, which provides information regarding
investment objectives and policies of each Fund, should be read in conjunction
with this Prospectus. A Statement of Additional Information providing additional
information about the Contract and the Separate Account has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
table of contents for the Statement of Additional Information is on page 30 of
this Prospectus. Call 1-800-862-6668, or write the Administrative Office of
Hartford to obtain a free copy of the Statement of Additional Information.
- --------------------------------------------------------------------------------
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS
PROSPECTUS MUST BE ACCOMPANIED BY THE CURRENT PROSPECTUS FOR EACH OF THE FUNDS.
- --------------------------------------------------------------------------------
AN INVESTMENT IN A CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, NOR IS THE CONTRACT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A
CONTRACT INVOLVES CERTAIN RISKS, INCLUDING THE RISK OF LOSS OF THE PREMIUM
PAYMENT (PRINCIPAL).
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
PROSPECTUS DATED: MAY 1, 1998
STATEMENT OF ADDITIONAL INFORMATION DATED: MAY 1, 1998
<PAGE>
2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS........................................................... 3
FEE AND EXPENSE TABLES................................................ 5
ACCUMULATION UNIT VALUES.............................................. 7
SUMMARY............................................................... 8
HARTFORD, THE SEPARATE ACCOUNT AND THE FUNDS.......................... 9
Hartford Life and Annuity Insurance Company......................... 9
Separate Account.................................................... 9
The Funds........................................................... 9
PERFORMANCE RELATED INFORMATION....................................... 11
DESCRIPTION OF THE CONTRACTS.......................................... 11
Purchasing a Contract............................................... 11
Right to Examine the Contract....................................... 11
Crediting and Allocating the Premium Payment........................ 12
Contract Value Before Income Start Date............................. 12
The Net Investment Factor........................................... 12
Sub-Account Value Transfers Before and After Income Start Date...... 13
Surrenders.......................................................... 13
Death Before Income Start Date...................................... 13
Death On or After the Income Start Date............................. 14
Determination of the Death Benefit.................................. 14
Distribution Requirements: Prior to the Income Start Date........... 14
Payments Under the Contract......................................... 15
SELECTING AN ANNUITY PAYMENT OPTION................................... 15
Annuity Payment Options............................................. 15
Annuity Calculation Date and Income Start Date...................... 16
Income Payment Dates................................................ 16
Variable Annuity Payments........................................... 16
CONTRACT FEES AND CHARGES............................................. 17
Contingent Deferred Sales Charge.................................... 17
Premium Tax Charge.................................................. 18
Mortality and Expense Risk Charge................................... 18
Fund Expenses....................................................... 18
ADDITIONAL CONTRACT INFORMATION....................................... 18
Contract Ownership.................................................. 18
Changing the Contract Owner or Beneficiary.......................... 18
Misstatement of Age or Sex.......................................... 19
Change of Contract Terms............................................ 19
Reports to Contract Owners.......................................... 19
Miscellaneous....................................................... 19
Voting Privileges................................................... 19
FEDERAL TAX CONSIDERATIONS............................................ 20
General............................................................. 20
Taxation of Hartford and the Separate Account....................... 20
Taxation of Purchasers of Non-Qualified Contracts................... 20
Taxation of Purchasers of Qualified Contracts....................... 23
Federal Income Tax Withholding...................................... 24
Contract Owners That Are Nonresident Aliens or Foreign
Corporations....................................................... 24
Other Tax Consequences.............................................. 24
OTHER INFORMATION..................................................... 24
Distribution of the Contracts....................................... 24
Legal Proceedings................................................... 25
Experts............................................................. 25
ILLUSTRATIONS OF ANNUITY PAYMENTS ASSUMING HYPOTHETICAL RATES OF
RETURN.............................................................. 26
ILLUSTRATIONS OF ANNUITY PAYMENTS USING HISTORIC RATES OF RETURN...... 29
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION............. 43
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
- --------------------------------------------------------------------------------
DEFINITIONS
ACCUMULATION UNIT: An accounting unit of measure used to calculate Sub- Account
Value prior to the Annuity Calculation Date.
ADMINISTRATIVE OFFICE OF HARTFORD: Currently located at 200 Hopmeadow Street,
Simsbury, CT. All correspondence concerning this Contract should be sent to P.O.
Box 5085, Hartford, CT 06102-5085, Attn.: Individual Annuity Services, except
for overnight or express mail packages, which should be sent to: 200 Hopmeadow
Street, Simsbury, CT 06089.
ANNIVERSARY VALUE: The Commuted Value calculated as of a Contract Anniversary.
ANNUITANT: The person (or persons) whose life (or lives) determines the Annuity
Payments payable under the Contract and whose death determines the Death Benefit
after the Income Start Date. With regard to joint and last survivor Annuity
Payment Options, the maximum number of joint Annuitants is two and provisions
referring to the death of an Annuitant mean the death of the last surviving
Annuitant. Provisions relating to an action by the Annuitant mean, in case of
joint Annuitants, both Annuitants acting jointly. Unless otherwise specified,
the Contract Owner is the Annuitant.
ANNUITY CALCULATION DATE: The date as of which the first Annuity Payment will be
calculated. It will be no more than five days prior to the Income Start Date.
Values calculated prior to the Income Start Date but after the Annuity
Calculation Date will equal values as of the Annuity Calculation Date.
ANNUITY PAYMENT: One of several periodic payments made by Hartford to the Payee
under an Annuity Payment Option.
ANNUITY PAYMENT OPTION: The form of Annuity Payments selected by the Contract
Owner. The Annuity Payment Option is shown on the Contract specifications page
as the "Annuity Benefit."
ANNUITY UNIT: An accounting unit of measure used to calculate the amount of
Variable Annuity Payments.
ANNUITY UNIT FACTOR: The factor applied in computing Annuity Unit values to
neutralize the effect of the Assumed Investment Return.
ASSUMED INVESTMENT RETURN (AIR): The annual rate of return shown on the
specification page of the Contract. This rate is used to determine the degree of
fluctuation in the amount of Variable Annuity Payments in response to
fluctuations in the net investment return of selected Sub-Accounts by assuming
(among other things) that the assets in the Sub-Accounts supporting the Contract
will have a net annual return over the anticipated Annuity Payment period equal
to that rate of return. If the actual performance of the selected Sub-Accounts
is equal to the AIR, the Annuity Payment will be constant. If the actual
performance is greater than the AIR, the Annuity Payment will increase. If the
actual performance is less than the AIR, the Variable Annuity Payment amount
will be lower.
BENEFICIARY: The person(s) entitled to receive the Contract Value upon the death
of the Contract Owner or Annuitant prior to the Income Start Date or, the Death
Benefit upon the death of the Annuitant after the Income Start Date available
under some Annuity Payment Options.
CANCELLATION PERIOD: The "Right to Examine" period described on the cover page
of the Contract during which the Contract Owner may return the Contract.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: U.S. Securities and Exchange Commission.
COMMUTED VALUE: The present value of the remaining guaranteed Annuity Payments
under an Annuity Payment Option having Annuity Payments guaranteed for a
specified number of years, computed using the Assumed Investment Return for the
Contract and the Annuity Unit value(s) calculated as of the date that Hartford
receives a fully completed request for surrender, or Due Proof of Death of the
Annuitant.
CONTRACT ANNIVERSARY: The same date in each Contract Year as the Contract Issue
Date.
CONTRACT ISSUE DATE: The date on which Hartford issues the Contract and on which
the Contract becomes effective. The Contract Issue Date is shown on the
specifications page of the Contract and is used to determine Contract Years and
Contract Anniversaries.
CONTRACT OWNER(S): The person (or persons) who owns (or own) the Contract and
who is (are) entitled to exercise all rights and privileges provided in the
Contract. The maximum number of joint Contract Owners is two. Provisions
relating to action by the Contract Owner mean, in the case of joint Contract
Owners, both Contract Owners acting jointly.
CONTRACT VALUE: The sum of the Sub-Account Values under the Contract prior to
the Annuity Calculation Date.
CONTRACT YEAR: A 12-month period beginning on the Contract Issue Date or on a
Contract Anniversary.
DEATH BENEFIT: The amount payable by Hartford based upon the death of the
Contract Owner or Annuitant prior to the Income Start Date, or upon the death of
Annuitant on or after the Income Start Date. The Death Benefit is calculated as
of the date that Due Proof of Death is received at Hartford.
DUE PROOF OF DEATH: A certified copy of a death certificate, an order of a court
of competent jurisdiction, a statement
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
from a physician who attended the deceased or any other proof acceptable to
Hartford.
FUND: Any open-end management investment company (or investment portfolio
thereof) or unit investment trust (or series thereof) in which a Sub-Account
invests.
HARTFORD: Hartford Life and Annuity Insurance Company.
INCOME PAYMENT DATE: The date each month, quarter, semi-annual period, or year
as of which Hartford computes the Annuity Payments.
INCOME START DATE: The date as of which the Annuity Payments are to begin. It is
the first Income Payment Date and is shown on the specifications page of the
Contract.
IRA: An "individual retirement annuity" as described in Section 408 of the Code.
JOINT ANNUITANT: A person, other than the primary Annuitant, whose life
determines the Annuity Payments payable. The Contract will have a Joint
Annuitant only if a joint life Annuity Payment Option is elected.
MAXIMUM ANNIVERSARY VALUE: The greatest Anniversary Value under the Contract
while the Annuitant is alive prior to his or her 81st birthday reduced by the
dollar amount of Annuity Payments made since that anniversary.
NET ASSET VALUE: The value per share of any Fund on any Valuation Day. The
method of computing the Net Asset Value is described in the prospectus for each
Fund.
NET INVESTMENT FACTOR: The Net Investment Factor for each of the Sub-Accounts
equals the Net Asset Value 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 of the corresponding Fund at the beginning of the
Valuation Period.
NON-QUALIFIED CONTRACT: A Contract that is not a Qualified Contract.
PAYEE: The person or party designated by the Contract Owner to receive Annuity
Payments. Unless otherwise specified the Annuitant is the Payee.
PAYMENT FACTOR: The factor used on the Annuity Calculation Date to calculate the
first Annuity Payment.
PREMIUM PAYMENT: The payment made to Hartford pursuant to the terms of the
Contract.
PREMIUM TAX: The amount of tax charged by a state or municipality on the Premium
Payment or Contract Value.
QUALIFIED CONTRACT: A Contract that is issued in connection with a retirement
plan that qualifies for special federal income tax treatment under Section 408
or Section 457 of the Code.
SEPARATE ACCOUNT: Hartford Life and Annuity Insurance Company Separate Account
One.
SUB-ACCOUNT: A subdivision of the Separate Account, the assets of which are
invested in a corresponding Fund.
SUB-ACCOUNT VALUE: On or before the Annuity Calculation Date, the amount is
determined on any day by multiplying the number of Accumulation Units
attributable to the Contract in that Sub-Account by the Accumulation Unit value
for that Sub-Account.
SURRENDER VALUE: The Contract Value less any applicable Premium Tax prior to the
Annuity Calculation Date, or the Commuted Value less applicable contingent
deferred sales charges on or after the Annuity Calculation Date.
VALUATION DAY: Every day that the New York Stock Exchange is open for trading.
VALUATION PERIOD: The period that starts at the close of regular trading on the
New York Stock Exchange on any Valuation Day and ends at the close of regular
trading on the next succeeding Valuation Day.
VARIABLE ANNUITY PAYMENT: An Annuity Payment that may vary in amount from one
Income Payment Date to the next as a function of the investment performance of
one or more Sub-Accounts selected by the Contract Owner to support Annuity
Payments.
WRITTEN NOTICE: A notice or request submitted in writing in a form satisfactory
to Hartford that is manually signed by the Contract Owner(s) and received at the
Administrative Office of Hartford.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
- --------------------------------------------------------------------------------
FEE AND EXPENSE TABLES
Contract Owner Transaction Expenses
<TABLE>
<S> <C>
Sales Charge Imposed on Premium Payment........................... None
Contingent Deferred Sales Charge (as a percentage of Commuted
Value)*
First Year.................................................... 6%
Second Year................................................... 6%
Third Year.................................................... 5%
Fourth Year................................................... 5%
Fifth Year.................................................... 4%
Sixth Year.................................................... 3%
Seventh Year.................................................. 2%
Eighth Year................................................... 0%
Exchange Fee...................................................... None
</TABLE>
- ---------
* Only applies to PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS Annuity
Payment Option, after the Income Start Date.
Annual Separate Account Expenses
(as a percentage of average annual net assets)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge................................. 1.25%
Other Charges..................................................... None
Total Separate Account Expenses................................... 1.25%
</TABLE>
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 Advisers Fund.......................... 0.610% 0.020% 0.630%
Hartford Bond Fund.............................. 0.490% 0.020% 0.510%
Hartford Capital Appreciation Fund.............. 0.620% 0.020% 0.640%
Hartford Dividend and Growth Fund............... 0.660% 0.020% 0.680%
Hartford Index Fund............................. 0.375% 0.015% 0.390%
Hartford International Advisers Fund............ 0.750% 0.120% 0.870%
Hartford International Opportunities Fund....... 0.680% 0.090% 0.770%
Hartford Money Market Fund...................... 0.425% 0.015% 0.440%
Hartford MidCap Fund (1)........................ 0.750% 0.040% 0.790%
Hartford Mortgage Securities Fund............... 0.425% 0.025% 0.450%
Hartford Small Company Fund..................... 0.750% 0.020% 0.770%
Hartford Stock Fund............................. 0.430% 0.020% 0.450%
</TABLE>
- ---------
(1) Hartford MidCap Fund is a new Fund: Operating expenses are based on
annualized estimates of such expenses to be incurred in the current fiscal
year.
The above tables are intended to assist the Contract Owner in understanding
the costs and expenses that he or she will bear directly or indirectly. The
table reflects the current management fees, other expenses and total expenses
for each Fund. Premium Taxes, ranging from 0% to 4%, may also be applicable. For
a more complete description of the various costs and expenses, see "Charges and
Deductions," page - and the prospectus for the Funds which accompanies this
Prospectus.
<PAGE>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
EXAMPLES
A Contract Owner will pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets and an Annuitant age 65 with a 5% Assumed
Investment Return:
1. If the LIFE Annuity Payment Option is selected and you do not surrender
your Contract:
<TABLE>
<CAPTION>
SUB-ACCOUNT 1 YEAR 3 YEARS
- --------------------------------------------- ------- -------
<S> <C> <C>
Advisers Fund................................ $19 $60
Bond Fund.................................... 18 56
Capital Appreciation Fund.................... 19 60
Dividend and Growth Fund..................... 20 61
Index Fund................................... 17 52
International Advisers Fund.................. 22 67
International Opportunities Fund............. 21 64
MidCap Fund.................................. 21 65
Money Market Fund............................ 17 54
Mortgage Securities Fund..................... 17 54
Small Company Fund........................... 21 64
Stock Fund................................... 17 54
</TABLE>
2. If the PAYMENTS GUARANTEED FOR 20 YEARS Annuity Payment Option is
selected and you do not surrender your Contract:
<TABLE>
<CAPTION>
SUB-ACCOUNT 1 YEAR 3 YEARS
- --------------------------------------------- ------- -------
<S> <C> <C>
Advisers Fund................................ $19 $60
Bond Fund.................................... 18 56
Capital Appreciation Fund.................... 19 61
Dividend and Growth Fund..................... 20 52
Index Fund................................... 17 67
International Advisers Fund.................. 22 64
International Opportunities Fund............. 21 65
MidCap Fund.................................. 21 54
Money Market Fund............................ 17 54
Mortgage Securities Fund..................... 17 54
Small Company Fund........................... 21 64
Stock Fund................................... 17 54
</TABLE>
3. If the GUARANTEED PAYMENTS FOR 20 YEARS Annuity Payment Option is
selected and you surrender your Contract:
<TABLE>
<CAPTION>
SUB-ACCOUNT 1 YEAR 3 YEARS
- --------------------------------------------- ------- -------
<S> <C> <C>
Advisers Fund................................ $79 $110
Bond Fund.................................... 78 106
Capital Appreciation Fund.................... 79 110
Dividend and Growth Fund..................... 80 111
Index Fund................................... 77 102
International Advisers Fund.................. 82 117
International Opportunities Fund............. 81 114
MidCap Fund.................................. 81 115
Money Market Fund............................ 77 104
Mortgage Securities Fund..................... 77 104
Small Company Fund........................... 81 114
Stock Fund................................... 77 104
</TABLE>
These examples should not be considered representations of past or future
performance or expenses. The actual expenses paid or performance achieved may be
greater or less than those shown.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
- --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
The following information has been derived from the audited financial
statements of the Separate Account, which have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and should be read in conjunction with those statements which are
included in the Statement of Additional Information, which is incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
YEAR
ENDED
DECEMBER
31, 1997
-------
<S> <C>
BOND FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $1.000
Accumulation unit value at end of period.................. $2.114
Number accumulation units outstanding at end of period (in
thousands)............................................... 107,759
STOCK FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $1.000
Accumulation unit value at end of period.................. $4.602
Number accumulation units outstanding at end of period (in
thousands)............................................... 440,557
MONEY MARKET FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $1.000
Accumulation unit value at end of period.................. $1.650
Number accumulation units outstanding at end of period (in
thousands)............................................... 120,947
ADVISERS FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $1.000
Accumulation unit value at end of period.................. $3.572
Number accumulation units outstanding at end of period (in
thousands)............................................... 999,829
CAPITAL APPRECIATION FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $1.000
Accumulation unit value at end of period.................. $4.845
Number accumulation units outstanding at end of period (in
thousands)............................................... 461,578
MORTGAGE SECURITIES FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $1.000
Accumulation unit value at end of period.................. $2.098
Number accumulation units outstanding at end of period (in
thousands)............................................... 38,292
INDEX FUND SUB-ACCOUNT
(INCEPTION DATE MAY 1, 1987)
Accumulation unit value at beginning of period............ $1.000
Accumulation unit value at end of period.................. $3.726
Number accumulation units outstanding at end of (in
thousands)............................................... 117,372
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT
(INCEPTION DATE JULY 2, 1990)
Accumulation unit value at end of period.................. $1.000
Accumulation unit value at end of period.................. $1.469
Number accumulation units outstanding at end of period (in
thousands)............................................... 396,430
DIVIDEND & GROWTH FUND SUB-ACCOUNT
(INCEPTION DATE MARCH 8, 1994)
Accumulation unit value at beginning of period............ $1.000
Accumulation unit value at end of period.................. $2.149
Number accumulation units outstanding at end of period (in
thousands)............................................... 541,076
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT
(INCEPTION DATE MARCH 1, 1995)
Accumulation unit value at beginning of period............ $1.000
Accumulation unit value at end of period.................. $1.319
Number accumulation units outstanding at end of period (in
thousands)............................................... 109,735
SMALL COMPANY FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 9, 1996)
Accumulation unit value at beginning of period............ $1.000
Accumulation unit value at end of period.................. $1.247
Number accumulation units outstanding at end of period (in
thousands)............................................... 108,104
MIDCAP FUND SUB-ACCOUNT
(INCEPTION DATE JULY 30, 1997)
Accumulation unit value at beginning of period............ $1.000
Accumulation unit value at end of period.................. $1.097
Number of accumulation units outstanding at end of period
(in thousands)........................................... 13,437
</TABLE>
<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
SUMMARY
GENERAL DESCRIPTION
This Prospectus is designed to provide prospective Contract Owners with
information necessary to decide whether or not to purchase a Contract. This
summary provides a concise description of the more significant aspects of the
Contract. Further detail is provided in this Prospectus, the related Statement
of Additional Information, the Contract, and the prospectus for the Funds. For
further information, contact the Administrative Office of Hartford or your
registered representative.
PURCHASING A CONTRACT
A prospective Contract Owner may purchase a Contract by completing and
submitting an application or an order request along with a single Premium
Payment to the Administrative Office of Hartford. The minimum Premium Payment
for a Contract is $25,000 and the maximum Premium Payment generally is
$1,000,000 (See "Purchasing a Contract," page 11), unless approved by Hartford.
Subject to certain minimum allocation requirements that may be in effect
from time to time, the Premium Payment is allocated to each Sub-Account as
specified on the application or order request. All percentage allocations must
be in whole numbers. (See "Crediting and Allocating Premium Payment," page 12.)
RIGHT TO EXAMINE THE CONTRACT
Contract Owners may cancel the Contract during the Cancellation Period and
receive a refund equal to the Contract Value. The Cancellation Period is a
ten-day period of time beginning when the Contract is received by a Contract
Owner. Some states require a longer Cancellation Period and return of the
Premium Payment. (See "Right to Examine the Contract," page 11.)
TRANSFERS
Prior to the Annuity Calculation Date, a Contract Owner may transfer all or
part of any Sub-Account Value to another available Sub-Account(s), subject to
certain restrictions. (See "Sub-Account Value Transfers," page 13.) Similar
transfers may be made after the Income Start Date, subject to certain
restrictions. (See "Variable Annuity Payments," page 16.)
ANNUITY PAYMENT OPTIONS
The following Annuity Payment Options are available under the Contract: LIFE
ANNUITY; LIFE ANNUITY WITH CASH REFUND; LIFE ANNUITY WITH PAYMENTS GUARANTEED
FOR A SPECIFIED NUMBER OF YEARS; JOINT AND LAST SURVIVOR; JOINT AND LAST
SURVIVOR LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS;
and PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS.
DEATH BENEFITS
The Contract provides for a Death Benefit, under certain Annuity Payment
Options, in the event the Annuitant or Contract Owner(s) die(s) prior to the
Income Start Date and if the Annuitant dies after the Income Start Date. (See
"Payment Upon the Death of Any Contract Owner or the Annuitant," page - .)
Certain Annuity Payment Options do not provide a Death Benefit.
SURRENDERS
Upon Written Notice prior to the Annuity Calculation Date, a Contract Owner
may surrender the Contract and receive the Contract Value. On or after the
Income Start Date under a PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS
Annuity Payment Option, a Contract Owner also may surrender the Contract for the
Surrender Value. (See "Surrenders," page 13.) Surrenders may have adverse
federal income tax consequences including the possibility of being subject to a
penalty tax. (See "Federal Tax Considerations," page 20.)
CHARGES AND FEES
The following charges and fees are assessed under the Contracts:
CONTINGENT DEFERRED SALES CHARGE. Hartford deducts a contingent deferred
sales charge if the Contract is surrendered after the Income Start Date under
PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS ANNUITY PAYMENT OPTION. The
contingent deferred sales charge is 6% of the Commuted Value (less any
applicable Premium Tax charge) if surrendered during the first two Contract
Years; 5% of the Commuted Value (less any applicable Premium Tax charge) if
surrendered during the third or fourth contract years; and decreases 1% each
Contract Year up to and including the seventh Contract Year. The contingent
deferred sales charge is 0% if the Contract is surrendered after the seventh
Contract Year. No contingent deferred sales charge is assessed upon the death of
the Annuitant after the Income Start Date.
MORTALITY AND EXPENSE RISK CHARGE. Hartford makes a daily charge of
0.003446% (approximately equivalent to an effective annual rate of 1.25%) of the
Separate Account's net assets to compensate it for assuming certain mortality
and expense risks. (See "Mortality and Expense Risk Charge," page 18.)
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
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PREMIUM TAX CHARGE. Generally, taxes, if any, on the Premium Payment are
incurred as of the Annuity Calculation Date, and a Premium Tax Charge is
deducted from the Contract Value as of that date. These taxes currently range
from 0% to 4.0% of the Premium Payment. (See "Premium Tax Charge," page 18.)
EXPENSES OF THE FUNDS. The investment experience of each Sub-Account
reflects that of the Fund whose shares it holds. The investment experience of
each Fund, in turn, reflects its fees and other operating expenses. Please read
the prospectus for each of the Funds for details.
HARTFORD, THE SEPARATE
ACCOUNT AND THE FUNDS
HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
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, except
New York, and the District of Columbia. Effective January 1, 1998, Hartford's
name changed from ITT Hartford Life and Annuity Insurance Company 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 controlled by
The Hartford Financial Services Group, Inc., a Delaware corporation.
HARTFORD RATINGS
<TABLE>
<CAPTION>
EFFECTIVE
DATE OF
RATING AGENCY RATING RATING BASIS OF RATING
- --------------------- ----------- ----------- ----------------------
<S> <C> <C> <C>
A.M. Best and 9/9/97 A+ Financial soundness
Company, Inc......... and operating
performance.
Standard & Poor's.... 1/23/98 AA Claims paying ability
Duff & Phelps........ 1/23/98 AA+ Claims paying ability
</TABLE>
SEPARATE ACCOUNT
The Separate Account is a separate investment account of Hartford
established under Connecticut law on May 20, 1991. Hartford owns the assets of
the Separate Account. These assets are held separate from Hartford's general
account and its other separate accounts. That portion of the Separate Account's
assets that is equal to the reserves and other Contract liabilities of the
Separate Account is not chargeable with liabilities arising out of any other
business Hartford may conduct.
The Separate Account is registered with the Commission under the Investment
Company Act of 1940 (the "1940 Act") as a unit investment trust and meets the
definition of a "separate account" under the federal securities laws. Such
registration does not involve any supervision by the Commission of the
management of the Separate Account or of Hartford. The Separate Account is also
governed by the laws of Connecticut, Hartford's state of domicile, and may also
be governed by laws of other states in which Hartford does business.
The investment in the Separate Account is allocated to one or more Sub-
Accounts as per the Contract Owner's specifications. Each Sub-Account is
invested exclusively in the assets of one underlying Fund. The Separate Account
has 12 Sub-Accounts, each of which invests in shares of a corresponding Fund.
Income, gains and losses, realized or unrealized, from assets allocated to a
Sub-Account are credited to or charged against that Sub-Account without regard
to other income, gains or losses of Hartford.
CHANGES TO THE SEPARATE ACCOUNT. Hartford may make the following changes to
the Separate Account:
1. Any changes required by the 1940 Act or other applicable law or regulation;
2. combine separate accounts, including the Separate Account;
3. add new Sub-Accounts to or remove existing Sub-Accounts from the Separate
Account or combine Sub-Accounts;
4. make Sub-Accounts (including new Sub-Accounts) available to such classes of
Contracts as Hartford may determine;
5. add new Funds or remove existing Funds;
6. substitute new Funds for any existing Fund if shares of the Fund are no
longer available for investment or if Hartford determines that investment in
a Fund is no longer appropriate in light of the purposes of the Separate
Account;
7. de-register the Separate Account under the 1940 Act if such registration is
no longer required; and
8. operate the Separate Account as a management investment company under the
1940 Act or as any other form permitted by law.
No such changes will be made without any necessary approval of the
Commission and applicable state insurance departments. Contract Owners will be
notified of any changes.
THE FUNDS
Each Sub-Account invests in a corresponding Fund. Each of the Funds is an
open-end diversified management
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10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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investment company managed by HL Investment Advisors, Inc. ("HL Advisors"), a
registered investment adviser. HL Advisors has retained Wellington Management
Company to act as investment sub-adviser to the Funds indicated by an asterisk.
In addition, HL Advisors has entered into an investment services agreement with
Hartford Investment Management Company ("HIMCO") for the provision of investment
services to the remaining Funds. The Funds, as well as a brief description of
their investment objectives, are provided below:
HARTFORD ADVISERS FUND
Seeks to achieve maximum long-term total rate of return by investing in
common stocks and other equity securities, bonds and other debt securities, and
money market instruments.*
HARTFORD BOND FUND
Seeks to achieve maximum current income consistent with preservation of
capital by investing primarily in fixed-income securities.
HARTFORD CAPITAL APPRECIATION FUND
Seeks to achieve growth of capital by investing in equity securities
selected solely on the basis of potential for capital appreciation.*
HARTFORD DIVIDEND AND GROWTH FUND
Seeks a high level of current income consistent with growth of capital and
reasonable investment risk. The Fund invests primarily in equity securities and
securities convertible into equity securities.*
HARTFORD INDEX FUND
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.(1)
HARTFORD INTERNATIONAL ADVISERS FUND
Seeks to provide maximum long-term total return consistent with prudent
investment risk. The Fund assets will be diversified among at least five
countries and will be allocated among equity and debt securities and money
market instruments.*
HARTFORD INTERNATIONAL OPPORTUNITIES FUND
Seeks growth of capital by investing primarily in equity securities issued
by non-U.S. companies.*
HARTFORD MIDCAP FUND
Seeks to achieve long-term capital growth through capital appreciation by
investing primarily in equity securities.*
HARTFORD MORTGAGE SECURITIES FUND
Seeks to achieve 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
Seeks to achieve growth of capital by investing primarily in equity
securities selected on the basis of potential for capital appreciation.*
HARTFORD STOCK FUND
Seeks to achieve long-term growth of capital by investing primarily in
equity securities.*
HARTFORD MONEY MARKET FUND
Seeks to achieve maximum current income consistent with liquidity and
preservation of capital.
No one can assure that any Fund will achieve its stated objectives and
policies. Since each underlying Fund has different investment objectives, each
is subject to different risks. More detailed information concerning the
investment objectives, policies and restrictions of the Funds, the expenses of
the Funds, the risks attendant to investing in the Funds and other aspects of
their operations can be found in the current prospectus for each Fund which
accompanies this Prospectus and the current statement of additional information
for the Funds. THE FUNDS' PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAN
BE ALSO OBTAINED BY CALLING 1-800-862-6668. The Funds' prospectus should be read
carefully before any decision is made concerning the allocation of the Premium
Payment or transfers of Contract Value among the Sub-Accounts.
Hartford cannot guarantee that each Fund will always be available under the
Contracts, but in the unlikely event that a Fund is not available, Hartford will
take reasonable steps to secure the availability of a comparable fund. Shares of
each Fund are purchased and redeemed at Net Asset Value, without a sales charge.
Shares of the Funds are sold to separate accounts of Hartford and its
insurance company affiliates other than the Separate Account to serve as the
underlying investment for both variable annuity contracts and variable life
insurance contracts, a practice known as "mixed funding." As a result, there is
a possibility that a material conflict may arise between the interests of
Contract Owners, and of owners of other contracts whose contract values are
allocated to one or more of these other separate accounts investing in any one
of the Funds. In the event of any such material conflicts,
(1) "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 HARTFORD INDEX FUND, INC. ("INDEX
FUND") IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S
("S&P") AND S&P MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF
INVESTING IN THE INDEX FUND.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
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Hartford will consider what action may be appropriate, including removing the
Fund from the Separate Account or replacing the Fund with another Fund. There
are certain risks associated with mixed funding,as disclosed in the Funds'
prospectus.
ALL FUNDS MAY NOT BE AVAILABLE IN ALL STATES.
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,
MidCap Fund, Mortgage Securities Fund, Small Company Fund, Stock Fund, and Money
Market 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 is 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,
divided by the unit value on the last day of the period. This figure reflects
the recurring charges at the Separate Account level.
The Money Market Fund Sub-Account may advertise yield and effective yield.
The yield of the Money Market 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.
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 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.
DESCRIPTION OF THE CONTRACTS
PURCHASING A CONTRACT
A prospective Contract Owner may purchase a Contract by completing and
submitting an application or an order request. The maximum age for Annuitants on
the Contract Issue Date is 90. A single Premium Payment must be delivered to the
Administrative Office of Hartford along with the Contract Owner's application or
an order request. The minimum Premium Payment is $25,000 unless Hartford
specifically consents to a lower Premium Payment. No additional Premium Payments
may be made under the Contracts. Unless Hartford gives its prior approval, it
will not accept a Premium Payment in excess of $1,000,000. Hartford will send
Contract Owners a confirmation notice upon receipt and acceptance of the
Contract Owner's Premium Payment.
RIGHT TO EXAMINE THE CONTRACT
Contract Owners may cancel the Contract during the Cancellation Period,
which is the 10-day period beginning
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12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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on the day the Contract Owner receives the Contract. Some states may require a
longer Cancellation Period. To cancel the Contract, the Contract Owner must mail
or deliver within 10 days, a written request for cancellation accompanied by the
Contract to the Administrative Office of Hartford.
Hartford will refund the Contract Value as of the date of receipt of the
request for cancellation. The Contract Owner bears the investment risk during
the period prior to Hartford's receipt of the request for cancellation. Hartford
will refund the Premium Payment where required by law.
CREDITING AND ALLOCATING
THE PREMIUM PAYMENT
If the application or an order request for a Contract is properly completed
and is accompanied by any additional information necessary to process it, the
Premium Payment will be allocated, as designated by the Contract Owner, to one
or more of the Sub-Accounts within two business days of receipt. If the
application, order request, or other required information is incomplete when
received, Hartford reserves the right to retain the Premium Payment for up to
five business days while it attempts to complete the information. If the
information cannot be made complete within five business days, the applicant
will be informed of the reasons for the delay and the Premium Payment will be
returned unless the applicant specifically consents to Hartford retaining the
Premium Payment until the information is made complete. The Premium Payment will
then be allocated within two business days after receipt of the complete
information.
Contract Owners may allocate the Premium Payment among any or all available
Sub-Accounts subject to minimum amounts then in effect. Currently, amounts
allocated to any one Sub-Account must equal at least 1% of the net Premium
Payment. All percentage allocations must be in whole numbers.
CONTRACT VALUE BEFORE INCOME START DATE
SUB-ACCOUNT VALUE. The Contract Value is the sum of all Sub-Account Values
and therefore reflects the investment performance of the Sub-Accounts to which
it is allocated. The Sub-Account Value for any Sub-Account as of the Contract
Issue Date is equal to the amount of the Premium Payment allocated to that
Sub-Account. The Sub-Account Value for a Contract is determined on any given day
by the multiplying the number of Accumulation Units attributable to the Contract
in that Sub-Account by the Accumulation Unit value for that Sub-Account.
Therefore, on any Valuation Day the Contract Owner's Sub-Account Value reflects
any variation of the interest income, dividends, net capital gains or losses,
realized or unrealized, and any amounts transferred into or out of that
Sub-Account.
ACCUMULATION UNITS. The portions of the Premium Payment allocated to a
Sub-Account or amounts of Contract Value transferred to a Sub-Account are
converted into Accumulation Units. For any Contract, the number of Accumulation
Units credited to a Sub-Account is determined by dividing the dollar amount
directed to the Sub-Account by the Accumulation Unit value for that Sub-Account
for the Valuation Day as of which the portion of the Premium Payment or
transferred Contract Value is invested in the Sub- Account. Transferred Contract
Value is invested in a Sub-Account as of the end of the Valuation Period during
which the transfer request was received. Therefore, a Premium Payment or portion
thereof allocated to or amounts transferred to a Sub-Account under a Contract
increase the number of Accumulation Units of that Sub-Account credited to the
Contract.
Surrenders, transfers out of a Sub-Account, the death of any Contract Owner
or the Annuitant before the Income Start Date, and the application of Contract
Value less Premium Tax to an Annuity Payment Option on the Annuity Calculation
Date all result in a decrease in the number of Accumulation Units of one or more
Sub-Accounts. Accumulation Units are valued as of the end of the Valuation
Period.
The Accumulation Unit value for each Sub-Account was arbitrarily set
initially at $1 when the Sub-Account began operations. Thereafter, the
Accumulation Unit value at the end of every Valuation Day equals the
Accumulation Unit value at the end of the preceding Valuation Day multiplied by
the Net Investment Factor (described below).
THE NET INVESTMENT FACTOR
(BEFORE AND AFTER INCOME START DATE)
The Net Investment Factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. For each
Sub-Account, the Net Investment Factor reflects the investment performance of
the Fund in which that Sub-Account invests and the charges assessed against that
Sub-Account for a Valuation Period. The Net Investment Factor is calculated by
dividing (1) by (2) and subtracting (3) from the result, where:
(1) is the result of:
a. the Net Asset Value of the Fund held in the Sub-Account, determined at
the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions made
by the Fund held in the Sub-Account.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
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(2) is the Net Asset Value of the Fund held in the Sub-Account, determined at
the beginning of the Valuation Period.
(3) is a daily factor representing the mortality and expense risk charge
deducted from the Sub-Account, adjusted for the number of days in the
Valuation Period.
SUB-ACCOUNT VALUE TRANSFERS
BEFORE AND AFTER INCOME START DATE
The Contract Owner may transfer the values of the Sub-Accounts allocations
from one or more Sub-Accounts to another free of charges. However, Hartford
reserves the right to limit the number of transfers to twelve (12) per Contract
Year, with no two (2) transfers occurring on consecutive Valuation Days.
Transfers by telephone may be made by a Contract Owner or by the
attorney-in-fact pursuant to a power of attorney by calling 1-800-862-6668 or by
the agent of record by calling 1-800-862-7155. Telephone transfers may not be
permitted by some states for their residents who purchase variable annuities.
The policy of Hartford and its agents and affiliates is that they will not
be responsible for losses resulting from acting upon telephone requests
reasonably believed to be genuine. Hartford will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine; otherwise,
Hartford may be liable for any losses due to unauthorized or fraudulent
instructions. The procedures Hartford follows for transactions initiated by
telephone include requirements that the callers provide certain information for
identification purposes. All transfer instructions by telephone are tape
recorded.
Transfers between Sub-Accounts may be made both before and after the Income
Start Date, provided that the minimum allocation to any Sub-Account may not be
less than $500. All percentage (%) allocations must be in whole numbers (e.g.,
1%).
It is the responsibility of the Contract Owner to verify the accuracy of all
confirmations of transfers and to promptly advise Hartford of any inaccuracies
within 30 days of receipt of the confirmation. Hartford will send the Contract
Owner a confirmation of the transfer within five days from the date of any
instructions.
Subject to exceptions set forth in the following paragraph, the right to
reallocate Contract Values 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
could be applied to transfers to or from some or all of the Sub-Accounts and
could include, but would not be limited to, the requirements of a minimum time
period between each transfer, not accepting transfer requests of an agent acting
under power of attorney on behalf of more than one Contract Owner, or limiting
the dollar amount that may be transferred between the Sub-Accounts by 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. Some states may
have certain limitations.
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.
SURRENDERS
ON OR BEFORE THE INCOME START DATE. Contract for its Surrender Value at any
time on or before the Income Start Date. A Contract's Surrender Value fluctuates
daily as a function of the investment performance of the Sub-Accounts in which a
Contract Owner is invested. Hartford does not guarantee any minimum Surrender
Value. The Surrender Value will be determined as of the date Hartford receives
the Written Notice for surrender at the Administrative Office of Hartford.
AFTER THE INCOME START DATE. Contract on or after the Income Start Date only
if the PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS Annuity Payment
Option is in effect. Upon such a surrender Hartford pays the Contract Owner the
Commuted Value less any applicable contingent deferred sales charges. This
surrender charge is computed as of the date Hartford receives the Written Notice
for surrender at the Administrative Office of Hartford.
Contract Owners should consult their tax adviser regarding the tax
consequences of a surrender. A surrender made before age 59 1/2 may result in
adverse tax consequences, including the imposition of a penalty tax of 10% of
the taxable portion of the Surrender Value. See "Federal Tax Considerations,"
page 20 for more details.
DEATH BEFORE INCOME START DATE
If the Contract Owner or the Annuitant dies before the Income Start Date,
Hartford will pay the Death Benefit.
The Death Benefit is an amount equal to the Contract Value. The Contract
Value may be taken in one sum or under any of the settlement options then being
offered by Hartford.
IF THE CONTRACT OWNER DIES before the Income Start Date, any surviving joint
Contract Owner becomes the Beneficiary. If there is no surviving joint Contract
Owner, the designated Beneficiary will be the Beneficiary. If the
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14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Contract Owner's spouse is the sole Beneficiary and the Annuitant is living, the
spouse may elect, in lieu of receiving the Contract Value, to be treated as the
Contract Owner. If no Beneficiary designation is in effect or if the Beneficiary
has predeceased the Contract Owner, the Contract Owner's estate will be the
Beneficiary.
IF THE ANNUITANT DIES prior to the Income Start Date and the Contract Owner
is living, the Contract Owner shall be the Beneficiary. In that case, the rights
of any designated Beneficiary shall be voided.
DEATH ON OR AFTER THE INCOME START DATE
If the Annuitant dies on or after the Income Start Date, Hartford will pay
the Death Benefit under the Annuity Payment Option in effect as of the
Annuitant's death. Under some Annuity Payment Options, there is no Death
Benefit.
The Death Benefit on or after the Income Start Date, under the PAYMENTS
GUARANTEED FOR A SPECIFIED NUMBER OF YEARS ANNUITY PAYMENT OPTION, is the
greatest of:
a) the Commuted Value;
b) 100% of the Premium Payment reduced by the aggregate dollar amount of all
Annuity Payments made since the Income Start Date; and
c) the Maximum Anniversary Value (the greatest Anniversary Value under the
Contract while the Annuitant is alive prior to his or her 81st birthday
reduced by the dollar amount of Annuity Payments made since that
anniversary).
IF THE ANNUITANT DIES on or after the Income Start Date, the Beneficiary
will have the option of having payments continue to the Beneficiary for the
remainder of the period or taking the Death Benefit in one sum.
IF A CONTRACT OWNER WHO IS NOT THE ANNUITANT, DIES on or after the Income
Start Date, any surviving joint Contract Owner becomes the sole Contract Owner.
If there is no surviving Contract Owner, the Payee becomes the new Contract
Owner. If any Contract Owner dies, the remaining Annuity Payments will be
distributed at least as rapidly as under the method of distribution being used
as of the date of such death.
DETERMINATION OF THE DEATH BENEFIT
The Death Benefit will be calculated as of the date Hartford receives
Written Notice of Due Proof of Death. Any Annuity Payments made on or after the
date of death, but before receipt of Written Notice of Due Proof of Death will
be recovered by Hartford from the Payee.
PRIOR TO THE INCOME START DATE, in the absence of complete instructions to
either pay the Death Benefit in one sum or under one of the settlement options
being offered, the Contract Value will be moved to the Hartford Money Market
Fund.
ON OR AFTER THE INCOME START DATE, in the absence of complete instructions
to either pay the Death Benefit in one sum or continue payments, the present
value of the guaranteed remaining payments will be moved to the Hartford Money
Market Fund.
Upon receipt of complete instructions, Hartford will proceed as follows: If
the instructions are to resume payments, Hartford will make any payments that
went unpaid since the date Hartford received Written Notice of Due Proof of
Death. Hartford will then reallocate the remaining balance in the Hartford Money
Market Fund according to the instructions and resume payments. If the
instructions are to pay the Death Benefit in one sum, Hartford will pay the
Death Benefit.
DISTRIBUTION REQUIREMENTS:
PRIOR TO THE INCOME START DATE
The Contract Value will be distributed based on the Contract Owner's or
Annuitant's date of death and the Beneficiary's election:
1) in a single lump sum within five years;
2) under an Annuity Payment Option provided that:
a) Annuity Payments begin within one year of the date of death, and
b) Annuity Payments are made in substantially equal installments over the
life of the Beneficiary, or
c) Annuity Payments are made in substantially equal installments over a
period not greater than the life expectancy of the Beneficiary;
3) if the sole Beneficiary is the spouse of the deceased Contract Owner, he or
she may by Written Notice within one year of the Contract Owner's death,
elect to continue the Contract as the new Contract Owner. If the spouse so
elects, all of his or her rights as Beneficiary cease and if the deceased
Contract Owner was also the sole Annuitant and appointed no contingent
Annuitant, he or she will become the Annuitant; or
4) if the Contract Owner is not an individual, then the "primary Annuitant"
shall be treated as the Contract Owner under 1) and 2) above. For this
purpose, the "primary Annuitant" means 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.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
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PAYMENTS UNDER THE CONTRACT
Hartford generally makes payments of surrenders, Death Benefits, or any
Annuity Payments within seven days of receipt of all applicable Written Notices
and/or Due Proofs of Death. However, Hartford may postpone such payments for any
of the following reasons:
1. when the New York Stock Exchange ("NYSE") is closed for trading other than
customary holiday or weekend closing, or trading on the NYSE is restricted,
as determined by the Commission; or
2. when the Commission by order permits a postponement for the protection of
Contract Owners; or
3. when the Commission determines that an emergency exists that would make the
disposal of securities held in the Separate Account or the determination of
their value not reasonably practicable.
If a recent check or draft has been submitted, Hartford has the right to
defer payment of surrenders, payments upon the death of the Contract Owner or
Annuitant before the Income Start Date, Death Benefits, or Annuity Payments
until the check or draft has been honored.
SELECTING AN ANNUITY
PAYMENT OPTION
The Annuity Payment Option specifies the type of annuity to be paid and
determines how long the annuity will be paid, the frequency of Annuity Payments,
and the amount of each Annuity Payment. The Contract Owner must select the
Annuity Payment Option when applying for the Contract. This election is
irrevocable once the Contract is issued. The Contract Owner must select the
Sub-Accounts to which Contract Value less applicable Premium Tax will be
applied. Unless otherwise directed, Sub-Account values, as they exist on the
Annuity Calculation Date, are used to calculate the first Annuity Payment.
ANNUITY PAYMENT OPTIONS
LIFE ANNUITY. Hartford makes Annuity Payments to the Payee for as long as
the Annuitant lives. UNDER THIS OPTION, A PAYEE WOULD RECEIVE ONLY ONE ANNUITY
PAYMENT IF THE ANNUITANT DIES AFTER THE FIRST ANNUITY PAYMENT, TWO ANNUITY
PAYMENTS IF THE ANNUITANT DIES AFTER THE SECOND ANNUITY PAYMENT, ETC.
LIFE ANNUITY WITH CASH REFUND. Hartford makes Annuity Payments to the Payee
as long as the Annuitant lives. If the Annuitant dies and the sum of all Annuity
Payments made are less than the Contract Value less Premium Tax used to purchase
Annuity Units on the Annuity Calculation Date, the Beneficiary is entitled to a
Death Benefit. The Death Benefit equals the Contract Value less Premium Tax used
to purchase Annuity Units on the Annuity Calculation Date minus the sum of all
Annuity Payments made. This Option is only available using the 5% A.I.R.
LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF
YEARS. Hartford makes Annuity Payments to the Payee for as long as the Annuitant
lives. At the time this Option is selected, the Contract Owner must select a
specific number of years (a minimum of five years and maximum of: a) 100 minus
the Annuitant's age or b) 40 years, whichever is less). If the Annuitant dies
before the specified number of years has passed, the Beneficiary will have the
option of either having the payments continue to the Beneficiary for the
remainder of the period or receiving the Commuted Value in one sum. Some
restrictions apply to Qualified Contracts with regards to the specified number
of years for which payments are guaranteed.
JOINT AND LAST SURVIVOR LIFE ANNUITY. Hartford makes Annuity Payments to the
Payee while both Annuitants are living. After the death of either Annuitant,
Annuity Payments continue to the Payee for as long as the other Annuitant lives.
UNDER THIS OPTION, A PAYEE WOULD RECEIVE ONLY ONE ANNUITY PAYMENT IF BOTH
ANNUITANTS DIE AFTER THE FIRST ANNUITY PAYMENT, ETC. At the time of purchase the
Contract Owner must elect to have Annuity Payments after the death of the first
Annuitant made in amounts equal to 100%, 66.67% or 50% of the amount that would
otherwise be paid.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR A
SPECIFIED NUMBER OF YEARS. Hartford makes Annuity Payments to the Payee while
both Annuitants are living. After the death of either Annuitant, Annuity
Payments continue to the Payee for as long as the other Annuitant lives. At the
time of purchase, the Contract Owner must elect to have Annuity Payments after
the death of the first Annuitant made in amounts equal to 100%, 66.67% or 50% of
the amount that would otherwise be paid. At the time this Option is selected,
the Contract Owner must select a specific number of years (a minimum of five
years and maximum of 100 minus the younger Annuitant's age). If the Annuitants
die before the specified number of years has passed, the Beneficiary will have
the option of either having the payments continue to the Beneficiary for the
remainder of the period or receiving the Commuted Value in one sum. Some
restrictions apply to Qualified Contracts with regards to the specified number
of years for which payments are guaranteed.
PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS. Hartford makes Annuity
Payments to the Payee for the number of years (a minimum of five years and
maximum of 100 minus the Annuitant's age) selected by the Contract Owner. If the
Annuitant dies before the specified number of years has passed, payments to the
Beneficiary will continue until the specified number of years has elapsed. After
the
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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death of the Annuitant, the Beneficiary will have the option of either having
the payments continue to the Beneficiary for the remainder of the period or
receiving the Commuted Value in one sum. Some restrictions apply to Qualified
Contracts with regards to the specified number of years for which payments are
guaranteed.
Prior to the death of the Annuitant, the Contract Owner may elect to receive
the Commuted Value. If the Contract Owner makes this election, Hartford will
deduct the contingent deferred sales charge from the Commuted Value before
paying it to the Contract Owner.
ANNUITY CALCULATION DATE AND
INCOME START DATE
The Contract Owner selects the Income Start Date in the application or order
request. The Annuity Calculation Date will be no more than five Valuation Days
before the Income Start Date. The Contract Value less any applicable Premium Tax
is applied to purchase Annuity Units of the Sub- Accounts selected by the
Contract Owner as of the Annuity Calculation Date. The first Annuity Payment is
computed using the value of such Annuity Units as of the Annuity Calculation
Date.
INCOME PAYMENT DATES
All Annuity Payments after the first Annuity Payment are computed and
payable as of the Income Payment Dates. These dates are the same day of the
month as the Income Start Date based on the Annuity Payment frequency selected
by the Contract Owner and shown on the specification page of the Contract.
Available Annuity Payment frequency includes monthly, quarterly, semi-annual and
annual. The Annuity Payment frequency may not be changed once selected by the
Contract Owner.
In the event that the Contract Owner does not select an Annuity Payment
frequency, Annuity Payments will be made monthly.
VARIABLE ANNUITY PAYMENTS
THE FIRST VARIABLE ANNUITY PAYMENT. Variable Annuity Payments are periodic
payments from Hartford to the designated Payee, the amount of which varies from
one Income Payment Date to the next as a function of the net investment
performance of the Sub-Accounts selected by the Contract Owner to support such
Annuity Payments. The dollar amount of the first Variable Annuity Payment
depends on the Annuity Payment Option chosen, the age of the Annuitant, the
gender of the Annuitant (if applicable), the amount of Contract Value applied to
purchase the Annuity Payments, and the applicable annuity purchase rates based
on the 1983a Individual Annuity Mortality table using projection scale G
projected to the year 2000 and an Assumed Investment Return of not less than
3.0%.
The dollar amount of the first Variable Annuity Payment attributable to each
Sub-Account is determined by dividing the dollar amount of the Contract Value
less applicable Premium Tax applied to that Sub-Account on the Annuity
Calculation Date by $1,000 and multiplying the result by the Payment Factor in
the Contract for the selected Annuity Payment Option. The dollar value of the
first Variable Annuity Payment is the sum of the first Variable Annuity Payments
attributable to each Sub-Account.
ANNUITY UNITS. The number of Annuity Units attributable to a Sub-Account is
derived by dividing the first Variable Annuity Payment attributable to that
Sub-Account by the Annuity Unit value for that Sub-Account for the Valuation
Period ending on the Annuity Calculation Date or during which the Annuity
Calculation Date falls if the Valuation Period does not end on such date. The
number of Annuity Units attributable to each Sub-Account under a Contract
remains fixed unless there is a transfer of Annuity Units between Sub-Accounts.
SUBSEQUENT VARIABLE ANNUITY PAYMENTS. The dollar amount of each subsequent
Variable Annuity Payment attributable to each Sub-Account is determined by
multiplying the number of Annuity Units of that Sub-Account credited under the
Contract by the Annuity Unit value (described below) for that Sub- Account for
the Valuation Period ending on the Income Payment Date, or during which the
Annuity Payment Date falls if the Valuation Period does not end on such date.
The dollar value of each subsequent Variable Annuity Payment is the sum of the
subsequent Variable Annuity Payments attributable to each Sub-Account.
Notwithstanding the foregoing, when an Income Payment Date would fall on a day
that is not a Valuation Day, the Income Payment is computed as of the Valuation
Day immediately following what would have been the Income Payment Date.
The Annuity Unit value of each Sub-Account for any Valuation Period is equal
to (a) multiplied by (b) divided by (c) where:
(a) is the Net Investment Factor for the Valuation Period for which the Annuity
Unit value is being calculated;
(b) is the Annuity Unit value for the preceding Valuation Period; and
(c) is a daily Assumed Investment Return factor (for the 3%, 5% or 6% Assumed
Investment Return) adjusted for the number of days in the Valuation Period.
The Annuity Unit Factor is equal to one plus the applicable Assumed
Investment Return percentage. Therefore, for 3%, it is 1.03, for 5% it is 1.05
and for 6% it is 1.06. The annual factors can be translated into daily factor of
1.00008098, 1.00013368, and 1.00015965, respectively.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
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THE ASSUMED INVESTMENT RETURN. The Annuity Unit value will increase or
decrease from one Income Payment Date to the next in direct proportion to the
net investment return of the Sub-Account or Sub-Accounts supporting the Variable
Annuity Payments, less an adjustment to neutralize the selected Assumed
Investment Return. Dividing what would otherwise be the Annuity Unit value by
the Assumed Investment Return factor is necessary in order to adjust the change
in the Annuity Unit value (resulting from the Net Investment Factor) so that the
Annuity Unit value only changes to the extent that the Net Investment Factor
represents a rate of return greater than or less than the Assumed Investment
Return selected by the Contract Owner. Without this adjustment, the Net
Investment Factor would decrease the Annuity Unit value to the extent that such
value represented an annualized rate of return of less than 0.0% and increase
the Annuity Unit value to the extent that such value represented an annualized
rate of return of greater than 0.0%.
Subject to state approval, the Contract permits Contract Owners to select
one of three Assumed Investment Returns: 3%, 5% or 6%. A higher Assumed
Investment Return will result in a higher initial payment, a more slowly rising
series of subsequent payments when actual investment performance (minus any
deductions and expenses) exceeds the Assumed Investment Return, and a more rapid
drop in subsequent payments when actual investment performance (minus any
deductions and expenses) is less than the Assumed Investment Return. The
following examples may help clarify the impact of selecting one Assumed
Investment Return over another:
1. If a Contract Owner selects a 3% ASSUMED INVESTMENT RETURN and if the net
investment return of the Sub-Account for an Annuity Payment period is equal
to the pro-rated portion of the 3% Assumed Investment Return, the Variable
Annuity Payment attributable to that Sub-Account for that period will equal
the Annuity Payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 3% for a payment
period, the Annuity Payment for that period will be greater than the Annuity
Payment for the prior period. To the extent that such return for a period
falls short of an annualized rate of 3%, the Annuity Payment for that period
will be less than the Annuity Payment for the prior period.
2. If a Contract Owner selects a 5% ASSUMED INVESTMENT RETURN and if the net
investment return of the Sub-Account for an Annuity Payment period is equal
to the pro-rated portion of the 5% Assumed Investment Return, the Variable
Annuity Payment attributable to that Sub-Account for that period will equal
the Annuity Payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 5% for a payment
period, the Annuity Payment for that period will be greater than the Annuity
Payment for the prior period. To the extent that such return for a period
falls short of an annualized rate of 5%, the Annuity Payment for that period
will be less than the Annuity Payment for the prior period.
3. If a Contract Owner selects a 6% ASSUMED INVESTMENT RETURN and if the net
investment return of the Sub-Account for an Annuity Payment period is equal
to the pro-rated portion of the 6% Assumed Investment Return, the Variable
Annuity Payment attributable to that Sub-Account for that period will equal
the Annuity Payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 6% for a payment
period, the Annuity Payment for that period will be greater than the Annuity
Payment for the prior period. To the extent that such return for a period
falls short of an annualized rate of 6%, the Annuity Payment for that period
will be less than the Annuity Payment for the prior period.
Exchange ("Transfer") of Annuity Units. After the Annuity Calculation Date,
the Contract Owner may exchange (i.e., "transfer") the dollar value of a
designated number of Annuity Units of a particular Sub-Account for an equivalent
dollar amount of Annuity Units of another Sub-Account. On the date of the
transfer, the dollar amount of a Variable Annuity Payment generated from the
Annuity Units of either Sub-Account would be the same. Transfers are executed as
of the day Hartford receives Written Notice requesting transfer. For guidelines
refer to "Sub-Account Value Transfers" on page 13.
CONTRACT FEES AND CHARGES
CONTINGENT DEFERRED SALES CHARGE
No sales charge is deducted from the Premium Payment at the time that the
Premium Payment is made. However, a contingent deferred sales charge is deducted
when a Contract Owner elects to receive the Commuted Value under the PAYMENTS
GUARANTEED FOR A SPECIFIED NUMBER OF YEARS Annuity Payment Option.
In the event that surrender charges from the Contracts are not sufficient to
cover the expenses of selling the Contracts, Hartford will bear such expenses.
Conversely, if the revenue from such charges exceeds such expenses, the excess
of revenues from such charges over expenses will be retained by Hartford.
<PAGE>
18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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The surrender charge is equal to a percentage of the Commuted Value (not to
exceed the Premium Payment) and is deducted from those values prior to their
being paid.
<TABLE>
<CAPTION>
SURRENDER CHARGE
AS A PERCENTAGE
CONTRACT YEAR OF COMMUTED VALUE
- ------------- -----------------------
<S> <C>
1 6%
2 6%
3 5%
4 5%
5 4%
6 3%
7 2%
8 or more 0%
</TABLE>
PREMIUM TAX CHARGE
Certain states and municipalities impose a tax on Hartford in connection
with the Premium Payment or Contract Value. This tax can range from 0% to 4% of
either the Premium Payment or the Contract Value and is generally based on the
Contract Owner's state of residence. Taxes are generally incurred by Hartford as
of the Annuity Calculation Date. Hartford deducts the charge for taxes from the
Contract Value on the Annuity Calculation Date. Some jurisdictions impose a tax
on the Premium Payment at the time the Premium Payment is received. In those
jurisdictions, Hartford's current practice is to pay the tax on the Premium
Payment and then deduct the charge for these taxes from the Contract Value on a
surrender prior to Annuity Calculation Date, or on the Annuity Commencement
Date.
MORTALITY AND EXPENSE RISK CHARGE
Hartford deducts a daily charge from the assets of the Separate Account to
compensate Hartford for mortality and expense risks that Hartford assumes under
the Contracts. The daily charge is at the rate of 0.003446% (approximately
equivalent to an effective annual rate of 1.25%) of the net assets of the
Separate Account. Approximately .90% of this annual charge is for the assumption
of mortality risk and .35% is for the assumption of expense risk.
The mortality risk that Hartford assumes (for life contingency based Annuity
Payment Options) is the risk that Annuitants, as a group, will live for a longer
period of time than Hartford estimated when it established the annuity purchase
rates in the Contract. Because of these guarantees, each Contract Owner is
assured that the Annuitant's longevity will not have an adverse effect on the
Annuity Payments that the Payee receives under Annuity Payment Options based on
life contingencies. Hartford also assumes a mortality risk because the Contracts
guarantee a "death benefit" if the Contract Owner or Annuitant dies before the
Income Start Date.
FUND EXPENSES
The investment performance of each Fund reflects the management fee that the
Fund pays to its investment manager as well as other operating expenses that the
Fund incurs. Investment management fees are generally daily fees computed as a
percent of a Fund's average daily net assets at an annual rate. Please read the
prospectus for each Fund for complete details.
ADDITIONAL CONTRACT INFORMATION
CONTRACT OWNERSHIP
The Contract belongs to the Contract Owner. A Contract Owner may exercise
all of the rights and options described in the Contract. Only the Annuitant may
be the owner of an IRA Contract.
The Contract Owner's rights include the right to: (1) select or change the
Contract Owner, (2) select or change any Beneficiary or contingent Beneficiary,
(3) select or change the Payee while the Annuitant is still alive, (4) allocate
the Premium Payment among and between the Sub-Accounts, (5) transfer Contract
Value among and between the Sub-Accounts, and (6) exchange or transfer Annuity
Units between Sub-Accounts on which Variable Annuity Payments are based.
The rights of owners of Qualified Contracts may be restricted by the terms
of a related employee benefit plan. For example, such plans may require an owner
of a Qualified Contract to obtain the consent of his or her spouse before
exercising certain ownership rights or may restrict withdrawals. See "Federal
Tax Considerations," page 20 for more details.
Selection of an Annuitant or Payee who is not the Contract Owner may have
adverse tax consequences. See "Federal Tax Considerations," page 20 for more
details.
CHANGING THE CONTRACT OWNER OR BENEFICIARY
At any time after the Cancellation Period, a Contract Owner may transfer
ownership of the Contract subject to Hartford's policies and procedures at the
time of the change.
At any time prior to the death of the Annuitant, the Contract Owner may name
a new Beneficiary by Written Notice unless an irrevocable Beneficiary has
previously been named. When an irrevocable Beneficiary has been designated, the
Contract Owner must provide the irrevocable Beneficiary's written consent to
Hartford before a new Beneficiary is designated.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
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These changes take effect as of the day the Written Notice was signed and
dated. Hartford is not liable for any payments made under the Contract prior to
the effectiveness of any change. For possible tax consequences of these changes,
see "Federal Tax Considerations," page 20.
MISSTATEMENT OF AGE OR SEX
If an age or sex of the Annuitant given to Hartford (in the application or
otherwise) is misstated, Hartford will adjust the benefits it pays under the
Contract to the amount that would have been payable at the correct age or sex.
If Hartford made any underpayments because of any such misstatement, it shall
pay the amount of such underpayment to the Payee or Beneficiary in one sum. If
Hartford makes any overpayments because of a misstatement of age or sex, it
shall deduct from current or future payments due under the Contract, the amount
of such overpayment.
CHANGE OF CONTRACT TERMS
Upon notice to the Contract Owner, Hartford may modify the Contract to:
1. conform the Contract or the operations of Hartford or of the Separate
Account to the requirements of any law to which the Contract, Hartford or
the Separate Account is subject;
2. assure continued qualification of the Contract as an annuity contract or a
Qualified Contract under the Code;
3. reflect a change (as permitted in the Contract) in the operation of the
Separate Account.
In the event of any such modification, Hartford will make appropriate
endorsements to the Contract.
No modification of this Contract shall be made except over the signature of
the President, a Vice President, an Assistant Vice President or a Secretary of
Hartford. Any modification or waiver must be in writing. No agent may bind
Hartford by making any promise not contained in the Contract.
REPORTS TO CONTRACT OWNERS
Hartford sends each Contract Owner a report at least annually, or more often
as required by law, indicating: the number of Accumulation or Annuity Units and
the dollar value of such units; the Contract Value prior to the Annuity
Calculation Date; the Premium Payment; or surrenders made before the Annuity
Calculation Date; Annuity Payments on or after the Income Start Date; and any
other information required by law.
The reports, which are mailed to Contract Owners at their last known
address, include any information that may be required by the Commission or the
insurance supervisory official of the jurisdiction in which the Contract is
issued.
Hartford also sends any other reports, notices or documents required by law
to be furnished to Owners.
MISCELLANEOUS
NON-PARTICIPATING. The Contract does not participate in the surplus or
profits of Hartford and Hartford does not pay dividends on the Contract.
PROOF OF AGE AND SURVIVAL. Hartford reserves the right to require proof of
the Annuitant's age and gender prior to the Annuity Calculation Date. In
addition, Hartford reserves the right to require proof that the Annuitant is
living before any Income Payment Date.
CONTRACT APPLICATION OR ORDER REQUEST. Hartford issues the Contract in
consideration of the Contract Owner's application or order request and Premium
Payment. The entire Contract is made up of the Contract and any attached
endorsements or riders. In the absence of fraud, Hartford considers statements
made in the application or order request to be representations and not
warranties. Hartford will not use any statement in defense of a claim or to void
the Contract unless it is contained in the application or order request.
Hartford will not contest the Contract.
VOTING PRIVILEGES
In accordance with current interpretations of applicable law, Hartford votes
Fund shares held in the Separate Account at regular and special shareholder
meetings of the Funds in accordance with instructions received from persons
having voting interests in the corresponding Sub-Accounts.
The number of votes that a Contract Owner has the right to instruct are
calculated separately for each Sub-Account, and may include fractional votes.
Prior to the Annuity Calculation Date, the Contract Owner holds a voting
interest in each Sub-Account to which Variable Contract Value is allocated.
After the Annuity Calculation Date, the Contract Owner has a voting interest in
each Sub-Account from which Variable Annuity Payments are made.
For each Contract Owner prior to the Annuity Calculation Date, the number of
votes attributable to a Sub-Account will be determined by dividing the Contract
Owner's Sub-Account Value by the Net Asset Value of the Fund in which that
Sub-Account invests. For each Contract Owner after the Annuity Calculation Date,
the number of votes attributable to a Sub-Account is determined by dividing the
liability for future Variable Annuity Payments to be paid from that Sub-Account
by the Net Asset Value of the Fund in which that
<PAGE>
20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Sub-Account invests. This liability for future payments is calculated on the
basis of the mortality assumptions, the selected Assumed Investment Return and
the Annuity Unit value of that Sub-Account. As Variable Annuity Payments are
made to the Payee, the liability for future payments decreases as does the
number of votes.
The number of votes available to a Contract Owner are determined as of the
date coinciding with the date established by the Fund for determining
shareholders eligible to vote at the relevant meeting of the Fund's
shareholders. Voting instructions are solicited by written communication prior
to such meeting in accordance with procedures established for the Fund. Each
Contract Owner or Payee having a voting interest in a Sub-Account will receive
proxy materials and reports relating to any meeting of shareholders of the Funds
in which that Sub-Account invests.
Fund shares as to which no timely instructions are received and shares held
by Hartford in a Sub-Account as to which no Owner or Payee has a beneficial
interest are voted in proportion to the voting instructions that are received
with respect to all Contracts participating in that Sub-Account. Voting
instructions to abstain on any item to be voted upon are applied to reduce the
total number of votes eligible to be cast on a matter.
FEDERAL TAX CONSIDERATIONS
GENERAL
TAX LAW IS COMPLEX AND TAX CONSEQUENCES WILL VARY ACCORDING TO THE ACTUAL
STATUS OF THE CONTRACT OWNER AND, IF APPLICABLE, THE TYPE OF RETIREMENT PROGRAM
FOR WHICH THE CONTRACT IS PURCHASED. THEREFORE, A PERSON, TRUSTEE OR OTHER
ENTITY CONTEMPLATING THE PURCHASE OF A CONTRACT MAY NEED LEGAL AND TAX ADVICE.
This Prospectus does not provide a detailed description of the federal
income tax consequences of purchasing a Contract. Special tax rules may apply 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 prospective purchaser should always consult a qualified tax
adviser. This discussion is based on Hartford's understanding of existing
federal income tax laws as they are currently interpreted.
TAXATION OF HARTFORD AND
THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company under Subchapter L of Chapter 1 of the Internal Revenue Code
of 1986, as amended (the "Code"). Accordingly, the Separate Account is not
separately taxed as a "regulated investment company" under subchapter M 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. 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.
TAXATION OF PURCHASERS OF
NON-QUALIFIED CONTRACTS
CORPORATIONS, TRUSTS AND OTHER NON-NATURAL PERSONS. Section 72 of the Code
governs the taxation of annuity contracts and contains provisions relating to
non-natural Contract Owners. Non-natural persons include entities such as
corporations, trusts, and partnerships. In general, unless the non-natural
person holds a Contract as agent for a natural person, the annual net increase
in the value of the Contract is includable in the non-natural person's gross
income for the tax period in which the net increase occurs. There is, however,
an exception to this general rule for certain annuity contracts held by
structured settlement companies, certain annuity contracts held by an employer
with respect to a terminated qualified retirement plan and certain immediate
annuity contracts. For this purpose, an immediate annuity means an annuity that
is purchased with a single premium payment, that has an annuity start date
commencing no later than one year from the date of purchase, and that provides
for a series of substantially equal periodic payments to be made not less
frequently than annually during the annuity period. A non-natural person which
is a tax-exempt entity for federal income tax purposes is not subject to income
tax as a result of Section 72 of the Code.
NATURAL PERSONS. Section 72 generally provides that a Contract Owner is not
taxed on increases in the value of the Contract until an amount distributed from
the Contract is received (or deemed received) by the Contract Owner, either in
the form of Annuity Payments, as contemplated by the Contract, or in some other
form (i.e., surrender or Death Benefit). However, this tax deferral generally
applies only if: (1) the investments in the Separate Account are "adequately
diversified" in accordance with Treasury Department regulations, (2) Hartford,
rather than the Contract Owner, is considered the owner of such assets for
federal income tax purposes, and (3) certain distribution requirements are met
in the event that the Contract Owner dies. These requirements are discussed
further under the caption "Tax Status of the Contract" below.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
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DISTRIBUTIONS PRIOR TO THE INCOME START DATE. The Contract does not permit
partial withdrawals or partial surrenders or loans. If, however, a Contract is
surrendered prior to the Income Start Date, amounts received by the Contract
Owner are includable in his or her income to the extent that such amounts exceed
the "investment in the contract." For this purpose, the investment in the
contract at any time equals the Premium Payment (to the extent that such Payment
was neither deductible when made nor excludable from income as, for example, in
the case of certain contributions to Qualified Contracts), less any amounts
previously received from the Contract which were not includable in income. Also,
the Surrender Value may be subject to a penalty tax, described below. In
general, an assignment of the Contract (or other change of ownership) without
full and adequate consideration will be treated as a distribution from the
Contract and taxed in the same manner as a surrender (except where the Contract
is transferred between spouses or incident to a divorce).
The Contract provides that upon the death of Contract Owner, Annuitant or
Joint Annuitant, the Beneficiary will receive the Contract Value. This
distribution is includable in the Beneficiary's income as follows: (1) if
distributed in a lump sum, it is taxed in the same manner as a surrender, (2) if
it is distributed in the form of Annuity Payments, it is taxed in the same
manner as Annuity Payments (see below).
DISTRIBUTIONS AFTER THE INCOME START DATE. The portion of each Annuity
Payment taxable as ordinary income is equal to the excess of the Annuity Payment
over the "exclusion amount." The "exclusion amount" is the investment in the
Contract (described above), adjusted for any guaranteed period, divided by the
number of Annuity Payments expected to be made (determined by Treasury
Department regulations that take into account the Annuitant's life expectancy
and the Annuity Payment Option elected). After the dollar amount of the
investment in the Contract, adjusted for any guaranteed period, is deemed to be
recovered, the entire amount of each Annuity Payment is fully includable in
income. Nonetheless, should the Annuity Payments cease before the adjusted
investment in the Contract is fully recovered, a deduction is allowed for the
unrecovered amount of the adjusted investment in the Contract. Where a
guaranteed period of Annuity Payments is selected and the Annuitant does not
live to the end of that period, the Annuity Payments for the remainder of the
period are includable in income as follows: (1) if distributed in a lump sum,
they are included in income to the extent that they exceed the unrecovered
investment in the Contract at that time, or (2) if received as Annuity Payments,
they are fully excluded from income until the remaining investment in the
Contract is deemed to be recovered. All Annuity Payments thereafter are fully
includable in income.
PENALTY TAX ON CERTAIN DISTRIBUTIONS. Distributions received (or deemed
received) from a Contract (before or after the Income Start Date) may be subject
to a penalty tax equal to 10% of the amount treated as taxable income. In
general, however, there is no penalty tax on distributions:
1. made on or after a taxpayer reaches age 59 1/2;
2. made on or after the death of the Contract Owner;
3. attributable to a taxpayer's becoming disabled;
4. that are part of a series of substantially equal periodic payments (not less
frequently than annually) for the life (or the life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the taxpayer and
his or her designated beneficiary;
5. made under certain annuities issued in connection with structured settlement
agreements; and
6. made under an annuity contract that is purchased with a single premium
payment when the annuity date is no later than a year from purchase and
substantially equal periodic payments are made, not less frequently than
annually, during the annuity payment period.
AGGREGATION OF TWO OR MORE CONTRACTS. All non-qualified deferred annuity
contracts issued by Hartford (or its affiliates) to the same owner during a
calendar year are treated as one annuity contract for purposes of determining
the amount includable in gross income under Section 72(e) of the Code. The
effects of this rule are not yet clear; however, it could affect the time when
income is taxable and the amount that might be subject to the 10% penalty tax
described above. In addition, the Treasury Department has specific authority to
issue regulations that prevent the avoidance of Section 72(e) of the Code
through the serial purchase of annuity contracts or otherwise. There may also be
other situations in which the Treasury Department may conclude that it would be
appropriate to aggregate two or more deferred or immediate annuity contracts
purchased by the same owner. Accordingly, a Contract Owner should consult a
competent tax adviser before purchasing more than one annuity contract in a
calendar year.
POSSIBLE CHANGES IN TAXATION. In past years, legislation has been proposed
that would have adversely modified the federal taxation of certain annuity
contracts. For example, one such proposal would have changed the tax treatment
of non-qualified annuities that did not have "substantial life contingencies" by
taxing income as it is credited to the annuity contract. There is always the
possibility that the tax treatment of annuities could change by legislation or
other means (such as IRS regulations, revenue rulings, judicial decisions,
etc.). Moreover, it is also possible that any change could be retroactive (that
is, effective prior to the date of the change).
CONTRACTS OBTAINED THROUGH A TAX-FREE EXCHANGE OF OTHER ANNUITY OR LIFE
INSURANCE CONTRACTS. Section 1035 of the Code generally provides that no gain or
loss shall be recognized on the exchange of one annuity contract for another. If
the
<PAGE>
22 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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surrendered contract was issued prior to August 14, 1982, the tax rules formerly
provided that the surrender was taxable only to the extent the amount received
exceeds the owner's investment in the contract will and continue to apply to
amounts allocable to investments in that contract prior to August 14, 1982. In
contrast, contracts issued after January 19, 1985 in a Code Section 1035
exchange are treated as new contracts for purposes of the penalty and
distribution-at-death rules. Special rules and procedures apply to Section 1035
transactions. Prospective Contract Owners desiring to take advantage of Section
1035 should consult their tax adviser.
TAX STATUS OF THE CONTRACTS. The foregoing discussion assumes that the
Contracts qualify as "annuity contracts" for federal income tax purposes under
the Code.
DIVERSIFICATION REQUIREMENTS. Section 817(h) of the Code provides that
separate account investments underlying a contract must be "adequately
diversified" in accordance with Treasury Department regulations in order for the
contract to qualify as an annuity contract under Section 72 of the Code. The
Separate Account, through each underlying Fund, intends to comply with the
diversification requirements prescribed in regulations under Section 817(h) of
the Code, which affect how the assets in the various Sub-Accounts may be
invested. Although Hartford does not have direct control over the Funds in which
the Separate Account invests, Hartford believes that each Fund will meet the
diversification requirements, and therefore, the Contract will be treated as an
annuity contract under the Code.
The Treasury Department has issued diversification regulations which
generally require, in effect, among other things, that no more than 55% of the
value of the total assets of each Fund 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.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includable in the variable
annuity contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses certain incidents of ownership in those
assets, such as the ability to exercise investment control over the assets. The
Treasury Department has also announced, in connection with the issuance of
regulations concerning investment diversification, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor (i.e., the
contract owner), rather than the insurance company, to be treated as the owner
of the assets in the account." This announcement also states that guidance would
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular Sub-Accounts without being treated as
owners of the underlying assets." As of the date of this Prospectus, no such
guidance has been issued.
The ownership rights under the Contracts are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the Contract Owner has the choice of several Sub-Accounts in which to
allocate the Premium Payment and Contract Value, and may be able to transfer
Contract Value among Sub-Accounts more frequently than in such rulings. In
addition, the Contract provides for more Sub-Accounts than did the variable
contracts that were the subject of the such rulings. These differences could
result in a Contract Owner being treated as the owner of the assets of the
Separate Account. In addition, Hartford does not know what standards will be set
forth, if any, in the regulations or rulings which the Treasury Department has
stated it expects to issue. Hartford therefore reserves the right to modify the
Contract as necessary to attempt to prevent the Contract Owner from being
considered the owner of the Separate Account's assets.
REQUIRED DISTRIBUTIONS. In order to be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires any
Non-Qualified Contract to provide that: (a) if any Contract Owner dies on or
after the Income Start Date but prior to the time the entire interest in the
Contract has been distributed, the remaining portion of such interest will be
distributed at least as rapidly as under the method of distribution being used
as of the date of that Contract Owner's death; and (b) if any Contract Owner
dies prior to the Income Start Date, the entire interest in the Contract will be
distributed within five years after the date of the Contract Owner's death.
These requirements will be considered satisfied as to any portion of the
Contract Owner's interest that is payable to or for the benefit of a "designated
beneficiary," and that is distributed over the life of such Beneficiary or over
a period not extending beyond the life expectancy of that Beneficiary, provided
that such distributions begin within one year of that Contract Owner's death.
The Contract Owner's "designated beneficiary" is the person designated by such
Contract Owner as a Beneficiary and must be a natural person. However, if the
Contract Owner's sole designated beneficiary is the surviving spouse of the
Contract Owner, the Contract may be continued with
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
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the surviving spouse as the new Contract Owner. The requirements further provide
that if the Contract Owner is not an individual, the primary Annuitant shall be
treated as the Contract Owner for purposes of making distributions that 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. The Contract does not permit a change of the Annuitants.
Non-Qualified Contracts contain provisions that are intended to comply with
the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. Hartford will review such
provisions and modify them if necessary to assure that they comply with the
requirements of Code Section 72(s) when clarified by regulation or otherwise.
TAXATION OF PURCHASERS OF
QUALIFIED CONTRACTS
The Contracts are designed for use as IRAs or in connection with Deferred
Compensation Plans established and maintained by state or local governments or
tax-exempt organizations. Important differences exist between the tax rules
which are applicable to IRAs and Deferred Compensation Plans. These rules are
complex and may vary depending on individual circumstances. Adverse tax
consequences may result from distributions prior to age 59 1/2 (subject to
certain exceptions); distributions that do not conform to applicable
commencement and minimum distribution rules; aggregate distributions in excess
of a specified annual amount; and in other circumstances. Therefore, no attempt
is made to provide more than general information about the use of the Contracts
as IRAs or when owned by eligible employers in connection with Deferred
Compensation Plans. Contract Owners, Annuitants, and Beneficiaries are cautioned
that the rights of any person to any benefits under a Deferred Compensation Plan
may be subject to the terms and conditions of the plan itself, regardless of the
terms and conditions of the Contract, but that Hartford is not bound by the
terms and conditions of such plans to the extent such terms conflict with the
Contract, unless Hartford specifically consents to be bound. A brief description
of some of the federal income tax rules which apply to IRAs and Deferred
Compensation Plans is set forth below. Hartford may amend the Contract as
necessary to conform it to the requirements of applicable law.
INDIVIDUAL RETIREMENT ANNUITIES. The Contract is designed for use as an IRA
purchased through a tax-deferred rollover contribution from another IRA, a
retirement plan qualified under Section 401 or Section 403(a) of the Code or tax
sheltered annuity contract under Section 403(b) of the Code. Amounts held under
a Deferred Compensation Plan under Section 457 of the Code CANNOT be rolled over
or transferred to an IRA.
DISTRIBUTIONS FROM AN IRA. In general, payments from an IRA which are not
rolled over must be included in gross income as ordinary taxable income in the
year in which they are received. Required minimum distributions must begin by
April 1 of the calendar year following the calendar year in which the IRA owner
attains the age of 70 1/2. Certain other mandatory distribution rules apply upon
the death of the IRA owner.
TEN PERCENT PENALTY TAX ON EARLY DISTRIBUTIONS. Distributions from an IRA
may be subject to a penalty tax equal to ten percent (10%) of the amount treated
as taxable income. In general, however, there is no such penalty tax on
distributions:
1. made on or after the date on which the taxpayer reaches age 59 1/2,
2. made to a beneficiary (or to the estate of the taxpayer) on or after the
death of the taxpayer,
3. attributable to the taxpayer's becoming disabled,
4. which are part of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the taxpayer and
his or her designated beneficiary,
5. made to the taxpayer to the extent such distributions do not exceed the
amount allowable as a deduction for federal income tax purposes allowed to
the taxpayer for amounts paid during the taxable year for medical care, or
6. if certain conditions are met, made to an unemployed taxpayer after
separation from employment, for health insurance premiums.
In addition, effective for distributions made from an IRA after December 31,
1997, there is no such penalty for distributions:
7. made to the taxpayer to the extent the distribution does not exceed the
amount of certain qualifying higher education expenses, as defined by
section 72 (t) (7) of the Code, or
8. which are qualified first-time home buyer distributions meeting the
requirements specified at section 72 (t) (8) of the Code.
CODE SECTION 457 DEFERRED COMPENSATION PLANS. The Contracts may be purchased
by a state or local government or tax-exempt organization that is an employer
sponsoring a Deferred Compensation Plan under Section 457 of the Code in order
to effect distribution of plan benefits to participants under the plan. In
general, distributions from a Deferred Compensation Plan are prohibited under
Section 457 unless made after the participant attains age 70 1/2 specified in
the plan, separates from service, dies, or suffers an unforeseeable financial
emergency. Distributions under
<PAGE>
24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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plans that meet the requirements of Section 457 of the Code are taxable as
ordinary income in the year paid or made available to the participant or
beneficiary.
Generally, required minimum distributions must begin by April 1 of the
calendar year following the calendar year in which the participating employee
attains the age of 70 1/2. Certain other mandatory distribution rules apply upon
the death of the participating employee.
Amounts held under a Deferred Compensation Plan under Section 457 of the
Code CANNOT be rolled over or transferred to an IRA.
FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution from a Contract that is taxable income to the
recipient is generally subject to withholding for the recipient's federal income
tax liability at rates that vary according to the type of distribution and the
recipient's tax status. Section 3405 of the Code governs withholding and is
summarized below:
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.
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.
DEFERRED COMPENSATION PLANS. Distributions from a non-qualified deferred
compensation plan meeting the requirements of Section 457 of the Code are
generally subject to regular wage withholding rules. Certain states also require
withholding of state income tax whenever federal income tax is withheld.
CONTRACT OWNERS THAT ARE NONRESIDENT
ALIENS OR FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to Contract Owners 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 and any required tax forms are submitted to
Hartford. In addition, purchasers may be subject to state premium tax, other
state and/or municipal taxes, and taxes that may be imposed by the purchaser's
country of citizenship or residence. Prospective purchasers are advised to
consult with a qualified tax adviser regarding U.S., state, and foreign taxation
with respect to the purchase of a Contract.
OTHER TAX CONSEQUENCES
As noted above, the foregoing comments about the federal tax consequences
under these Contracts are not exhaustive, and special rules may apply to other
tax situations not discussed in the Prospectus. Further, the federal income tax
consequences discussed herein reflect Hartford's understanding of current law
which is subject to change. Federal, state and local gift estate, inheritance
and other tax consequences of ownership or receipt of distributions under a
Contract depend on the individual circumstances of each Contract Owner or
recipient of the distribution. In particular, certain gift and/or estate tax
consequences may result in situations where the Contract Owner is not also the
Annuitant, Payee, and Beneficiary. A competent tax adviser should be consulted
for further information.
OTHER INFORMATION
DISTRIBUTION OF THE CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD"), which is located at
200 Hopmeadow Street, Simsbury, CT 06070, is principal underwriter and
distributor of the Contracts. HSD is an affiliate of Hartford, is registered
with the Commission as a broker-dealer, and is a member of the National
Association of Securities Dealers, Inc. Hartford pays HSD for acting as
principal underwriter under a distribution agreement. The Contracts are offered
on a continuous basis and Hartford does not anticipate discontinuing the offer.
Applications for Contracts are solicited by agents who are licensed by
applicable state insurance authorities to sell Hartford's insurance contracts
and who are also registered representatives of a broker-dealer having a selling
agreement with HSD. Such broker-dealers will generally receive commissions based
on a percent of Premium Payment made (up to a maximum of 6%). The writing agent
will receive a percentage of these commissions from the respective
broker-dealer, depending on the practice of that broker-dealer. Contract Owners
do not pay these commissions.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
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Broker-dealers or financial institutions are compensated according to a
schedule set forth by HSD and any applicable rules or regulations for variable
insurance compensation. Compensation is generally based on premium payments made
by policyholders or contract owners. This compensation is usually paid from the
sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or surrender variable insurance products.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or
to which the assets of the Separate Account are subject.
EXPERTS
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 the reports. Reference is made to the report on the
statutory-basis financial statements of Hartford Life and Annuity Insurance
Company (formerly 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, and are not presented in accordance with generally accepted
accounting principles. The principal business address of Arthur Andersen LLP is
One Financial Plaza, Hartford, Connecticut 06103.
<PAGE>
26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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ILLUSTRATIONS OF ANNUITY PAYMENTS
ASSUMING HYPOTHETICAL RATES OF RETURN
The following graph has been prepared to show how investment performance could
affect Variable Annuity Payments over time. The graph illustrates the Variable
Annuity Payments of a Non-Qualified Contract under three hypothetical rate of
return scenarios. Of course, the illustrations merely represent what Variable
Annuity Payments might be paid under a HYPOTHETICAL Non-Qualified Contract.
WHAT THE GRAPHS ILLUSTRATE. Each curve plotted on the graph illustrates the
payments under a hypothetical Non-Qualified Contract (described in more detail
below) assuming a different hypothetical rate of return for a single Sub-Account
supporting the Contract by plotting one point for each contract year. Each such
annual point on the graph represents the average of twelve monthly Variable
Annuity Payments made in that contract year under the hypothetical Contract
(hereinafter, an "Average Monthly Payment"). Each curve on the graph assumes
that the initial Variable Annuity Payment under the hypothetical Contract is
$1,000 (discussed in more detail below).
HYPOTHETICAL RATES OF RETURN. The Variable Annuity Payments reflect three
different assumptions for a constant investment return before fees and expenses:
0%, 6% and 12%. Net of all expenses, these constant returns are: -1.83%, 4.06%
and 9.95%. Average Monthly Payments reflect the assumed investment return net of
all expenses of the illustrated Sub-Account (and the Funds) over the periods
shown in each graph. Fund management fees and operating expenses are assumed to
be at an annual rate of 0.60% of their average daily net assets. This is the
weighted average of Fund expenses shown in the fee table on page 5. The
mortality and expense risk charge is assumed to be at an annual rate of 1.25% of
the illustrated Sub-Account's average daily net assets.
Nevertheless, THE AVERAGE MONTHLY PAYMENTS DEPICTED IN THE GRAPH ARE BASED
ON HYPOTHETICAL CONTRACTS AND HYPOTHETICAL INVESTMENT RESULTS AND ARE NOT
PROJECTIONS OR INDICATIONS OF FUTURE RESULTS. HARTFORD DOES NOT GUARANTEE OR
EVER SUGGEST THAT ANY SUB-ACCOUNT OR CONTRACT ISSUED BY IT WOULD GENERATE THESE
OR SIMILAR AVERAGE MONTHLY PAYMENTS FOR ANY PERIOD OF TIME. THE GRAPHS ARE FOR
ILLUSTRATION PURPOSES ONLY AND DO NOT REPRESENT FUTURE VARIABLE ANNUITY PAYMENTS
OR FUTURE INVESTMENT RETURNS. Variable Annuity Payments under a real Contract
may be more or less than those forming the basis for the Average Monthly
Payments shown in these illustrations if the actual returns of the Sub-Accounts
selected by a Contract Owner are different from the hypothetical returns.
Because it is very likely that a Sub-Account's investment return will fluctuate
over time, one can expect Variable Annuity Payments under a real Contract to
fluctuate. Moreover, under a real Contract, the total amount of Variable Annuity
Payments ultimately received by a Payee depends upon which Annuity Payment
Option the Contract Owner selects and, for life contingent annuity payment
options, how long the Annuitant lives. (See "Selecting an Annuity Payment
Option" on page 15.)
ASSUMPTIONS ON WHICH THE HYPOTHETICAL CONTRACT IS BASED. In order to
illustrate a hypothetical Contract, Hartford had to make several assumptions
about the Contract. These assumptions are that: (1) the hypothetical Contract is
a Non-Qualified Contract, (2) the entire Contract Value of the hypothetical
Contract is allocated (on the Annuity Calculation Date) to a Sub-Account having
a constant investment return before fees and expenses of 0%, 6%, or 12%, (3) the
Contract Owner selected an Assumed Investment Return of 5%, (4) the Contract
Owner elects to receive monthly Variable Annuity Payments, and (5) the Contract
Value (less any applicable Premium Tax) applied to the purchase of Annuity Units
on the Annuity Calculation Date under the Annuity Payment Option selected
results in an initial Variable Annuity Payment of $1,000.
For a discussion of how a Contract Owner may elect to receive monthly,
quarterly, semi-annual or annual Variable Annuity Payments, see "Income Payment
Dates," page 16.
ASSUMED INVESTMENT RETURN. Among the most important facts that determine
that amount of Variable Annuity Payments is the Assumed Investment Return
selected by the Contract Owner. The hypothetical Contract has an Assumed
Investment Return of 5%. Subject to state approval, a Contract Owner may,
however, select a 3%, 5% or 6% Assumed Investment Return under a real Contract.
Generally, Variable Annuity Payments will increase in size from one Income
Payment Date to the next if the annualized net rate of return during that time
is greater than the Assumed Investment Return, and will decrease if the
annualized net rate of return over this period is less than the Assumed
Investment Return. (The Assumed Investment Return is an important component of
the Payment Factor.) For a detailed discussion of Assumed Investment Returns,
see "Variable Annuity Payments," page 16.
THE $1,000 INITIAL ANNUITY PAYMENT. The hypothetical Contract has an initial
Variable Annuity Payment of $1,000. The dollar amount of the first Variable
Annuity Payment under a real Contract generally depends upon the Annuity Payment
Option selected by the Contract Owner, the amount of Contract Value applied to
purchase the Variable Annuity Payments, the annuity purchase rates in the
Contract at the time it is purchased (i.e., the Payment Factor), the age of the
Annuitant, and, in most cases (e.g., Non-Qualified Contracts), the sex of the
Annuitant. For each of the illustrations, the entire Contract Value under the
hypothetical Contract is allocated to a Sub-Account
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
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having a constant investment return before fees and expenses of 0%, 6%, or 12%.
However, for a real Contract, Contract Value is often allocated among several
Sub-Accounts prior to the Annuity Calculation Date. The dollar amount of the
first Variable Annuity Payment attributable to each Sub-Account is determined
under a real Contract by dividing the dollar amount of Contract Value (less
applicable Premium Tax) applied to that Sub-Account on the Annuity Calculation
Date by $1,000, and multiplying the result by the annuity Payment Factor in the
Contract for the selected Annuity Payment Option. The dollar value of the first
Variable Annuity Payment is the sum of the first Variable Annuity Payments
attributable to each Sub-Account. For a detailed discussion of how the first
Variable Annuity Payment is determined, see "Variable Annuity Payments," page
16.
<PAGE>
28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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HYPOTHETICAL ILLUSTRATIONS
<TABLE>
<CAPTION>
HYPOTHETICAL 0% GROSS HYPOTHETICAL 6% GROSS HYPOTHETICAL 12% GROSS
RATE RATE RATE
AVERAGE MONTHLY AVERAGE MONTHLY AVERAGE MONTHLY
PAYMENT PAYMENT PAYMENT
FOR EACH YEAR SHOWN FOR EACH YEAR SHOWN FOR EACH YEAR SHOWN
$1,000 INITIAL $1,000 INITIAL $1,000 INITIAL
PAYMENT; 5% AIR PAYMENT; 5% AIR PAYMENT; 5% AIR
- ---------------------- ---------------------- ----------------------
AVERAGE AVERAGE AVERAGE
CONTRACT MONTHLY CONTRACT MONTHLY CONTRACT MONTHLY
YEAR PAYMENT YEAR PAYMENT YEAR PAYMENT
- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1 970 1 996 1 1,021
2 907 2 987 2 1,070
3 848 3 978 3 1,120
4 793 4 969 4 1,173
5 741 5 961 5 1,228
6 693 6 952 6 1,286
7 648 7 943 7 1,346
8 606 8 935 8 1,410
9 566 9 927 9 1,476
10 529 10 918 10 1,546
11 495 11 910 11 1,619
12 463 12 902 12 1,695
13 433 13 894 13 1,775
14 404 14 886 14 1,858
15 378 15 878 15 1,946
16 353 16 870 16 2,038
17 330 17 862 17 2,134
18 309 18 854 18 2,234
19 289 19 847 19 2,340
20 270 20 839 20 2,450
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C> <C> <C>
Contract Year 0% Gross Rate 6% Gross Rate 12% Gross Rate
1 970 996 1,021
2 907 987 1,070
3 848 978 1,120
4 793 969 1,173
5 741 961 1,228
6 693 952 1,286
7 648 943 1,346
8 606 935 1,410
9 566 927 1,476
10 529 918 1,546
11 495 910 1,619
12 463 902 1,695
13 433 894 1,775
14 404 886 1,858
15 378 878 1,946
16 353 870 2,038
17 330 862 2,134
18 309 854 2,234
19 289 847 2,340
20 270 839 2,450
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
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ILLUSTRATIONS OF ANNUITY PAYMENTS
USING HISTORIC RATES OF RETURN
The following graphs have been prepared to show how investment performance
affects Variable Annuity Payments over time. These graphs illustrate the
"performance" of a Non-Qualified Contract under which Variable Annuity Payments
begin at the end of the month that the Contract was issued which is the same
month that each Sub-Account illustrated began operations. Of course, Hartford
did not sell Contracts prior to the date of this Prospectus (i.e., during any of
the time periods shown) and therefore the illustrations merely represent what
Variable Annuity Payments might have been under a HYPOTHETICAL Non-Qualified
Contract had one existed during the years shown.
WHAT THE GRAPHS ILLUSTRATE. Each graph illustrates the "performance" of a
particular Sub-Account based on hypothetical Non-Qualified Contract (described
in more detail below) by plotting one point for each calendar year since the
Sub-Account began operations. Each such annual point on the graph represents the
average of twelve monthly Variable Annuity Payments made in that year under the
hypothetical Contract. Each graph assumes that the initial Variable Annuity
Payment under the hypothetical Contract is $1,000 (discussed in more detail
below). All of the graphs end on December 31, 1997. Where a Sub-Account began
operations in mid-year, the point for the first year represents the average of
monthly Variable Annuity Payments made (which is fewer than 12) under the
hypothetical Contract during that year. The points therefore represent, in each
case, the average monthly Variable Annuity Payment (hereinafter, an "Average
Monthly Payment").
Average Monthly Payments reflect the actual past investment return after all
expenses of the Sub-Accounts over the periods shown in each graph. Nevertheless,
THE AVERAGE MONTHLY PAYMENTS DEPICTED IN THE GRAPHS ARE BASED ON HYPOTHETICAL
CONTRACTS AND PAST INVESTMENT RESULTS AND ARE NOT PROJECTIONS OR INDICATIONS OF
FUTURE RESULTS. HARTFORD DOES NOT GUARANTEE OR EVEN SUGGEST THAT ANY CONTRACT
ISSUED BY IT WOULD GENERATE THESE OR SIMILAR VARIABLE ANNUITY PAYMENTS FOR ANY
PERIOD OF TIME. THE GRAPHS ARE FOR ILLUSTRATION PURPOSES ONLY AND DO NOT
REPRESENT FUTURE VARIABLE ANNUITY PAYMENTS OR FUTURE INVESTMENT RETURNS.
Variable Annuity Payments under a real Contract may be more or less than those
forming the basis for the Average Monthly Payments shown in these illustrations
if the actual returns of the Sub-Accounts selected by a Contract Owner are
different from the past returns of the Sub-Accounts. Because it is very likely
that a Sub-Account's investment return will fluctuate over time, one can expect
Variable Annuity Payments under a real Contract to fluctuate. Moreover, under a
real Contract, the total amount of Variable Annuity Payments ultimately received
by a Payee depends upon which Annuity Payment Option the Contract Owner selects
and, for life contingent annuity options, how long the Annuitant lives. (See
"Selecting an Annuity Payment Option," page 15.)
ASSUMPTIONS ON WHICH THE HYPOTHETICAL CONTRACT IS BASED. In order to
illustrate a hypothetical Contract, Hartford had to make several assumptions
about the Contract. These assumptions are that: (1) the hypothetical Contract is
a Non-Qualified Contract, (2) the entire Contract Value of the hypothetical
Contract is allocated (on the Annuity Calculation Date) to the Sub-Account being
illustrated, (3) the Contract Owner selected an Assumed Investment Return of 5%,
(4) the Contract Owner elects to receive monthly Variable Annuity Payments and
elects an Income Start Date that is the last day of the month in which the
Contract was issued, (5) the Contract Value (less any applicable premium tax)
applied to the purchase of Annuity Units on the Annuity Calculation Date under
the Annuity Payment Option selected results in an initial Variable Annuity
Payment of $1,000, and (6) the Income Start Date is the last day of the month
that the Sub-Account illustrated began operations. TO THE EXTENT THAT A REAL
CONTRACT IS ISSUED BY HARTFORD ON A BASIS DIFFERENT FROM THE FOREGOING
ASSUMPTIONS, THAT REAL CONTRACT WOULD HAVE HAD AVERAGE MONTHLY PAYMENTS
DIFFERENT FROM THOSE ILLUSTRATED EVEN DURING THE PERIODS ILLUSTRATED.
For a discussion of how a Contract Owner may elect to receive monthly,
quarterly, semi-annual or annual Variable Annuity Payments, see "Income Payment
Dates," page 16.
ASSUMED INVESTMENT RETURN. Among the most important facts that determine
that amount of Variable Annuity Payments is the Assumed Investment Return
selected by the Contract Owner. The hypothetical Contract has an Assumed
Investment Return of 5%. Subject to state approval, a Contract Owner may,
however, select a 3%, 5% or 6% Assumed Investment Return under a real Contract.
Generally, Variable Annuity Payments will increase in size from one Income
Payment Date to the next if the annualized net rate of return during that time
is greater than the Assumed Investment Return, and will decrease if the
annualized net rate of return over this period is less than the Assumed
Investment Return. (The Assumed Investment Return is an important component of
the Payment Factor.) For a detailed discussion of Assumed Investment Returns,
see "Variable Annuity Payments," page 16. Standardized and non-standardized
average annual total returns as well as the Sub-Account Annual Percentage Change
column reflect the performance of the Sub-Account being illustrated without
adjustment for an Assumed Investment Return.
THE $1,000 INITIAL ANNUITY PAYMENT. The hypothetical Contract has an initial
Variable Annuity Payment of $1,000.
<PAGE>
30 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
The dollar amount of the first Variable Annuity Payment under a real Contract
generally depends upon the Annuity Payment Option selected by the Contract
Owner, the amount of Contract Value applied to purchase the Variable Annuity
Payments, the annuity purchase rates in the Contract at the time it is purchased
(i.e., the Payment Factor), the age of the Annuitant, and, in most cases (e.g.,
Non-Qualified Contracts), the sex of the Annuitant. For each of the
illustrations, the entire Contract Value under the hypothetical Contract is
allocated to the Sub-Account shown in the illustrations. However, for a real
Contract, Contract Value is often allocated among several Sub-Accounts prior to
the Annuity Calculation Date. The dollar amount of the first Variable Annuity
Payment attributable to each Sub-Account is determined under a real Contract by
dividing the dollar amount of Contract Value (less applicable Premium Tax)
applied to that Sub-Account on the Annuity Calculation Date by $1,000, and
multiplying the result by the annuity Payment Factor in the Contract for the
selected Annuity Payment Option. The dollar value of the first Variable Annuity
Payment is the sum of the first Variable Annuity Payments attributable to each
Sub-Account. For a detailed discussion of how the first Variable Annuity Payment
is determined, see "Variable Annuity Payments," page 16.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 31
- --------------------------------------------------------------------------------
ADVISERS FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983 * 990 1.26%
1984 948 6.05%
1985 1,078 25.26%
1986 1,253 11.27%
1987 1,337 4.66%
1988 1,322 12.71%
1989 1,479 20.24%
1990 1,459 0.01%
1991 1,584 18.88%
1992 1,630 6.96%
1993 1,731 10.86%
1994 1,688 -3.94%
1995 1,821 26.74%
1996 2,042 15.14%
1997 2,384 22.96%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 22.96%
5 Year 13.83%
10 Year 12.66%
Since Inception 11.84%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 16.96%
5 Year 13.35%
10 Year 12.66%
Since Inception 11.84%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Advisers Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983* 990
1984 948
1985 1,078
1986 1,253
1987 1,337
1988 1,322
1989 1,479
1990 1,459
1991 1,584
1992 1,630
1993 1,731
1994 1,688
1995 1,821
1996 2,042
1997 2,384
</TABLE>
* Fund inception was 4/83. Therefore, the Average Monthly Payment represents
the average monthly payment from April 1983 to December 1983. The Annual
Sub-Account Return is based on the period from April 1983 to December 1983.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
32 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984 * 1,038 9.16%
1985 1,237 34.37%
1986 1,485 7.65%
1987 1,496 -5.55%
1988 1,451 24.67%
1989 1,694 22.60%
1990 1,550 -12.02%
1991 1,852 52.16%
1992 2,100 15.55%
1993 2,492 19.30%
1994 2,562 1.26%
1995 2,897 28.63%
1996 3,328 19.20%
1997 3,881 20.83%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 20.83%
5 Year 17.48%
10 Year 18.13%
Since Inception 16.32%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL
RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- -------------------------------------
<S> <C>
1 Year 14.83%
5 Year 17.06%
10 Year 18.13%
Since Inception 16.32%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Capital Appreciation Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984* 1,038
1985 1,237
1986 1,485
1987 1,496
1988 1,451
1989 1,694
1990 1,550
1991 1,852
1992 2,100
1993 2,492
1994 2,562
1995 2,897
1996 3,328
1997 3,881
</TABLE>
* Fund inception was 4/84. Therefore, the Average Monthly Payment represents
the average monthly payment from April 1984 to December 1984. The Annual
Sub-Account Return is based on the period from April 1984 to December 1984.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 33
- --------------------------------------------------------------------------------
INDEX FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987 * 978 -14.02%
1988 890 14.75%
1989 1,049 28.73%
1990 1,035 -5.24%
1991 1,145 27.93%
1992 1,205 5.49%
1993 1,256 7.76%
1994 1,228 -0.31%
1995 1,401 34.85%
1996 1,653 20.58%
1997 2,044 30.96%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 30.96%
5 Year 18.00%
10 Year 15.76%
Since Inception 13.12%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 24.96%
5 Year 17.58%
10 Year 15.76%
Since Inception 13.12%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Index Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987* 978
1988 890
1989 1,049
1990 1,035
1991 1,145
1992 1,205
1993 1,256
1994 1,228
1995 1,401
1996 1,653
1997 2,044
</TABLE>
* Fund inception was 5/87. Therefore, the Average Monthly Payment represents
the average monthly payment from May 1987 to December 1987. The Annual
Sub-Account Return is based on the period from May 1987 to December 1987.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
34 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990 * 900 -12.18%
1991 890 11.60%
1992 869 -5.62%
1993 911 32.07%
1994 999 -3.15%
1995 967 12.51%
1996 1,056 11.53%
1997 1,090 -0.91%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year -0.91%
5 Year 9.73%
10 Year --
Since Inception 5.26%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year -6.91%
5 Year 9.17%
10 Year --
Since Inception 5.26%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
International Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990* 900
1991 890
1992 869
1993 911
1994 999
1995 967
1996 1,056
1997 1,090
</TABLE>
* Fund inception was 7/90. Therefore, the Average Monthly Payment represents
the average monthly payment from July 1990 to December 1990. The Annual
Sub-Account Return is based on the period from July 1990 to December 1990.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
MONEY MARKET FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980 * 1,009 5.09%
1981 1,074 14.29%
1982 1,162 12.39%
1983 1,212 8.01%
1984 1,254 9.35%
1985 1,296 7.19%
1986 1,313 5.45%
1987 1,311 5.17%
1988 1,319 6.06%
1989 1,347 7.77%
1990 1,375 6.76%
1991 1,386 4.72%
1992 1,364 2.35%
1993 1,324 1.66%
1994 1,286 2.67%
1995 1,272 4.45%
1996 1,261 3.86%
1997 1,248 4.02%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 4.02%
5 Year 3.33%
10 Year 4.42%
Since Inception 6.31%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year -1.98%
5 Year 2.62%
10 Year 4.42%
Since Inception 6.31%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Money Market Fund
Calendar Year Sub-Account
1977
1978
1979
1980* 1,009
1981 1,074
1982 1,162
1983 1,212
1984 1,254
1985 1,296
1986 1,313
1987 1,311
1988 1,319
1989 1,347
1990 1,375
1991 1,386
1992 1,364
1993 1,324
1994 1,286
1995 1,272
1996 1,261
1997 1,248
</TABLE>
* Fund inception was 6/80. Therefore, the Average Monthly Payment represents
the average monthly payment from June 1980 to December 1980. The Annual
Sub-Account Return is based on the period from June 1980 to December 1980.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
36 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
SMALL COMPANY FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996 * 1,025 4.26%
1997 1,092 16.91%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 16.91%
5 Year --
10 Year --
Since Inception 16.84%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 10.91%
5 Year --
10 Year --
Since Inception 13.05%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Small Company Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996* 1,025
1997 1,092
</TABLE>
* Fund inception was 8/96. Therefore, the Average Monthly Payment represents
the average monthly payment from August 1996 to December 1996. The Annual
Sub-Account Return is based on the period from August 1996 to December 1996.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 37
- --------------------------------------------------------------------------------
BOND FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977 * 998 1.00%
1978 979 1.34%
1979 959 1.63%
1980 929 4.91%
1981 932 9.12%
1982 1,045 26.16%
1983 1,132 1.48%
1984 1,121 11.78%
1985 1,262 19.11%
1986 1,396 10.78%
1987 1,360 -1.26%
1988 1,364 6.25%
1989 1,397 10.73%
1990 1,416 7.06%
1991 1,506 15.02%
1992 1,579 4.23%
1993 1,645 8.86%
1994 1,541 -5.14%
1995 1,585 17.01%
1996 1,596 2.24%
1997 1,637 9.97%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 9.97%
5 Year 6.32%
10 Year 7.45%
Since Inception 7.74%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 3.97%
5 Year 5.69%
10 Year 7.45%
Since Inception 7.74%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Bond Fund
Calendar Year Sub-Account
1977* 998
1978 979
1979 959
1980 929
1981 932
1982 1,045
1983 1,132
1984 1,121
1985 1,262
1986 1,396
1987 1,360
1988 1,364
1989 1,397
1990 1,416
1991 1,506
1992 1,579
1993 1,645
1994 1,541
1995 1,585
1996 1,596
1997 1,637
</TABLE>
* Fund inception was 8/77. Therefore, the Average Monthly Payment represents
the average monthly payment from August 1977 to December 1977. The Annual
Sub-Account Return is based on the period from August 1977 to December 1977.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
38 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
DIVIDEND AND GROWTH FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994 * 1,024 4.07%
1995 1,146 34.68%
1996 1,383 21.39%
1997 1,695 30.25%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 30.25%
5 Year --
10 Year --
Since Inception 22.09%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 24.25%
5 Year --
10 Year --
Since Inception 21.45%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Dividend and Growth Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994* 1,024
1995 1,146
1996 1,383
1997 1,695
</TABLE>
* Fund inception was 3/94. Therefore, the Average Monthly Payment represents
the average monthly payment from March 1994 to December 1994. The Annual
Sub-Account Return is based on the period from March 1994 to December 1994.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 39
- --------------------------------------------------------------------------------
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995 * 1,037 11.45%
1996 1,099 10.41%
1997 1,143 4.20%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 4.20%
5 Year --
10 Year --
Since Inception 10.26%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year -1.80%
5 Year --
10 Year --
Since Inception 8.75%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
International Advisers
Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995* 1,037
1996 1,099
1997 1,143
</TABLE>
* Fund inception was 3/95. Therefore, the Average Monthly Payment represents
the average monthly payment from March 1995 to December 1995. The Annual
Sub-Account Return is based on the period from March 1995 to December 1995.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
40 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MORTGAGE SECURITIES FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984 * 1,000
1985 1,064 19.13%
1986 1,162 9.75%
1987 1,151 1.36%
1988 1,170 7.03%
1989 1,205 11.74%
1990 1,239 8.35%
1991 1,324 13.31%
1992 1,365 3.35%
1993 1,372 4.99%
1994 1,297 -2.83%
1995 1,336 14.73%
1996 1,348 3.77%
1997 1,372 7.66%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 7.66%
5 Year 5.51%
10 Year 7.09%
Since Inception 7.72%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 1.66%
5 Year 4.86%
10 Year 7.09%
Since Inception 7.72%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Mortgage Securities Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984* 1,000
1985 1,064
1986 1,162
1987 1,151
1988 1,170
1989 1,205
1990 1,239
1991 1,324
1992 1,365
1993 1,372
1994 1,297
1995 1,336
1996 1,348
1997 1,372
</TABLE>
* Fund inception was 12/84. Therefore, the Average Monthly Payment represents
the monthly payment for December 1984.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 41
- --------------------------------------------------------------------------------
STOCK FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977 * 999 1.72%
1978 992 3.55%
1979 1,044 21.10%
1980 1,228 29.61%
1981 1,349 -0.64%
1982 1,311 19.81%
1983 1,652 12.50%
1984 1,500 -0.70%
1985 1,718 29.85%
1986 2,052 10.93%
1987 2,305 4.09%
1988 2,172 17.51%
1989 2,536 24.49%
1990 2,450 -5.07%
1991 2,701 23.07%
1992 2,758 8.68%
1993 2,982 12.92%
1994 2,980 -3.11%
1995 3,306 32.43%
1996 3,937 22.83%
1997 4,893 29.75%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 29.75%
5 Year 18.22%
10 Year 15.67%
Since Inception 13.91%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 23.75%
5 Year 17.81%
10 Year 15.67%
Since Inception 13.91%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Stock Fund
Calendar Year Sub-Account
1977* 999
1978 992
1979 1,044
1980 1,228
1981 1,349
1982 1,311
1983 1,652
1984 1,500
1985 1,718
1986 2,052
1987 2,305
1988 2,172
1989 2,536
1990 2,450
1991 2,701
1992 2,758
1993 2,982
1994 2,980
1995 3,306
1996 3,937
1997 4,893
</TABLE>
* Fund inception was 8/77. Therefore, the Average Monthly Payment represents
the average monthly payment from August 1977 to December 1977. The Annual
Sub-Account Return is based on the period from August 1977 to December 1977.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
42 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MID-CAP FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997 * 1,026 9.68%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS FOR THE PERIOD ENDED
7/31/97 - 12/31/1997**
- ------------------------------------------------------------
<S> <C>
9.68% (does not reflect contingent deferred sales charge)
<CAPTION>
3.68% (reflects contingent deferred sales charge)
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Mid-Cap Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997* 1,026
</TABLE>
* Fund inception was 7/97. Therefore, the Average Monthly Payment represents
the average monthly payment from July 1997 to December 1997. The Annual
Sub-Account Return is based on the period from July 1997 to December 1997.
** These returns are not annualized.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 43
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
FOR
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY..............
INDEPENDENT PUBLIC ACCOUNTANTS..........................................
CALCULATION OF YIELD AND RETURN.........................................
Yield of the Money Market Fund Sub-Account..........................
Yield of the Bond Fund and Mortgage Securities Fund Sub-Accounts....
Calculation of Total Return.........................................
PERFORMANCE COMPARISONS.................................................
Yield and Total Return..............................................
VARIABLE ANNUITY PAYMENTS...............................................
Annuity Unit value..................................................
Illustration of Calculation of Annuity Unit value...................
Illustration of Variable Annuity Payments...........................
OTHER INFORMATION.......................................................
</TABLE>
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Individual Single Premium Payment Immediate Variable Annuity Contract
Issued by
Hartford Life and Annuity Insurance Company
(formerly "ITT Hartford Life and Annuity Insurance Company")
and
Hartford Life and Annuity Insurance Company Separate Account One
THIS STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1998, IS NOT A
PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1998 FOR HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY ("HARTFORD") SINGLE PURCHASE PAYMENT IMMEDIATE VARIABLE
ANNUITY CONTRACT WHICH IS REFERRED TO HEREIN.
THE PROSPECTUS SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR SHOULD KNOW
BEFORE PURCHASING A CONTRACT. FOR A COPY OF THE PROSPECTUS, SEND A WRITTEN
REQUEST TO THE ADMINISTRATIVE OFFICE OF HARTFORD AT 200 HOPMEADOW STREET,
SIMSBURY, CONNECTICUT 06070, OR TELEPHONE 1-800-862-6668.
<PAGE>
TABLE OF CONTENTS
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY . . . . . . . . . . .
SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CALCULATION OF YIELD AND RETURN. . . . . . . . . . . . . . . . . . . . . . . . .
Yield of the Money Market Fund Sub-Account . . . . . . . . . . . . . . . .
Yield of the Bond Fund and Mortgage
Securities Fund Sub-Accounts. . . . . . . . . . . . . . . . . . . . .
Calculation of Total Return . . . . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield and Total Return. . . . . . . . . . . . . . . . . . . . . . . . . . .
VARIABLE ANNUITY PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annuity Unit Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Illustration of Calculation of Annuity Unit Value . . . . . . . . . . . . .
Illustration of Variable Annuity Payments . . . . . . . . . . . . . . . . .
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States and the District of Columbia,
except New York. Effective on January 1, 1998, Hartford's name changed from ITT
Hartford Life and Annuity Insurance Company 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 controlled by The
Hartford Financial Services Group, Inc., a Delaware corporation.
<TABLE>
<CAPTION>
HARTFORD RATINGS
- ----------------------------------------------------------------------------------------
RATING AGENCY EFFECTIVE RATING BASIS OF RATING
DATE OF
RATING
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 9/9/97 A+ Financial soundness and operating
performance.
- ----------------------------------------------------------------------------------------
Standard & Poor's 1/23/98 AA Claims paying ability
- ----------------------------------------------------------------------------------------
Duff & Phelps 1/23/98 AA+ Claims paying ability
- ----------------------------------------------------------------------------------------
</TABLE>
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for Hartford Life and Annuity Insurance
Company Separate One are Arthur Andersen LLP. Its principal business address
at One Financial Plaza, Hartford, CT 06103. Arthur Andersen LLP audits the
financial statements included in the Prospectus and elsewhere in the
registration statement and verifies that 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.
CALCULATION OF YIELD AND RETURN
YIELD OF THE MONEY MARKET FUND SUB-ACCOUNT
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 accumulation unit of the Sub-Account at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from Contract
Owner accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
multiplying the base period return by 365/7 with the resulting yield figure
carried to the nearest hundredth of one percent. Net changes in value of a
hypothetical account will include net investment income of the account (accrued
daily dividends as declared by the underlying funds, less daily expense charges
of the account) for the period, but will not include realized gains or losses or
unrealized appreciation or depreciation on the underlying fund shares.
2
<PAGE>
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from the
result, according to the following formula:
Effective Yield = [(Base Period Return + 1) 365/7] - 1
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.
MONEY MARKET FUND SUB-ACCOUNT
The yield and effective yield for the seven day period ending December 31, 1997
for the Money Market Fund Sub-Account was as follows:
<TABLE>
<S> <C>
Yield 4.11%
Effective Yield 4.20%
</TABLE>
YIELDS OF THE BOND FUND AND 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. 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 Mortgage Securities Fund.
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL.
BOND FUND AND
MORTGAGE SECURITIES FUND SUB-ACCOUNTS
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges assessed
against a Contract Owner's account over the base period. Yield quotations based
on a 30 day period ended December 31, 1997 were computed by dividing the
dividends and interests earned during the period by the maximum offering price
per unit on the last day of the period, according to the following formula:
Example:
6
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1) - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the period
that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the period.
3
<PAGE>
Bond Fund
Yield = 5.02 %
Mortgage Securities Fund
Yield = 5.34 %
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.
CALCULATION OF TOTAL RETURN
As summarized in the Prospectus under the heading "Performance Related
Information," total return is a measure of the change in value of an investment
in a Sub-Account over the period covered. The formula for total return used
herein includes three steps: (1) calculating the value of the hypothetical
initial investment of $1,000 as of the end of the period by multiplying the
total number of units owned at the end of the period by the unit value per unit
on the last trading day of the period; (2) assuming redemption at the end of the
period and deducting any applicable contingent deferred sales charge (the
contingent deferred sales charge deducted under the "Since Inception" column
below depends on the fund inception date; 6% is deducted for 1 Year, 4% for 5
Year, and 0% for 10 Year periods) 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.
The following are the standardized average annual total return quotations for
the Sub-Accounts for the period ended December 31, 1997.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Inception Since
Sub-Accounts Date Inception 1 Year 5 Year 10 Year
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advisers Fund 3/31/83 11.84% 16.96% 13.35% 12.66%
Bond Fund 8/31/77 7.74% 3.97% 5.69% 7.45%
Capital Appreciation Fund 4/2/84 16.32% 14.83% 17.06% 18.13%
Dividend and Growth Fund 3/8/94 21.45% 24.25% N/A N/A
Index Fund 5/1/87 13.12% 24.96% 17.58% 15.76%
International Advisers Fund 3/1/95 8.75% -1.80% N/A N/A
MidCap Fund 7/30/97 3.68% N/A N/A N/A
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Inception Since
Sub-Accounts Date Inception 1 Year 5 Year 10 Year
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market Fund 6/30/80 6.31% -1.98% 2.62% 4.42%
Mortgage Securities Fund 1/1/85 7.72% 1.66% 4.86% 7.09%
Small Company Fund 8/9/96 13.05% 10.91% N/A N/A
International Opportunities Fund 7/2/90 5.26% -6.91% 9.17% N/A
Stock Fund 8/31/77 13.91% 23.75% 17.81% 15.67%
- -----------------------------------------------------------------------------------------------------
</TABLE>
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 is not deducted. Therefore,
non-standardized total return for a Sub-Account is higher than standardized
total return for a Sub-Account.
The following are the non-standardized annualized total return quotations for
the Sub-Accounts for the period ended December 31, 1997.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Inception Since
Sub-Accounts Date Inception 1 Year 5 Year 10 Year
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advisers Fund 3/31/83 11.84% 22.96% 13.83% 12.66%
Bond Fund 8/31/77 7.74% 9.97% 6.32% 7.45%
Capital Appreciation Fund 4/2/84 16.32% 20.83% 17.48% 18.13%
Dividend and Growth Fund 3/8/94 22.09% 30.25% N/A N/A
5
<PAGE>
Index Fund 5/1/87 13.12% 30.96% 18.00% 15.76%
International Advisers Fund 3/1/95 10.26% 4.20% N/A N/A
MidCap Fund 7/30/97 9.68% N/A N/A N/A
Money Market Fund 6/30/80 6.31% 4.02% 3.33% 4.42%
Mortgage Securities Fund 1/1/85 7.72% 7.66% 5.51% 7.09%
Small Company Fund 8/9/96 16.84% 16.91% N/A N.A
International Opportunities Fund 7/2/90 5.26% -0.91% 9.73% N/A
Stock Fund 8/31/77 13.91% 29.75% 18.22% 15.67%
</TABLE>
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN
Each Sub-Account may from time to time include its total return in
advertisements or in information furnished to present or prospective
shareholders. Each Sub-Account may from time to time include its yield and
total return in advertisements or information furnished to present or
prospective shareholders. Each Sub-Account may from time to time include in
advertisements its total return (and yield in the case of certain Sub-Accounts)
the ranking of those performance figures relative to such figures for groups of
other annuities analyzed by Lipper Analytical Services and Morningstar, Inc. as
having the same investment objectives.
The total return and yield may also be used to compare the performance of the
Sub-Accounts against certain widely acknowledged outside standards or indices
for stock and bond market performance. The Standard & Poor's Composite Index of
500 Stocks (the "S&P 500") is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of common stocks
of companies listed on the New York Stock Exchange, although the common stocks
of a few companies listed on the American Stock Exchange or traded
over-the-counter are included. The 500 companies represented include 400
industrial, 60 transportation and 40 financial services concerns. The S&P 500
represents about 80% of the market value of all issues traded on the New York
Stock Exchange.
The NASDAQ-OTC Composite Price Index (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded.
The Morgan Stanley Capital International EAFE Index (the "EAFE Index") is an
unmanaged index, which includes over 1,000 companies representing the stock
markets of Europe, Australia, New Zealand, and the Far East. The
6
<PAGE>
EAFE Index is weighted by market capitalization, and therefore, it has a heavy
representation in countries with large stock markets, such as Japan.
The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency.
The Composite Index for Hartford Advisers Fund is comprised of the S&P 500
(55%), the Lehman Government/Corporate Bond Index (35%), both mentioned above,
and 90 Day U.S. Treasury Bills (10%).
VARIABLE ANNUITY PAYMENTS
ANNUITY UNIT VALUE
The value of an Annuity Unit is calculated at the same time that the value of an
Accumulation Unit is calculated and is based on the same values for Fund shares
and other assets and liabilities. (See "Annuity Payments" in the Prospectus.)
The Annuity Unit Value for each Sub-Account's first Valuation Period was set at
$10. The Annuity Unit Value of each Sub-Account for any subsequent Valuation
Period is equal to (a) multiplied by (b) divided by (c) where:
(a) is the Net Investment Factor for the Valuation Period for which the
Annuity Unit Value is being calculated;
(b) is the Annuity Unit Value for the preceding Valuation Period; and
(c) is a daily Assumed Investment Return factor (for the 3%, 5% or 6%
Assumed Investment Return) adjusted for the number of days in the
Valuation Period.
The Assumed Investment Return factor is equal to one plus the applicable
percentage. Therefore, for 3%, it is 1.03, for 4% it is 1.04 and for 6% it is
1.06. The annual factors can be translated into daily factor of 1.000080986,
1.00010746, and 1.000159654, respectively.
If a Contract Owner selects a 5% Assumed Investment Return rate and if the net
investment return of the Sub-Account for an Annuity Payment period is equal to
the pro-rated portion of the 5% Assumed Investment Return, the Variable Annuity
Payment attributable to that Sub-Account for that period will equal the Payment
for the prior period. To the extent that such net investment return exceeds an
annualized rate of return of 5% for a Payment period, the Payment for that
period will be greater than the Payment for the prior period and to the extent
that such return for a period falls short of an annualized rate of 5%, the
Payment for that period will be less than the Payment for the prior period.
The following illustrations show, by use of hypothetical examples, the method of
determining the Annuity Unit
7
<PAGE>
Value and the amount of several Variable Annuity Payments based on one
Sub-Account.
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
<TABLE>
<CAPTION>
<S> <C>
1. Annuity Unit Value for immediately preceding
Valuation Period 10.00000000
2. Net Investment Factor 1.00036164
3. Daily factor to compensate for Assumed Investment Return of 5% 1.00013368
4. Adjusted Net Investment Factor (2)/(3) 1.00028063
5. Annuity Unit Value for current Valuation Period (4)x(1) 10.00280630
ILLUSTRATION OF VARIABLE ANNUITY PAYMENTS
(assuming no premium tax is applicable)
<CAPTION>
<S> <C>
1. Number of Accumulation Units at Annuity Date 1,000.00
2. Accumulation Unit Value 12.55548000
3. Adjusted Contract Value (1)x(2) $12,555.48
4. First monthly Annuity Payment per $1,000 of
adjusted Contract Value $ 9.63
5. First monthly Annuity Payment (3)x(4)/1,000 $ 120.91
6. Annuity Unit Value 10.00280630
7. Number of Annuity Units (5)/(6) 12.08760785
8. Assume Annuity Unit value for second month equal to 10.04000000
9. Second Monthly Annuity Payment (7)X(8) $ 121.36
10. Assume Annuity Unit value for third month equal to 10.05000000
11. Third Monthly Annuity Payment (7)X(10) $ 121.48
</TABLE>
OTHER INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended, with respect to
the Contracts discussed in this Statement of Additional Information. Not all
the information set forth in the registration statement, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Contracts and other legal instruments are summaries. For a
complete statement of the terms of these documents, reference should be made to
the instruments filed with the SEC.
8
<PAGE>
- --------------------------------------------------------------------------------
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, 1997, and the related statement of operations for the year
then ended and statements of changes in net assets for each of the two years in
the period then ended. These financial statements are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ITT Hartford Life and Annuity
Insurance Company Separate Account One as of December 31, 1997, the results of
its operations for the year then ended and the changes in its net assets for
each of the two years in the period then ended in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 16, 1998
<PAGE>
This page intentionally left blank.
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT ONE
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1997
<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 217,551,092
Cost $ 221,691,144
Market Value............................. $228,375,129 -- -- --
Hartford Stock Fund, Inc.
Shares 396,147,047
Cost $1,491,417,347
Market Value............................. -- $2,029,590,860 -- --
HVA Money Market Fund, Inc.
Shares 199,835,317
Cost $ 199,835,317
Market Value............................. -- -- $199,835,317 --
Hartford Advisers Fund, Inc.
Shares 1,415,150,900
Cost $2,778,139,694
Market Value............................. -- -- -- $3,575,726,877
Hartford Capital Appreciation Fund, Inc.
Shares 507,465,622
Cost $1,785,263,721
Market Value............................. -- -- -- --
Hartford Mortgage Securities Fund, Inc.
Shares 74,125,274
Cost $ 79,718,184
Market Value............................. -- -- -- --
Hartford Index Fund, Inc.
Shares 152,035,329
Cost $ 339,334,949
Market Value............................. -- -- -- --
Hartford International Opportunities Fund,
Inc.
Shares 450,125,879
Cost $ 569,737,621
Market Value............................. -- -- -- --
Hartford Dividend and Growth Fund, Inc.
Shares 595,932,484
Cost $ 910,144,241
Market Value............................. -- -- -- --
Hartford International Advisers Fund, Inc.
Shares 123,244,687
Cost $ 142,711,367
Market Value............................. -- -- -- --
Hartford Small Company
Shares 112,112,739
Cost $ 132,155,930
Market Value............................. -- -- -- --
Hartford MidCap Fund
Shares 12,961,072
Cost $ 14,098,467
Market Value............................. -- -- -- --
Due from ITT Hartford Life and Annuity
Insurance Company......................... 636,020 1,508,268 -- 2,506,884
Receivable from fund shares sold........... -- -- 152,504 --
------------ -------------- ------------ --------------
Total Assets............................... 229,011,149 2,031,099,128 199,987,821 3,578,233,761
------------ -------------- ------------ --------------
LIABILITIES:
Due to ITT Hartford Life and Annuity
Insurance Company......................... -- -- 154,247 --
Payable for fund shares purchased.......... 635,827 1,511,603 -- 2,507,219
------------ -------------- ------------ --------------
Total Liabilities.......................... 635,827 1,511,603 154,247 2,507,219
------------ -------------- ------------ --------------
Net Assets (variable annuity contract
liabilities).............................. $228,375,322 $2,029,587,525 $199,833,574 $3,575,726,542
------------ -------------- ------------ --------------
------------ -------------- ------------ --------------
DEFERRED ANNUITY CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by Participants................ 107,758,556 440,556,573 120,947,391 999,829,112
Unit Price................................. $ 2.113753 $ 4.601624 $ 1.650311 $ 3.572368
ANNUITY CONTRACTS IN THE ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by Participants................ 284,022 502,394 141,042 1,111,033
Unit Price................................. $ 2.113753 $ 4.601624 $ 1.650311 $ 3.572368
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ------------ ------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund, Inc.
Shares 217,551,092
Cost $ 221,691,144
Market Value............................. -- -- -- --
Hartford Stock Fund, Inc.
Shares 396,147,047
Cost $1,491,417,347
Market Value............................. -- -- -- --
HVA Money Market Fund, Inc.
Shares 199,835,317
Cost $ 199,835,317
Market Value............................. -- -- -- --
Hartford Advisers Fund, Inc.
Shares 1,415,150,900
Cost $2,778,139,694
Market Value............................. -- -- -- --
Hartford Capital Appreciation Fund, Inc.
Shares 507,465,622
Cost $1,785,263,721
Market Value............................. $2,237,779,780 -- -- --
Hartford Mortgage Securities Fund, Inc.
Shares 74,125,274
Cost $ 79,718,184
Market Value............................. -- $80,335,564 -- --
Hartford Index Fund, Inc.
Shares 152,035,329
Cost $ 339,334,949
Market Value............................. -- -- $437,513,434 --
Hartford International Opportunities Fund,
Inc.
Shares 450,125,879
Cost $ 569,737,621
Market Value............................. -- -- -- $582,668,595
Hartford Dividend and Growth Fund, Inc.
Shares 595,932,484
Cost $ 910,144,241
Market Value............................. -- -- -- --
Hartford International Advisers Fund, Inc.
Shares 123,244,687
Cost $ 142,711,367
Market Value............................. -- -- -- --
Hartford Small Company
Shares 112,112,739
Cost $ 132,155,930
Market Value............................. -- -- -- --
Hartford MidCap Fund
Shares 12,961,072
Cost $ 14,098,467
Market Value............................. -- -- -- --
Due from ITT Hartford Life and Annuity
Insurance Company......................... -- 101,883 392,373 --
Receivable from fund shares sold........... 292,471 -- -- 8,115
----------------- --------------- ------------ ------------------
Total Assets............................... 2,238,072,251 80,437,447 437,905,807 582,676,710
----------------- --------------- ------------ ------------------
LIABILITIES:
Due to ITT Hartford Life and Annuity
Insurance Company......................... 148,468 -- -- 8,660
Payable for fund shares purchased.......... -- 102,528 388,792 --
----------------- --------------- ------------ ------------------
Total Liabilities.......................... 148,468 102,528 388,792 8,660
----------------- --------------- ------------ ------------------
Net Assets (variable annuity contract
liabilities).............................. $2,237,923,783 $80,334,919 $437,517,015 $582,668,050
----------------- --------------- ------------ ------------------
----------------- --------------- ------------ ------------------
DEFERRED ANNUITY CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by Participants................ 461,577,845 38,291,725 117,372,132 396,429,681
Unit Price................................. $ 4.845288 $ 2.097829 $ 3.726058 $ 1.468965
ANNUITY CONTRACTS IN THE ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by Participants................ 298,474 2,588 48,749 222,417
Unit Price................................. $ 4.845288 $ 2.097829 $ 3.726058 $ 1.468965
<CAPTION>
DIVIDEND AND INTERNATIONAL SMALL MIDCAP
GROWTH FUND ADVISERS FUND COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund, Inc.
Shares 217,551,092
Cost $ 221,691,144
Market Value............................. -- -- -- --
Hartford Stock Fund, Inc.
Shares 396,147,047
Cost $1,491,417,347
Market Value............................. -- -- -- --
HVA Money Market Fund, Inc.
Shares 199,835,317
Cost $ 199,835,317
Market Value............................. -- -- -- --
Hartford Advisers Fund, Inc.
Shares 1,415,150,900
Cost $2,778,139,694
Market Value............................. -- -- -- --
Hartford Capital Appreciation Fund, Inc.
Shares 507,465,622
Cost $1,785,263,721
Market Value............................. -- -- -- --
Hartford Mortgage Securities Fund, Inc.
Shares 74,125,274
Cost $ 79,718,184
Market Value............................. -- -- -- --
Hartford Index Fund, Inc.
Shares 152,035,329
Cost $ 339,334,949
Market Value............................. -- -- -- --
Hartford International Opportunities Fund,
Inc.
Shares 450,125,879
Cost $ 569,737,621
Market Value............................. -- -- -- --
Hartford Dividend and Growth Fund, Inc.
Shares 595,932,484
Cost $ 910,144,241
Market Value............................. $1,163,455,674 -- -- --
Hartford International Advisers Fund, Inc.
Shares 123,244,687
Cost $ 142,711,367
Market Value............................. -- $144,786,749 -- --
Hartford Small Company
Shares 112,112,739
Cost $ 132,155,930
Market Value............................. -- -- $134,783,169 --
Hartford MidCap Fund
Shares 12,961,072
Cost $ 14,098,467
Market Value............................. -- -- -- $14,738,151
Due from ITT Hartford Life and Annuity
Insurance Company......................... 2,905,020 -- 204,951 95,103
Receivable from fund shares sold........... -- 25,098 -- --
-------------- ------------- ------------- -----------
Total Assets............................... 1,166,360,694 144,811,847 134,988,120 14,833,254
-------------- ------------- ------------- -----------
LIABILITIES:
Due to ITT Hartford Life and Annuity
Insurance Company......................... -- 25,441 -- --
Payable for fund shares purchased.......... 2,905,424 -- 205,938 94,946
-------------- ------------- ------------- -----------
Total Liabilities.......................... 2,905,424 25,441 205,938 94,946
-------------- ------------- ------------- -----------
Net Assets (variable annuity contract
liabilities).............................. $1,163,455,270 $144,786,406 $134,782,182 $14,738,308
-------------- ------------- ------------- -----------
-------------- ------------- ------------- -----------
DEFERRED ANNUITY CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by Participants................ 541,076,428 109,734,605 108,104,289 13,437,161
Unit Price................................. $ 2.149172 $ 1.318862 $ 1.246631 $ 1.096832
ANNUITY CONTRACTS IN THE ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by Participants................ 274,041 46,710 12,853 --
Unit Price................................. $ 2.149172 $ 1.318862 $ 1.246631 $ --
</TABLE>
<PAGE>
SEPARATE ACCOUNT ONE
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
DECEMBER 31, 1997
<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.................................. $11,445,297 $ 17,644,351 $10,430,718 $ 71,905,491
EXPENSES:
Mortality and expense undertakings......... (2,221,972) (20,017,591) (2,508,581) (36,850,979)
----------- ------------ ----------- -------------
Net investment income (loss)............. 9,223,325 (2,373,240) 7,922,137 35,054,512
----------- ------------ ----------- -------------
CAPITAL GAINS INCOME......................... -- 62,602,913 -- 107,409,178
----------- ------------ ----------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on security
transactions.............................. 9,814 84,100 -- 1,305
Net unrealized appreciation (depreciation)
of investments during the period.......... 8,361,624 325,437,100 -- 440,215,879
----------- ------------ ----------- -------------
Net gain (loss) on investments........... 8,371,438 325,521,200 -- 440,217,184
----------- ------------ ----------- -------------
Net increase (decrease) in net assets
resulting from operations............... $17,594,763 $385,750,873 $ 7,922,137 $ 582,680,874
----------- ------------ ----------- -------------
----------- ------------ ----------- -------------
</TABLE>
* From inception, July 15, 1997 to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................. $ 10,461,911 $4,630,685 $ 4,775,090 $ 5,347,323
EXPENSES:
Mortality and expense undertakings......... (23,085,650) (950,587) (4,129,538) (7,060,305)
----------------- --------------- ----------- ------------------
Net investment income (loss)............. (12,623,739) 3,680,098 645,552 (1,712,982)
----------------- --------------- ----------- ------------------
CAPITAL GAINS INCOME......................... 112,339,947 -- 19,616,096 37,513,752
----------------- --------------- ----------- ------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on security
transactions.............................. (119,550) 58,290 185,916 (68,174)
Net unrealized appreciation (depreciation)
of investments during the period.......... 223,915,112 1,886,382 62,356,292 (45,233,169)
----------------- --------------- ----------- ------------------
Net gain (loss) on investments........... 223,795,562 1,944,672 62,542,208 (45,301,343)
----------------- --------------- ----------- ------------------
Net increase (decrease) in net assets
resulting from operations............... $323,511,770 $5,624,770 $82,803,856 $ (9,500,573)
----------------- --------------- ----------- ------------------
----------------- --------------- ----------- ------------------
<CAPTION>
DIVIDEND AND INTERNATIONAL SMALL MIDCAP
GROWTH FUND ADVISERS FUND COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
-------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................. $ 15,926,807 $ 3,867,653 $ 61,352 $ 13,070
EXPENSES:
Mortality and expense undertakings......... (10,204,886) (1,395,128) (903,283) (30,019)
-------------- ------------- ------------- -----------
Net investment income (loss)............. 5,721,921 2,472,525 (841,931) (16,949)
-------------- ------------- ------------- -----------
CAPITAL GAINS INCOME......................... 15,828,765 262,472 6,247,370 --
-------------- ------------- ------------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on security
transactions.............................. (12,819) 3,758 (1,756) 414
Net unrealized appreciation (depreciation)
of investments during the period.......... 182,031,024 383,378 2,416,430 639,685
-------------- ------------- ------------- -----------
Net gain (loss) on investments........... 182,018,205 387,136 2,414,674 640,099
-------------- ------------- ------------- -----------
Net increase (decrease) in net assets
resulting from operations............... $ 203,568,891 $ 3,122,133 $ 7,820,113 $623,150
-------------- ------------- ------------- -----------
-------------- ------------- ------------- -----------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT ONE
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
DECEMBER 31, 1997
<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)............... $ 9,223,325 $ (2,373,240) $ 7,922,137 $ 35,054,512
Capital gains income....................... -- 62,602,913 -- 107,409,178
Net realized gain (loss) on security
transactions.............................. 9,814 84,100 -- 1,305
Net unrealized appreciation (depreciation)
of investments during the period.......... 8,361,624 325,437,100 -- 440,215,879
------------ -------------- ------------ --------------
Net increase (decrease) in net assets
resulting from operations................. 17,594,763 385,750,873 7,922,137 582,680,874
------------ -------------- ------------ --------------
UNIT TRANSACTIONS:
Purchases.................................. 48,533,601 430,730,097 154,121,029 650,294,881
Net transfers.............................. 24,454,452 137,640,435 (105,053,239) 185,059,734
Surrenders................................. (9,332,737) (52,393,369) (32,455,810) (124,493,708)
Net annuity transactions................... 563,032 1,508,388 110,035 1,689,593
------------ -------------- ------------ --------------
Net increase in net assets resulting from
unit transactions......................... 64,218,348 517,485,551 16,722,015 712,550,500
------------ -------------- ------------ --------------
Total increase in net assets............... 81,813,111 903,236,424 24,644,152 1,295,231,374
NET ASSETS:
Beginning of period........................ 146,562,211 1,126,351,101 175,189,422 2,280,495,168
------------ -------------- ------------ --------------
End of period.............................. $228,375,322 $2,029,587,525 $199,833,574 $3,575,726,542
------------ -------------- ------------ --------------
------------ -------------- ------------ --------------
* From inception, July 15, 1997
to December 31, 1997.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- ----------- -------------
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 (depreciation) appreciation
of investments during the period.......... (2,390,902) 143,331,264 -- 201,866,663
----------- ------------- ----------- -------------
Net increase 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 in net assets resulting from
unit transactions......................... 51,880,058 416,973,796 68,093,483 637,270,459
----------- ------------- ----------- -------------
Total increase 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
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
** From inception, August 9, 1996 to December 31, 1996.
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ------------ ------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)............... $ (12,623,739) $ 3,680,098 $ 645,552 $ (1,712,982)
Capital gains income....................... 112,339,947 -- 19,616,096 37,513,752
Net realized gain (loss) on security
transactions.............................. (119,550) 58,290 185,916 (68,174)
Net unrealized appreciation (depreciation)
of investments during the period.......... 223,915,112 1,886,382 62,356,292 (45,233,169)
----------------- --------------- ------------ ------------------
Net increase (decrease) in net assets
resulting from operations................. 323,511,770 5,624,770 82,803,856 (9,500,573)
----------------- --------------- ------------ ------------------
UNIT TRANSACTIONS:
Purchases.................................. 444,618,125 11,734,160 106,908,193 103,316,180
Net transfers.............................. 111,621,605 (5,624,261) 38,286,952 21,889,359
Surrenders................................. (60,594,326) (6,044,100) (9,935,604) (18,041,766)
Net annuity transactions................... 689,458 5,419 151,370 39,532
----------------- --------------- ------------ ------------------
Net increase in net assets resulting from
unit transactions......................... 496,334,862 71,218 135,410,911 107,203,305
----------------- --------------- ------------ ------------------
Total increase in net assets............... 819,846,632 5,695,988 218,214,767 97,702,732
NET ASSETS:
Beginning of period........................ 1,418,077,151 74,638,931 219,302,248 484,965,318
----------------- --------------- ------------ ------------------
End of period.............................. $2,237,923,783 $80,334,919 $437,517,015 $582,668,050
----------------- --------------- ------------ ------------------
----------------- --------------- ------------ ------------------
* From inception, July 15, 1997
to December 31, 1997.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
CAPITAL MORTGAGE INTERNATIONAL
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ---------- ----------- -----------
OPERATIONS:
Net investment income (loss)............... $ (5,913,744) $ 3,346,436 $ 1,224,839 $ 2,771,532
Capital gains income....................... 50,334,274 -- 1,690,389 8,880,986
Net realized gain (loss) on security
transactions.............................. (93,060) 11,668 238,066 7,755
Net unrealized (depreciation) appreciation
of investments during the period.......... 142,164,193 (882,583) 25,487,376 31,201,375
------------- ---------- ----------- -----------
Net increase in net assets resulting from
operations . 186,491,663 2,475,521 28,640,670 42,861,648
------------- ---------- ----------- -----------
UNIT TRANSACTIONS:
Purchases.................................. 403,482,054 13,476,913 83,760,185 110,673,155
Net transfers.............................. 129,133,556 2,655,230 33,248,800 47,078,167
Surrenders................................. (30,210,654) (2,722,173) (3,699,700) (11,782,890)
Net annuity transactions................... 288,203 -- 203 81,416
------------- ---------- ----------- -----------
Net increase in net assets resulting from
unit transactions......................... 502,693,159 13,409,970 113,309,488 146,049,848
------------- ---------- ----------- -----------
Total increase in net assets............... 689,184,822 15,885,491 141,950,158 188,911,496
NET ASSETS:
Beginning of period........................ 728,892,329 58,753,440 77,352,090 296,053,822
------------- ---------- ----------- -----------
End of period.............................. $1,418,077,151 $74,638,931 $219,302,248 $484,965,318
------------- ---------- ----------- -----------
------------- ---------- ----------- -----------
<CAPTION>
DIVIDEND AND INTERNATIONAL SMALL MIDCAP
GROWTH FUND ADVISERS FUND COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
-------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)............... $ 5,721,921 $ 2,472,525 $ (841,931) $ (16,949 )
Capital gains income....................... 15,828,765 262,472 6,247,370 --
Net realized gain (loss) on security
transactions.............................. (12,819) 3,758 (1,756) 414
Net unrealized appreciation (depreciation)
of investments during the period.......... 182,031,024 383,378 2,416,430 639,685
-------------- ------------- ------------- -----------
Net increase (decrease) in net assets
resulting from operations................. 203,568,891 3,122,133 7,820,113 623,150
-------------- ------------- ------------- -----------
UNIT TRANSACTIONS:
Purchases.................................. 344,818,126 53,015,752 59,848,160 7,620,550
Net transfers.............................. 142,586,883 20,439,056 42,807,593 6,536,068
Surrenders................................. (25,953,097) (3,671,030) (1,723,390) (41,460 )
Net annuity transactions................... 343,961 63,436 14,177 --
-------------- ------------- ------------- -----------
Net increase in net assets resulting from
unit transactions......................... 461,795,873 69,847,214 100,946,540 14,115,158
-------------- ------------- ------------- -----------
Total increase in net assets............... 665,364,764 72,969,347 108,766,653 14,738,308
NET ASSETS:
Beginning of period........................ 498,090,506 71,817,059 26,015,529 --
-------------- ------------- ------------- -----------
End of period.............................. $1,163,455,270 $ 144,786,406 $134,782,182 $14,738,308
-------------- ------------- ------------- -----------
-------------- ------------- ------------- -----------
* From inception, July 15, 1997
to December 31, 1997.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
DIVIDEND AND INTERNATIONAL SMALL
GROWTH FUND ADVISERS FUND COMPANY FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT**
------------- ----------- -----------
OPERATIONS:
Net investment income (loss)............... $ 3,729,650 $ 1,500,255 $ (33,591)
Capital gains income....................... 3,429,737 1,446,895 --
Net realized gain (loss) on security
transactions.............................. (2,773) (563) 1,014
Net unrealized (depreciation) appreciation
of investments during the period.......... 53,771,055 1,479,032 210,808
------------- ----------- -----------
Net increase in net assets resulting from
operations . 60,927,669 4,425,619 178,231
------------- ----------- -----------
UNIT TRANSACTIONS:
Purchases.................................. 205,512,019 37,280,366 14,704,067
Net transfers.............................. 101,413,217 19,003,957 11,169,302
Surrenders................................. (7,316,597) (1,178,598) (36,071)
Net annuity transactions................... 146,210 31 --
------------- ----------- -----------
Net increase in net assets resulting from
unit transactions......................... 299,754,849 55,105,756 25,837,298
------------- ----------- -----------
Total increase in net assets............... 360,682,518 59,531,375 26,015,529
NET ASSETS:
Beginning of period........................ 137,407,988 12,285,684 --
------------- ----------- -----------
End of period.............................. $ 498,090,506 $ 71,817,059 $ 26,015,529
------------- ----------- -----------
------------- ----------- -----------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT ONE
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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. Dividend and capital gains income
are accrued as of the ex-dividend date. Capital gains income represents
dividends from the Funds which are characterized as capital gains under tax
regulations.
b) SECURITY VALUATION -- The 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, 1997.
c) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no federal
income taxes are payable with respect to the operations of the Account.
d) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT
AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS -- The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and, with
respect to the Account, receives a maximum annual fee of 1.25% of the Account's
average daily net assets.
b) DEDUCTION OF ANNUAL MAINTENANCE FEE -- Annual maintenance fees are
deducted through termination of units of interest from applicable contract
owners' accounts, in accordance with the terms of the contracts.
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of ITT Hartford Life
and Annuity Insurance Company:
We have audited the accompanying statutory 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,
1997 and 1996, and the related statutory statements of income, changes in
capital and surplus, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
statutory financial statements based on our audits.
We conducted our audits in accordance with 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 financial
statements. When statutory 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 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, 1997 and 1996, and the
results of its operations and its cash flows for each of three years in the
period ended December 31, 1997.
However, in our opinion, the statutory financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1997 and 1996, and the results of operations and its cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with statutory accounting practices as described in Note 1.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 27, 1998
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
($000)
<S> <C> <C> <C>
Revenues
Premiums and annuity considerations............. $ 296,645 $ 250,244 $ 165,792
Annuity and other fund deposits................. 1,981,246 1,897,347 1,087,661
Net investment income........................... 102,285 98,441 78,787
Commissions and expense allowances on
reinsurance ceded.............................. 396,921 370,637 183,380
Reserve adjustment on reinsurance ceded......... 3,672,076 3,864,395 1,879,785
Other revenues.................................. 288,632 161,906 140,796
---------- ---------- ----------
Total Revenues................................ 6,737,805 6,642,970 3,536,201
---------- ---------- ----------
Benefits and Expenses
Death and annuity benefits...................... 66,013 60,111 53,029
Surrenders and other benefit payments........... 461,733 276,720 221,392
Commissions and other expenses.................. 564,240 491,720 236,202
Increase in aggregate reserves for future
benefits....................................... 33,213 27,351 94,253
Increase in liability for premium and other
deposit funds.................................. 640,006 207,156 460,124
Net transfers to Separate Accounts.............. 4,914,980 5,492,964 2,414,669
---------- ---------- ----------
Total Benefits and Expenses................... 6,680,185 6,556,022 3,479,669
---------- ---------- ----------
Net Gain from Operations Before Federal Income
Taxes............................................ 57,620 86,948 56,532
Federal income tax (benefit) expense............ (14,878) 19,360 14,048
---------- ---------- ----------
Net Gain from Operations.......................... 72,498 67,588 42,484
Net realized capital gains, after tax........... 1,544 407 374
---------- ---------- ----------
Net Income........................................ $ 74,042 $ 67,995 $ 42,858
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------
1997 1996
----------- -----------
($000)
<S> <C> <C>
Assets
Bonds........................................... $ 1,501,311 $ 1,268,480
Common stocks................................... 64,408 44,996
Mortgage loans.................................. 85,103 0
Policy loans.................................... 36,533 28,853
Cash and short-term investments................. 309,432 176,830
Other invested assets........................... 20,942 2,858
----------- -----------
Total cash and invested assets................ 2,017,729 1,522,017
----------- -----------
Investment income due and accrued............... 15,878 14,555
Premium balances receivable..................... 389 373
Receivables from affiliates..................... 1,269 257
Other assets.................................... 22,788 19,099
Separate Account assets......................... 23,208,728 14,619,324
----------- -----------
Total Assets.................................. $25,266,781 $16,175,625
----------- -----------
----------- -----------
Liabilities
Aggregate reserves for future benefits.......... $ 605,183 $ 571,970
Policy and contract claims...................... 5,672 6,806
Liability for premium and other deposit funds... 1,795,149 1,155,143
Asset valuation reserve......................... 13,670 7,442
Payable to affiliates........................... 20,972 10,022
Other liabilities............................... (754,393) (498,195)
Separate Account liabilities.................... 23,208,728 14,619,324
----------- -----------
Total liabilities............................. 24,894,981 15,872,512
----------- -----------
Capital and Surplus
Common stock.................................... 2,500 2,500
Gross paid-in and contributed surplus........... 226,043 226,043
Unassigned funds................................ 143,257 74,570
----------- -----------
Total capital and surplus..................... 371,800 303,113
----------- -----------
Total liabilities, capital and surplus.......... $25,266,781 $16,175,625
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
($000)
<S> <C> <C> <C>
Capital and surplus -- beginning of year $ 303,113 $ 238,334 $ 91,285
--------- --------- ---------
Net income...................................... 74,042 67,995 42,858
Change in net unrealized capital gains (losses)
on common stocks and other invested assets..... 2,186 (5,171) 1,709
Change in asset valuation reserve............... (6,228) 568 (5,588)
Change in non-admitted assets................... (1,313) 1,387 (1,944)
Aggregate write-ins for surplus (See Note 3).... 0 0 8,080
Dividends to shareholder........................ 0 0 (10,000)
Paid-in surplus................................. 0 0 111,934
--------- --------- ---------
Change in capital and surplus................... 68,687 64,779 147,049
--------- --------- ---------
Capital and surplus -- end of year.............. $ 371,800 $ 303,113 $ 238,334
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
($000)
<S> <C> <C> <C>
Operations
Premiums, annuity considerations and fund
deposits....................................... $ 2,277,874 $ 2,147,627 $ 1,253,511
Investment income............................... 101,991 106,178 78,328
Other income.................................... 4,381,718 4,396,892 2,253,466
----------- ----------- -----------
Total income.................................. 6,761,583 6,650,697 3,585,305
----------- ----------- -----------
Benefits Paid................................... 529,733 338,998 277,965
Federal income taxes (received) paid on
operations..................................... (14,499) 28,857 208,423
Other expenses.................................. 5,754,725 6,254,139 2,664,385
----------- ----------- -----------
Total benefits and expenses..................... 6,269,959 6,621,994 3,150,773
----------- ----------- -----------
Net cash from operations........................ 491,624 28,703 434,532
----------- ----------- -----------
Proceeds from Investments
Bonds........................................... 614,413 871,019 287,941
Common stocks................................... 11,481 72,100 52
Other........................................... 152 10 28
----------- ----------- -----------
Net investment proceeds....................... 626,046 943,129 288,021
----------- ----------- -----------
Taxes Paid on Capital Gains....................... 0 936 226
Paid-In Surplus................................... 0 0 111,934
Other Cash Provided............................. 0 41,998 28,199
----------- ----------- -----------
Total Proceeds................................ 1,117,670 1,012,894 862,460
----------- ----------- -----------
Cost of Investments Acquired
Bonds........................................... 848,267 914,523 720,521
Common stocks................................... 28,302 82,495 35,794
Mortgage loans.................................. 85,103 0 0
Miscellaneous applications...................... 18,548 130 2,146
----------- ----------- -----------
Total Investments Acquired.................... 980,220 997,148 758,461
----------- ----------- -----------
Other Cash Applied
Dividends paid to stockholders.................. 0 0 10,000
Other........................................... 4,848 12,220 5,007
----------- ----------- -----------
Total other cash applied...................... 4,848 12,220 15,007
----------- ----------- -----------
Total applications.......................... 985,068 1,009,368 773,468
----------- ----------- -----------
Net Change in Cash and Short-Term Investments..... 132,602 3,526 88,992
Cash and Short-Term Investments, Beginning of
Year........................................... 176,830 173,304 84,312
----------- ----------- -----------
Cash and Short-Term Investments, End of Year.... $ 309,432 $ 176,830 $ 173,304
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1997
(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. ("HLI"), which is majority owned by The Hartford Financial
Services Group, Inc. ("The Hartford"), formerly a wholly owned subsidiary of ITT
Corporation ("ITT"). On February 10, 1997, HLI filed a registration statement,
as amended, with the Securities and Exchange Commission relating to the initial
public offering of HLI Class A Common Stock (the "Offering"). Pursuant to the
Offering on May 22, 1997, HLI sold to the public 26 million shares, representing
18.6% of the equity ownership of HLI. 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 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. The most significant estimates are
for determining the liability for aggregate reserves for future benefits and the
liability for premium and other deposit funds. Although some variability is
inherent in these estimates, management believes the amounts provided are
adequate.
Statutory accounting practices 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, for universal life policies and
investment products, generally, 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 recorded upon adoption of the applicable standard;
<PAGE>
- --------------------------------------------------------------------------------
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve); 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 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 bonds were classified on a GAAP basis
as "available-for-sale" and accordingly, those investments and common stocks
were reflected at fair value with the corresponding impact included as a
component of Stockholder's Equity designated as "Net unrealized capital
gains (losses) on securities net of tax". For statutory reporting purposes,
Change in Net Unrealized Capital Gains (Losses) on Common Stocks and Other
Invested Assets includes the change in unrealized gains (losses) 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, 1997, 1996 and 1995, the
significant differences between statutory and GAAP basis net income and capital
and surplus for the Company are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
GAAP Net Income............... $ 58,050 $ 41,202 $ 38,821
Amortization and
deferral of policy
acquisition costs............ (345,658) (341,572) (174,341)
Change in unearned revenue
reserve...................... 4,641 55,504 32,300
Deferred taxes................ 47,113 2,090 2,801
Separate accounts............. 282,818 306,978 146,635
Other, net.................... 27,078 3,793 (3,358)
------------ ---------- ----------
Statutory Net Income.......... $ 74,042 $ 67,995 $ 42,858
------------ ---------- ----------
------------ ---------- ----------
<CAPTION>
1997 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
GAAP Capital and
Surplus...................... $ 570,469 $ 503,887 $ 455,541
Deferred policy acquisition
costs........................ (1,283,771) (938,114) (596,542)
Unearned revenue reserve...... 134,789 130,148 74,644
Deferred taxes................ 64,522 12,823 1,493
Separate accounts............. 923,040 640,101 333,123
Asset valuation reserve....... (13,670) (7,442) (8,010)
Unrealized gains (losses) on
bonds........................ 13,943 5,112 (1,696)
Adjustment relating to Lyndon
contribution (see Note 3).... (41,277) (41,277) (41,277)
Other, net.................... 3,755 (2,125) 21,058
------------ ---------- ----------
Statutory Capital and
Surplus...................... $ 371,800 $ 303,113 $ 238,334
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
AGGREGATE RESERVES FOR FUTURE BENEFITS AND LIABILITY FOR PREMIUM AND OTHER
DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits
were computed in accordance with actuarial standards. Reserves for life
insurance policies are generally based on the 1958 and 1980 Commissioner's
Standard Ordinary Mortality Tables and various valuation rates ranging from 2.5%
to 6%. Accumulation and on-benefit annuity reserves are based principally on
individual annuity tables at various rates ranging from 2.5% to 8.75% and using
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 Statements of
Income.
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 fair value with the current year change in the
difference from cost reflected in surplus. Other invested assets are generally
recorded at fair value.
The Asset Valuation Reserve ("AVR") is designed to provide a standardized
reserving process for realized and unrealized losses due to default and equity
risks associated with invested assets. The reserve increased by $6,228 in 1997,
decreased by $568 in 1996 and increased by $5,588 in 1995. Additionally, the
Interest Maintenance Reserve
<PAGE>
- --------------------------------------------------------------------------------
("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 Statements of Income. Realized investment gains and losses are
determined on a specific identification basis. The amount of net capital losses
reclassified from the IMR was $719 in 1997 and the amount of net capital gains
reclassified was $1,413 and $39 in 1996 and 1995, respectively. The amount of
income amortized was $85, $392 and $256 in 1997, 1996 and 1995, respectively.
OTHER LIABILITIES
The amount reflected in other liabilities includes a receivable from the
separate accounts of $923 million and $640 million as of December 31, 1997 and
1996, respectively. The balances are classified in accordance with NAIC
accounting practices.
MORTGAGE LOANS
Mortgage loans, carried at cost, which approximates fair value, include
investments in assets backed by mortgage loan pools.
2. INVESTMENTS:
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
Interest income from bonds and
short-term investments....... $100,475 $89,940 $ 76,100
Interest income from policy
loans........................ 1,958 1,846 1,504
Interest and dividends from
other investments............ 1,005 7,864 2,288
-------- ------- --------
Gross investment income....... 103,438 99,650 79,892
Less: investment expenses..... 1,153 1,209 1,105
-------- ------- --------
Net investment income......... $102,285 $98,441 $ 78,787
-------- ------- --------
-------- ------- --------
</TABLE>
(B) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON COMMON STOCKS
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
Gross unrealized capital gains at
end of year........................ $ 537 $ 713 $ 1,724
Gross unrealized capital losses at
end of year........................ (1,820) (4,160) 0
-------- ------- --------
Net unrealized capital (losses)
gains.............................. (1,283) (3,447) 1,724
Balance at beginning of year........ (3,447) 1,724 15
-------- ------- --------
Change in net unrealized capital
gains (losses) on common stocks.... $ 2,164 $(5,171) $ 1,709
-------- ------- --------
-------- ------- --------
</TABLE>
(C) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON BONDS AND SHORT-TERM
INVESTMENTS
<TABLE>
<CAPTION>
1997 1996 1995
------- -------- --------
<S> <C> <C> <C>
Gross unrealized capital gains at
end of year........................ $23,357 $ 11,821 $ 22,251
Gross unrealized capital losses at
end of year........................ (1,906) (3,842) (1,374)
------- -------- --------
Net unrealized capital gains........ 21,451 7,979 20,877
Balance at beginning of year........ 7,979 20,877 33,732
------- -------- --------
Change in net unrealized capital
gains (losses) on bonds and
short-term investments............. $13,472 $(12,898) $ 54,609
------- -------- --------
------- -------- --------
</TABLE>
(D) COMPONENTS OF NET REALIZED CAPITAL GAINS
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Bonds and short-term investments......... $ (120) $ 2,756 $ 56
Common stocks............................ 0 0 52
Real estate and other.................... 114 0 0
------- ------- ------
Realized capital (losses) gains.......... (6) 2,756 208
Capital gains (benefit) tax.............. (831) 936 (205)
------- ------- ------
Net realized capital gains, after tax.... 825 1,820 413
Less: IMR capital (losses) gains......... (719) 1,413 39
------- ------- ------
Net realized capital gains............... $ 1,544 $ 407 $ 374
------- ------- ------
------- ------- ------
</TABLE>
(E) OFF-BALANCE SHEET INVESTMENTS
The Company had no significant financial instruments with off-balance sheet
risk as of December 31, 1997 and 1996.
(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.
<PAGE>
- --------------------------------------------------------------------------------
(G) BONDS, SHORT-TERM INVESTMENTS AND COMMON STOCKS
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- --------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. government and government agencies and
authorities:
Guaranteed and sponsored................... $ 11,114 $ 55 $ (51) $ 11,118
Guaranteed and sponsored -- asset-backed... 55,506 1,056 (269) 56,293
States, municipalities and political
subdivisions................................ 26,404 329 0 26,733
International governments.................... 7,609 500 0 8,109
Public utilities............................. 73,024 754 (132) 73,646
All other corporate.......................... 517,715 14,110 (704) 531,121
All other corporate -- asset-backed.......... 630,069 5,005 (739) 634,335
Short-term investments....................... 277,330 33 (8) 277,355
Certificates of deposit...................... 93,770 1,515 (3) 95,282
Parents, subsidiaries and affiliates......... 86,100 0 0 86,100
----------- ---------- ---------- -----------
Total bonds and short-term investments....... $ 1,778,641 $23,357 $(1,906) $ 1,800,092
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- --------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Common stock -- unaffiliated................. $ 30,307 $ 537 $ 0 $ 30,844
Common stock -- affiliated................... 35,384 0 (1,820) 33,564
----------- ---------- ---------- -----------
Total common stocks.......................... $ 65,691 $ 537 $(1,820) $ 64,408
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
1997 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 0 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 0 (66) 148,028
Certificates of deposit...................... 83,378 563 (110) 83,831
Parents, subsidiaries and affiliates......... 48,100 0 0 48,100
----------- ---------- ---------- -----------
Total bonds and short-term investments....... $ 1,416,574 $11,821 $(3,842) $ 1,424,553
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- --------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
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>
The amortized cost and estimated fair value of bonds and short-term
investments at December 31, 1997 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>
- --------------------------------------------------------------------------------
over the remaining life of the securities. Expected maturities differ from
contractual maturities reflecting borrowers' rights to call or prepay their
obligations.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
MATURITY COST FAIR VALUE
- --------------------------------------------- ---------- -----------
<S> <C> <C>
Due in one year or less...................... $ 424,518 $ 696,203
Due after one year through five years........ 586,980 708,365
Due after five years through ten years....... 451,963 295,896
Due after ten years.......................... 315,180 99,628
---------- -----------
Total...................................... $1,778,641 $ 1,800,092
---------- -----------
---------- -----------
</TABLE>
Proceeds from sales of investments in bonds and short-term investments
during 1997, 1996 and 1995 were $367,626, $668,078 and $313,961, respectively,
resulting in gross realized gains of $964, $3,675 and $1,419, respectively, and
gross realized losses of $1,084, $919 and $1,263, 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>
1997 1996
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
ASSETS
Bonds and short-term investments........... $1,778 $ 1,800 $1,417 $ 1,425
Common stocks.............................. 64 64 45 45
Policy loans............................... 37 37 29 29
Mortgage loans............................. 85 85 0 0
Other invested assets...................... 21 21 3 3
LIABILITIES
Liabilities on investment contracts........ $1,911 $ 1,835 $1,245 $ 1,191
</TABLE>
The carrying amounts for policy loans approximates fair value. The fair
value of liabilities on investment contracts 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. The Company has also invested in bonds
of its subsidiaries, Hartford Financial Services Corporation and HL Investment
Advisors, Inc., and common stock of its subsidiary, ITT Hartford Life, LTD.
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 HLI, 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 (received) paid by the Company were $(14,499), $29,792 and
$215,921 in 1997, 1996 and 1995, respectively. The effective tax rate was (26)%,
22% and 25% in 1997, 1996 and 1995, respectively. The following schedule
provides a reconciliation of the tax provision at the U.S. Federal Statutory
rate to Federal income tax (benefit) expense (in millions).
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Tax provision at U.S. Federal statutory
rate........................................ $ 20 $ 30 $ 20
Tax deferred acquisition costs............... 25 27 8
Statutory to tax reserve differences......... 1 0 3
Unrealized gain on separate accounts......... (44) (21) (13)
Investments and other........................ (17) (17) (4)
----- ----- -----
Federal income tax (benefit) expense......... $ (15) $ 19 $ 14
----- ----- -----
----- ----- -----
</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 1997 or
1996. 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 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
<PAGE>
- --------------------------------------------------------------------------------
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
$265, $358, and $1,034 in 1997, 1996 and 1995, 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 1997, 1996 and 1995.
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 8.5% for 1997, 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
1997, 1996 and 1995.
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 1997, 1996 and 1995.
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>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Direct premiums................... $266,427 $226,612 $159,918
Premiums assumed.................. 51,630 33,817 13,299
Premiums ceded.................... (21,412) (10,185) (7,425)
-------- -------- --------
Premiums and annuity
considerations................... $296,645 $250,244 $165,792
-------- -------- --------
-------- -------- --------
</TABLE>
The Company cedes to RGA Reinsurance Company, on a modified coinsurance
basis, 80% of the variable annuity business written since 1994.
8. SEPARATE ACCOUNTS:
The Company maintains separate account assets and liabilities totaling $23.2
billion and $14.6 billion at December 31, 1997 and 1996, 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 $252 million, $144
million and $72 million in 1997, 1996 and 1995, respectively, and are recorded
as a component of other revenues on the Statutory Statements of Income.
9. COMMITMENTS AND CONTINGENCIES:
As of December 31, 1997 and 1996, 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 $1,544, $1,262 and $1,684 in 1997, 1996 and 1995,
respectively. ILA incurred guaranteed fund expense of $548 in 1997 and 1996 and
$0 in 1995.
<PAGE>
PART C
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
(b) (1) Resolution of the Board of Directors of Hartford Life and
Annuity Insurance Company ("Hartford") authorizing the
establishment of the Separate Account.(1)
(2) Not applicable.
(3) (a) Principal Underwriter Agreement.(2)
(3) (b) Form of Dealer Agreement.(2)
(4) Form of Individual Single Premium Immediate Variable Annuity
Contract.(3)
(5) Form of Application.(3)
(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, Senior Vice President,
General Counsel and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(11) No financial statements are omitted.
- -------------------------
(1) Incorporated by reference to Post-Effective Amendment No. 2, to the
RegistrationStatement File No. 33-73568, dated May 1, 1995.
(2) Incorporated by reference to Post-Effective Amendment No. 3, to the
Registration Statement File No. 33-73568, dated May 1, 1996.
(3) Incorporated by reference to Pre-Effective Amendment No. 1, to the
Registration Statement File No. 333-19607, dated May 12, 1997.
<PAGE>
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
Item 25. Directors and Officers of the Depositor
- --------------------------------------------------------------------------------
NAME, AGE POSITION WITH HARTFORD
- --------------------------------------------------------------------------------
Wendell J. Bossen Vice President
- --------------------------------------------------------------------------------
Gregory A. Boyko Senior Vice President, Chief Financial Officer,
and Treasurer, Director*
- --------------------------------------------------------------------------------
Peter W. Cummins Senior Vice President
- --------------------------------------------------------------------------------
Ann M. de Raismes Senior Vice President
- --------------------------------------------------------------------------------
James R. Dooley Vice President
- --------------------------------------------------------------------------------
Timothy M. Fitch Vice President
- --------------------------------------------------------------------------------
David T. Foy Vice President
- --------------------------------------------------------------------------------
J. Richard Garrett Vice President and Assistant Treasurer
- --------------------------------------------------------------------------------
Donald J. Gillette Vice President
- --------------------------------------------------------------------------------
John P. Ginnetti Executive Vice President
- --------------------------------------------------------------------------------
William A. Godfrey, III Senior Vice President
- --------------------------------------------------------------------------------
Lynda Godkin Senior Vice President, General Counsel, and
Corporate Secretary, Director*
- --------------------------------------------------------------------------------
Lois W. Grady Senior Vice President
- --------------------------------------------------------------------------------
Christopher Graham Vice President
- --------------------------------------------------------------------------------
Mark E. Hunt Vice President
- --------------------------------------------------------------------------------
Stephen T. Joyce Vice President
- --------------------------------------------------------------------------------
-2-
<PAGE>
- --------------------------------------------------------------------------------
NAME, AGE POSITION WITH HARTFORD
- --------------------------------------------------------------------------------
Michael D. Keeler Vice President
- --------------------------------------------------------------------------------
Robert A. Kerzner Senior Vice President
- --------------------------------------------------------------------------------
David N. Levenson Vice President
- --------------------------------------------------------------------------------
William B. Malchodi, Jr. Vice President
- --------------------------------------------------------------------------------
Thomas M. Marra Executive Vice President and Director, Individual
Life and Annuity Division, Director*
- --------------------------------------------------------------------------------
Steven L. Matthiesen Vice President
- --------------------------------------------------------------------------------
Michael C. O'Halloran Vice President
- --------------------------------------------------------------------------------
Daniel E. O'Sullivan Vice President
- --------------------------------------------------------------------------------
Craig D. Raymond Senior Vice President and Chief Actuary
- --------------------------------------------------------------------------------
David T. Schrandt Vice President
- --------------------------------------------------------------------------------
Lowndes A. Smith President and Chief Executive Officer, Director*
- --------------------------------------------------------------------------------
Walter C. Welsh Senior Vice President
- --------------------------------------------------------------------------------
Raymond P. Welnicki Senior Vice President
- --------------------------------------------------------------------------------
Lizabeth H. Zlatkus Senior Vice President
- --------------------------------------------------------------------------------
David M. Znamierowski Senior 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 Board of Directors.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Filed herewith as Exhibit 16.
Item 27. Number of Contract Owners
As of February 28, 1998, there were 207,515 Contract Owners.
Item 28. Indemnification
-3-
<PAGE>
Under Section 33-772 of the Connecticut General Statutes, unless limited by its
certificate of incorporation, the Registrant must indemnify a director who was
wholly successful, on the merits or otherwise, in the defense of any proceeding
to which he was a party because he is or was a director of the corporation
against reasonable expenses incurred by him in connection with the proceeding.
The Registrant may indemnify an individual made a party to a proceeding because
he is or was a director against liability incurred in the proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Registrant, and, with respect to any criminal
proceeding, had no reason to believe his conduct was unlawful. Conn. Gen. Stat.
Section 33-771(a). Additionally, pursuant to Conn. Gen. Stat. Section 33-776,
the Registrant may indemnify officers and employees or agents for liability
incurred and for any expenses to which they becomes subject by reason of being
or having been an employees or officers of the Registrant. Connecticut law does
not prescribe standards for the indemnification of officers, employees and
agents and expressly states that their indemnification may be broader than the
right of indemnification granted to directors.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-770 et seq.
Notwithstanding the fact that Connecticut law obligates the Registrant to
indemnify only a director that was successful on the merits in a suit, under
Article VIII, Section 2 of the Registrant's bylaws, the Registrant must
indemnify both directors and officers of the Registrant who are parties or
threatened to be parties to a legal proceeding by reason of his being or having
been a director or officer of the Registrant for any expenses if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the company, and with respect to criminal proceedings, had no
reason to believe his conduct was unlawful. Unless otherwise mandated by a
court, no indemnification shall be made if such officer or director is adjudged
to be liable for negligence or misconduct in the performance of his duty to the
Registrant.
Additionally, the directors and officers of Hartford and Hartford Securities
Distribution Company, Inc. ("HSD") are covered under a directors and officers
liability insurance policy issued to The Hartford Financial Services Group, Inc.
and its subsidiaries. Such policy will reimburse the Registrant for any
payments that it shall make to directors and officers pursuant to law and will,
subject to certain exclusions contained in the policy, further pay any other
costs, charges and expenses and settlements and judgments arising from any
proceeding involving any director or officer of the Registrant in his past or
present capacity as such, and for which he may be liable, except as to any
liabilities arising from acts that are deemed to be uninsurable.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (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
-4-
<PAGE>
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 29. Principal Underwriters
(a) HSD acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - Separate Account One
Hartford Life Insurance Company - Separate Account Two
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account I)
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account II)
Hartford Life Insurance Company - Separate Account Two (QP Variable
Account)
Hartford Life Insurance Company - Separate Account Two (Variable
Account "A")
Hartford Life Insurance Company - Separate Account Two (NQ Variable
Account)
Hartford Life Insurance Company - Putnam Capital Manager Trust
Separate Account
Hartford Life Insurance Company - Separate Account Three
Hartford Life Insurance Company - Separate Account Five
Hartford Life and Annuity Insurance Company - Separate Account One
Hartford Life and Annuity Insurance Company - Putnam Capital Manager
Trust Separate Account Two
Hartford Life and Annuity Insurance Company - Separate Account Three
Hartford Life and Annuity Insurance Company - Separate Account Five
Hartford Life and Annuity Insurance Company - Separate Account Six
American Maturity Life Insurance Company - Separate Account AMLVA
(b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
------------------ ---------------------
Lowndes A. Smith President and Chief Executive Officer,
Director
John P. Ginnetti Executive Vice President, Director
Thomas M. Marra Executive Vice President, Director
Peter W. Cummins Senior Vice President
Lynda Godkin Senior Vice President, General Counsel
and Corporate Secretary
Donald E. Waggaman, Jr. Treasurer
George R. Jay Controller
Paul E. Olson Supervising Registered Principal
James Cubanski Assistant Secretary
Stephen T. Joyce Assistant Secretary
Glen J. Kvadus Assistant Secretary
Edward M. Ryan, Jr. Assistant Secretary
-5-
<PAGE>
Unless otherwise indicated, the principal business address of each 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 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. Registrant has
complied with conditions one through four of the no-action letter.
-6-
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has caused this Registration Statement to be
signed on its behalf, in the City of Hartford, and State of Connecticut on
this 10th day of April, 1998.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT ONE
(Registrant)
*By: /s/ Peter W. Cummins *By: /s/ Lynda Godkin
----------------------------------------- -------------------
Peter W. Cummins, Senior Vice President Lynda Godkin
Attorney-in-Fact
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Depositor)
*By: /s/ Peter W. Cummins
-----------------------------------------
Peter W. Cummins, Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons and in the capacities and on
the dates indicated.
Gregory A. Boyko, Senior Vice President,
Chief Financial Officer, and Treasurer,
Director *
Lynda Godkin, Senior Vice President,
General Counsel, and Corporate Secretary, BY: /s/ Lynda Godkin
Director * ------------------
Thomas M. Marra, Executive Vice Lynda Godkin
President and Director, Individual Life and Attorney-in-Fact
Annuity Division, Director* Dated: April 10, 1998
Lowndes A. Smith, President and
Chief Executive Officer, Director *
David M. Znamierowski, Senior Vice President,
Director*
<PAGE>
EXHIBIT INDEX
(6) (a) Certificate of Incorporation
(9) Opinion and Consent of Lynda Godkin, Senior Vice President, General
Counsel and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
<PAGE>
EXHIBIT 6(a)
FILING #0001734855 PG 03 OF OS VOL B-00133
FILED 07/11/1997 11:32 AM PAGE 03683
SECRETARY OF THE STATE
CONNECTICUT SECRETARY OF THE STATE
FIRST AMENDMENT TO 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 (the "Company").
2. The Amended and Restated Certificate of Incorporation of the Company (the
"Certificate of Incorporation") is further amended by the following
resolution:
RESOLVED, that the Certificate of Incorporation be further amended
by deleting Section 1 in its entirety and replacing it with the
following, such amendment to become effective at January 1, 1998.
All other sections of the Certificate of Incorporation shall remain
unchanged and continue in full force and effect:
Section 1. Effective January 1, 1998, the name of the Company
is HARTFORD LIFE AND ANNUITY INSURANCE COMPANY.
3. The above resolution was adopted by each of the Company's Board of
Directors and its sole shareholder. The number of shares of the Company'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.
Dated at Simsbury, Connecticut this 30 day of June, 1997.
We hereby declare, under penalty of false statement, that the statements made
in the foregoing Certificate are true.
HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
/s/ Thomas M. Marra
-----------------------------------------
Thomas M. Marra, Executive Vice President
/s/ Lynda Godkin
-----------------------------------------
Lynda Godkin, Senior Vice President,
General Counsel and Corporate Secretary
<PAGE>
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>
EXHIBIT 9
April 10, 1998 LYNDA GODKIN
Senior Vice President, General
Counsel & Corporate Secretary
Board of Directors
Hartford Life and Annuity Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: Hartford Life and Annuity Insurance Company Separate Account One
Immediate Variable Annuity
File No. 333-19607
Dear Sir/Madam:
I have acted as General Counsel to Hartford Life and Annuity Insurance Company
(the "Company"), a Connecticut insurance company, and Hartford Life and Annuity
Insurance Company Separate Account One (the "Account") in Connecticut with the
registration of an indefinite amount of securities in the form of single premium
variable annuity insurance 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 to by the Insurance Department of the State of Connecticut
to issue the Contacts.
2. The Account is a duly authorized and existing separate account established
pursuant to the provisions of Section 38a-433 of the Connecticut Statutes.
3. To the extent so provided under the Contracts, that portion of the assets
of the Account equal to the reserves and other contract liabilities with
respect to the Account will not be chargeable with liabilities arising out
of any other business that the Company may conduct.
4. The Contracts, when issued as contemplated by the Form N-4 registration
statement, will constitute legal, validly issued and binding obligations of
the Company.
<PAGE>
Board of Directors
April 10, 1998
Page 2
I hereby consent to the filing of this opinion as an exhibit to the Form N-4
Registration Statement for the Contracts and the Account.
Sincerely yours,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
EXHIBIT 10
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
Registration Statement File No. 333-19607 for Hartford Life and Annuity
Insurance Company Separate Account One on Form N-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 13, 1998
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
POWER OF ATTORNEY
Gregory A. Boyko
Lynda Godkin
Thomas M. Marra
Lowndes A. Smith
David M. Znamierowski
do hereby jointly and severally authorize Lynda Godkin, Marianne O'Doherty,
and Leslie T. Soler to sign as their agent, any Registration Statement,
pre-effective amendment, post-effective amendment and any application for
exemptive relief of the Hartford Life 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/ Gregory A. Boyko Dated as of March 16, 1998
- ------------------------------ --------------------------
Gregory A. Boyko
/s/ Lynda Godkin Dated as of March 16, 1998
- ------------------------------ --------------------------
Lynda Godkin
/s/ Thomas M. Marra Dated as of March 16, 1998
- ------------------------------ --------------------------
Thomas M. Marra
/s/ Lowndes A. Smith Dated as of March 16, 1998
- ------------------------------ --------------------------
Lowndes A. Smith
/s/ David M. Znamierowski Dated as of March 16, 1998
- ------------------------------ --------------------------
David M. Znamierowski
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
THE HARTFORD
The Hartford Financial Services Group, Inc.
(Delaware)
|
- -------------------------------------------------------------------------------------------------------------
Nutmeg Insurance Company The Hartford Investment
(Connecticut) Management Company
| (Delaware)
Hartford Fire Insurance Company |
(Connecticut) Hartford Investment
| Services, Inc.
Hartford Accident and Indemnity Company (Connecticut)
(Connecticut)
|
Hartford Life, Inc.
(Delaware)
|
Hartford Life and Accident Insurance Company
(Connecticut)
|
|
|
- -------------------------------------------------------------------------------------------------------------
Alpine Life Hartford Financial Hartford Life American Maturity ITT Hartford Canada
Insurance Services Life Insurance Company Life Insurance Holdings, Inc.
Company Insurance Co. (Connecticut) Company (Canada)
(New Jersey) (Connecticut) | (Connecticut) |
| | |
| AML Financial, Inc. |
| (Connecticut) Hartford Life
| Insurance Company
| of Canada
| (Canada)
|
|
- -------------------------------------------------------------------------------------------------------------
Hartford Life and Annuity ITT Hartford International Hartford Financial Services Royal Life
Insurance Company Life Reassurance Corporation Corporation Insurance
(Connecticut) (Connecticut) (Delaware) Company of
| | America
| | (Connecticut)
| |
ITT Hartford Life, Ltd. |
(Bermuda) |
|
|
- -------------------------------------------------------------------------------------------------------------
MS Fund HL Funding HL Investment Hartford Hartford Securities Hartford-Comp. Emp.
America Company, Inc. Advisors, Inc. Equity Sales Distribution Benefit Service
1993-K, Inc. (Connecticut) (Connecticut) Company, Inc. Company, Inc. Company
(Delaware) | (Connecticut) (Connecticut) (Connecticut)
|
Hartford Investment
Financial Services
Company
(Delaware)
</TABLE>
