<PAGE>
As filed with the Securities and Exchange Commission on June 1, 1998.
File No. 33-73568
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. 11 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 22 [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) 843-6733
(Depositor's Telephone Number, Including Area Code)
MARIANNE O'DOHERTY, ESQ.
HARTFORD LIFE, INC.
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ on June 1, 1998 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on June 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 Glossary of Special Terms
3. Synopsis or Highlights Introduction
4. Condensed Financial Yield Information
Information
5. General Description of Hartford, Separate Account One, the Fixed
Registrant Account, and the Funds
6. Deductions Charges Under the Contract
7. General Description of The Contracts, Separate Account, the
Annuity Contracts Fixed Account, and Surrender Benefits
8. Annuity Period Settlement Provisions
9. Death Benefit Death Benefits
10. Purchases and Contract Value The Contract, Contracts Offered, Premium
Payments and Initial Allocations and
Contract Value
11. Redemptions Surrender Benefits
12. Taxes Federal Tax Considerations
13. Legal Proceedings Legal Matters & Experts
14. Table of Contents of the Table of Contents to Statement of
Statement of Additional Additional Information
Information
15. Cover Page Part B; Statement of Additional
Information
16. Table of Contents Table of Contents
17. General Information and Introduction
History
18. Services None
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 ITEM NO. PROSPECTUS HEADING
- ------------ ------------------
21. Calculation of Performance Calculation of Yield and Return
Data
22. Annuity Payments Settlement Provisions
23. Financial Statements Financial Statements
24. Financial Statements and Financial Statements and
Exhibits Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Persons Controlled by or Under
Under Common Control Common Control with the
with the Depositor or Depositor or Registrant
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>
THE DIRECTOR
SEPARATE ACCOUNT ONE
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102-5085
TELEPHONE: 1-800-862-6668 (CONTRACT
OWNERS)
[LOGO] 1-800-862-7155 (INVESTMENT REPRESENTATIVES)
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This Prospectus describes The Director, an individual and group flexible premium
tax deferred variable annuity contract designed for retirement planning purposes
("Contracts").
The Contracts are issued by Hartford Life and Annuity Insurance Company
("Hartford".) Payments for the Contracts will be held in a series of Hartford
Life andAnnuity Insurance Company Separate Account One (the "Separate Account")
or in the Fixed Account of Hartford. Allocations to and transfers to and from
the Fixed Account are not permitted in certain states.
The following Sub-Accounts are available under the Contracts. Opposite each
Sub-Account is the name of the underlying investment for that Sub-Account.
<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")
Growth and Income Fund Sub-Account -- shares of Class IA of Hartford Growth and Income HLS Fund,
Inc. ("Hartford Growth and Income 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 -- shares of Class IA of Hartford International Opportunities
Sub-Account 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 Fund, Inc.
("Hartford Small Company Fund")
Stock Fund Sub-Account -- shares of Class IA of Hartford Stock HLS Fund, Inc.
("Hartford Stock Fund")
</TABLE>
This Prospectus sets forth the information concerning the Separate Account and
the Fixed Account that investors should know before investing. This Prospectus
should be kept for future reference. Additional information about the Separate
Account and the Fixed Account has been filed with the Securities and Exchange
Commission and is available without charge upon request. To obtain the Statement
of Additional Information send a written request to, or call Hartford, Attn.:
Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085. The Table
of Contents for the Statement of Additional Information may be found on page 28
of this Prospectus. The Statement of Additional Information is incorporated by
reference to this Prospectus.
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VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED
BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PROSPECTUS DATED: JUNE 1, 1998
STATEMENT OF ADDITIONAL INFORMATION DATED: JUNE 1, 1998
<PAGE>
2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GLOSSARY OF SPECIAL TERMS............................................. 3
FEE TABLE............................................................. 5
ACCUMULATION UNIT VALUES.............................................. 6
INTRODUCTION.......................................................... 7
HARTFORD, THE SEPARATE ACCOUNT, THE FUNDS AND THE FIXED ACCOUNT....... 7
Hartford Life and Annuity Insurance Company......................... 7
The Separate Account................................................ 8
The Funds........................................................... 8
The Fixed Account................................................... 10
PERFORMANCE RELATED INFORMATION....................................... 11
THE CONTRACTS......................................................... 11
Contracts Offered................................................... 11
Premium Payments and Initial Allocations............................ 12
Contract Value...................................................... 12
Transfers Between the Sub-Accounts/Fixed Account.................... 13
Charges Under the Contract.......................................... 13
Death Benefits...................................................... 15
Surrender Benefits.................................................. 16
Settlement Provisions............................................... 17
Other Information................................................... 19
FEDERAL TAX CONSIDERATIONS............................................ 20
A. General.......................................................... 20
B. Taxation of Hartford and the Separate Account.................... 20
C. Taxation of Annuities -- General Provisions Affecting Purchasers
Other Than Qualified Retirement Plans............................ 20
D. Federal Income Tax Withholding................................... 23
E. General Provisions Affecting Qualified Retirement Plans.......... 23
F. Annuity Purchases by Nonresident Aliens and Foreign
Corporations....................................................... 23
MISCELLANEOUS......................................................... 23
How Contracts are Sold.............................................. 23
Legal Matters and Experts........................................... 24
Additional Information.............................................. 24
APPENDIX I INFORMATION REGARDING TAX-QUALIFIED PLANS.................. 25
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION.............. 28
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
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GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT: An accounting unit of measure used to calculate values before
Annuity payments begin.
ADMINISTRATIVE OFFICE OF HARTFORD: Currently located at 200 Hopmeadow Street,
Simsbury, CT. All correspondence concerning the Contract should be sent to P.O.
Box 5085, Hartford, CT 06102-5085, Attn.: Individual Annuity Services, except
for overnight or express mail packages, which should be sent to: 200 Hopmeadow
Street, Simsbury, CT 06089.
ANNUAL MAINTENANCE FEE: An annual $30 charge on a Contract having a Contract
value of less than $50,000, as determined on the most recent Contract
Anniversary or upon full surrender of the Contract. The charge is deducted
proportionately from the investment options in use at the time of such
deduction.
ANNUAL WITHDRAWAL AMOUNT: The amount which can be withdrawn in any Contract Year
prior to incurring surrender charges.
ANNUITANT: The person or Participant upon whose life the Contract is issued.
ANNUITY: A Contract issued by an insurance company that provides, in exchange
for Premium Payments, a series of income payments. This Prospectus describes a
deferred annuity Contract in which Premium Payments accumulate tax-deferred
until a partial or full surrender is taken or until the Annuity Commencement
Date. Annuity payments under the Contract will begin as of the Annuity
Commencement Date in accordance with the Annuity payment option selected.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to commence.
Under a group unallocated Contract, the date for each Participant is determined
by the Contract Owner in accordance with the terms of the Plan.
ANNUITY UNIT: An accounting unit of measure used to calculate the value of
Annuity payments.
BENEFICIARY: The person(s) who receive Contract Values in the event of the
Annuitant's or Contract Owner's death under certain conditions. Under a group
unallocated Contract, the person named by the Participant within the Plan
documents/enrollment forms who is entitled to receive benefits in case of the
death of the Participant.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: Securities and Exchange Commission.
CONTINGENT ANNUITANT: The person so designated by the Contract Owner, who upon
the Annuitant's death, prior to the Annuity Commencement Date, becomes the
Annuitant.
CONTRACT: For an Annuity issued to an individual, the Contract is the individual
Annuity and any endorsements or riders. For a group Annuity, the Contract is a
certificate evidencing a participatory interest in a group Annuity and any
endorsements or riders. Any reference in this Prospectus to a Contract includes
the certificate.
CONTRACT ANNIVERSARY: The anniversary of the Contract Date.
CONTRACT OWNER(S): The owner(s) of the Contract, trustee or other entity,
sometimes herein referred to as "you".
CONTRACT VALUE: The aggregate value of any Sub-Account Accumulation Units held
under the Contract plus the value of the Fixed Account.
CONTRACT YEAR: A period of 12 months commencing with the Contract Date or any
anniversary thereof.
DEATH BENEFIT: The amount payable upon the death of a Contract Owner, Annuitant
or Participant, in the case of group Contracts before annuity payments have
commenced.
DUE PROOF OF DEATH: A certified copy of a death certificate, an order of a court
of competent jurisdiction, a statement from a physician who attended the
deceased or any other proof acceptable to Hartford.
FIXED ACCOUNT: Part of the General Account of Hartford to which a Contract Owner
may allocate all or a portion of his Premium Payment or Contract Value.
FIXED ANNUITY: An Annuity providing for guaranteed payments which remain fixed
in amount throughout the payment period and which do not vary with the
investment experience of a separate account.
FUNDS: The Funds described commencing on page 8 of this Prospectus and any
additional Funds which may be made available from time to time.
GENERAL ACCOUNT: The General Account of Hartford which consists of all assets of
Hartford other than those allocated to the separate accounts of Hartford.
HARTFORD: Hartford Life and Annuity Insurance Company.
MAXIMUM ANNIVERSARY VALUE: Value used in determining the death benefit. It is
based on a series of calculations of Contract Values on Contract Anniversaries,
premium payments and partial surrenders, as described on page 12.
NON-QUALIFIED CONTRACT: A Contract which is not part of a tax-qualified
retirement plan or arrangement which qualifies for special tax treatment under
the Code.
PARTICIPANT (FOR GROUP UNALLOCATED CONTRACTS ONLY): Any eligible employee of an
employer/Contract Owner participating in the Plan.
PLAN: A voluntary plan of an employer or other person which qualifies for
special tax treatment under the Code.
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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PREMIUM PAYMENT: The payment made to Hartford pursuant to the terms of the
Contract.
PREMIUM TAX: A tax on premiums charged by a state or municipality on Premium
Payments or Contract Values.
QUALIFIED CONTRACT: A Contract which is a part of a tax-qualified retirement
plan or arrangement which qualifies for special tax treatment under the Code,
such as an employer-sponsored Section 401(k) plan or an Individual Retirement
Annuity (IRA).
SEPARATE ACCOUNT: The Hartford separate account entitled "Hartford Life and
Annuity Insurance Company Separate Account One".
SUB-ACCOUNT: Accounts established within the Separate Account with respect to a
Fund.
TERMINATION VALUE: The Contract Value upon termination of the Contract prior to
the Annuity Commencement Date, less any applicable Premium Taxes, the Annual
Maintenance Fee and any applicable contingent deferred sales charges.
UNALLOCATED CONTRACTS: Contracts issued to employers, or other entity, as
Contract Owner under which no allocation of Contract Values is made for a
specific Participant. The Plans will be responsible for the individual
allocations.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined at the close of the New York Stock
Exchange (generally 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
VARIABLE ANNUITY: An Annuity providing for payments varying in amount in
accordance with the investment experience of the assets of the Separate Account.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
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FEE TABLE
SUMMARY
Contract Owner Transaction Expenses
(All Sub-Accounts)
<TABLE>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of premium
payments)...................................................... None
Exchange Fee...................................................... $0
Deferred Sales Load (as a percentage of amounts withdrawn)
First Year (1)................................................ 6%
Second Year................................................... 6%
Third Year.................................................... 5%
Fourth Year................................................... 5%
Fifth Year.................................................... 4%
Sixth Year.................................................... 3%
Seventh Year.................................................. 2%
Eighth Year................................................... 0%
Annual Maintenance Fee (2)........................................ $30
Annual Expenses -- Separate Account (as percentage of average
account value)
Mortality and Expense Risk.................................... 1.250%
</TABLE>
(1) Length of time from premium payment.
(2) The Annual Maintenance Fee is a single $30 charge on a Contract. It is
deducted proportionally from the investment options in use at the time of
the charge. Pursuant to requirements of the Investment Company Act of 1940,
the Annual Maintenance Fee has been reflected in the Examples by a method
intended to show the "average" impact of the Annual Maintenance Fee on an
investment in the Separate Account. The Annual Maintenance Fee is deducted
only when the accumulated value is less than $50,000. In the Example, the
Annual Maintenance Fee is approximated a 0.08% annual asset charge based on
the experience of the Contracts.
Annual Fund Operating Expenses
(as percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT FEES OTHER EXPENSES OPERATING EXPENSES
--------------- -------------- ------------------
<S> <C> <C> <C>
Hartford Bond Fund.............................. 0.490% 0.020% 0.510%
Hartford Stock Fund............................. 0.430% 0.020% 0.450%
Hartford Money Market Fund...................... 0.425% 0.015% 0.440%
Hartford Advisers Fund.......................... 0.610% 0.020% 0.630%
Hartford Capital Appreciation Fund.............. 0.620% 0.020% 0.640%
Hartford Mortgage Securities Fund............... 0.425% 0.025% 0.450%
Hartford Index Fund............................. 0.375% 0.015% 0.390%
Hartford International Opportunities Fund....... 0.680% 0.090% 0.770%
Hartford Dividend & Growth Fund................. 0.660% 0.020% 0.680%
Hartford International Advisers Fund............ 0.750% 0.120% 0.870%
Hartford MidCap Fund (1)........................ 0.750% 0.040% 0.790%
Hartford Small Company Fund..................... 0.750% 0.020% 0.770%
Hartford Growth and Income Fund (1)............. 0.520% 0.150% 0.670%
</TABLE>
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(1) Hartford MidCap Fund and Hartford Growth and Income Fund are new funds.
"Total Fund Operating Expenses" are based on annualized estimates of such
expenses to be incurred in the current fiscal year. HL Investment Advisors,
Inc. has agreed to waive its fees for the Hartford Growth and Income Fund
until the assets of the Funds (excluding assets contributed by companies
affiliated with HL Investment Advisors, Inc.) reach $20 million. Absent this
waiver, the investment advisory fee would be 0.575% annually and Total Fund
Operating Expenses ratio would be 0.900% (annualized).
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
If you surrender your If you annuitize your If you do not surrender your
Contract at the end of the Contract at the end of the Contract, you would pay the
applicable time period, you applicable time period, you following expenses on a
would pay the following would pay the following $1,000 investment, assuming a
expenses on a $1,000 expenses on a $1,000 5% annual return on assets:
investment, assuming a 5% investment, assuming a 5%
annual return on assets: annual return on assets:
<CAPTION>
5 10 5 10 5 10
SUB-ACCOUNT 1 YEAR 3 YEARS YEARS YEARS 1 YEAR 3 YEARS YEARS YEARS 1 YEAR 3 YEARS YEARS YEARS
------ ------- ------ ------- ------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bond Fund.................... $ 73 $ 106 $139 $215 $ 18 $ 57 $ 99 $214 $ 19 $ 58 $ 99 $215
Stock Fund................... 72 104 136 209 17 55 96 208 18 56 96 209
Money Market Fund............ 72 104 136 208 17 55 95 207 18 56 96 208
Advisers Fund................ 74 109 146 228 19 61 105 227 20 61 106 228
Capital Appreciation Fund.... 74 110 146 229 19 61 105 228 20 62 106 229
Mortgage Securities Fund..... 72 104 136 209 17 55 95 208 18 56 96 209
Index Fund................... 71 102 133 202 17 53 92 201 17 54 93 202
International Opportunities
Fund....................... 75 114 153 243 21 65 112 242 21 66 113 243
Dividend & Growth Fund....... 74 111 148 233 20 62 108 233 20 63 108 233
International Advisers
Fund....................... 76 117 158 253 22 68 117 253 22 69 118 253
MidCap Fund.................. 76 114 N/A N/A 21 66 N/A N/A 22 66 N/A N/A
Small Company Fund........... 75 114 153 243 21 65 112 242 21 66 113 243
Growth and Income Fund....... 74 111 N/A N/A 20 62 N/A N/A 20 63 N/A N/A
</TABLE>
The purpose of this table is to assist the Contract Owner in understanding
various costs and expenses that a Contract Owner will bear directly or
indirectly. The table reflects expenses of the Separate Account and underlying
Funds. Premium taxes may also be applicable.
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
<PAGE>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
The following information for the five years ended, has been derived from
the audited financial statements of the separate account, which have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and should be read in conjunction with those
statements which are included in the Statement of Additional Information, which
is incorporated by reference in this Prospectus. The information for the quarter
ended March 31, 1998 is unaudited and is included for informational purposes
only. There is no information regarding the Growth and Income Fund Sub-Account
because as of March 31, 1998, the Sub-Account had not yet commenced operations.
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31,
-------------- YEAR ENDED DECEMBER 31,
1998 -------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
-------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
BOND FUND SUB-ACCOUNT
(INCEPTION AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $2.114 $1.992 $1.880 $1.607 $1.694 $1.556
Accumulation unit value at end of period.................. $2.145 $2.114 $1.922 $1.880 $1.607 $1.694
Number accumulation units outstanding at end of period (in
thousands)............................................... 122,570 107,759 76,247 48,354 33,950 23,803
STOCK FUND SUB-ACCOUNT
(INCEPTION AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $4.602 $3.547 $2.887 $2.180 $2.250 $1.993
Accumulation unit value at end of period.................. $5,277 $4.602 $3.547 $2.887 $2.180 $2.250
Number accumulation units outstanding at end of period (in
thousands)............................................... 469,940 440,557 317,416 186,727 110,928 60,431
MONEY MARKET FUND SUB-ACCOUNT
(INCEPTION AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $1.650 $1.587 $1.528 $1.462 $1.424 $1.401
Accumulation unit value at end of period.................. $1.667 $1.650 $1.587 $1.528 $1.462 $1.424
Number accumulation units outstanding at end of period (in
thousands)............................................... 115,268 120,947 110,350 66,468 30,871 14,881
ADVISERS FUND SUB-ACCOUNT
(INCEPTION AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $3.572 $2.905 $2.523 $1.991 $2.072 $1.870
Accumulation unit value at end of period.................. $3.935 $3.572 $2.905 $2.523 $1.991 $2.072
Number accumulation units outstanding at end of period (in
thousands)............................................... 63,825 999,829 784,326 645,105 414,318 244,980
CAPITAL APPRECIATION FUND SUB-ACCOUNT
(INCEPTION AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $4.845 $4.010 $3.364 $2.615 $2.583 $2.165
Accumulation unit value at end of period.................. $5.446 $4.845 $4.010 $3.364 $2.615 $2.583
Number accumulation units outstanding at end of period (in
thousands)............................................... 483,913 461,578 353,466 216,591 116,535 58,645
MORTGAGE SECURITIES FUND SUB-ACCOUNT
(INCEPTION AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $2.098 $1.949 $1.878 $1.637 $1.685 $1.604
Accumulation unit value at end of period.................. $2.123 $2.098 $1.949 $1.878 $1.637 $1.685
Number accumulation units outstanding at end of period (in
thousands)............................................... 40,671 38,292 38,304 31,288 20,674 28,380
INDEX FUND SUB-ACCOUNT
(INCEPTION MAY 1, 1987)
Accumulation unit value at beginning of period............ $3.726 $2.845 $2.359 $1.750 $1.755 $1.629
Accumulation unit value at end of period.................. $4.228 $3.726 $2.845 $2.359 $1.750 $1.755
Number accumulation units outstanding at end of period (in
thousands)............................................... 129,470 117,372 77,074 32,779 12,030 7,491
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT
(INCEPTION JULY 2, 1990)
Accumulation unit value at beginning of period............ $1.469 $1.482 $1.329 $1.181 $1.220 $0.924
Accumulation unit value at end of period.................. $1.657 $1.469 $1.482 $1.329 $1.181 $1.220
Number accumulation units outstanding at end of period (in
thousands)............................................... 393,348 396,430 326,954 222,606 175,763 66,084
DIVIDEND & GROWTH FUND SUB-ACCOUNT
(INCEPTION MARCH 8, 1994)
Accumulation unit value at beginning of period............ $2.149 $1.650 $1.359 $1.009 $1.000 --
Accumulation unit value at end of period.................. $2.394 $2.149 $1.650 $1.359 $1.009 --
Number accumulation units outstanding at end of period (in
thousands)............................................... 606,538 541,076 301,767 101,085 21,973 --
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT
(INCEPTION MARCH 1, 1995)
Accumulation unit value at beginning of period............ $1.319 $1.266 $1.146 $1.000 -- --
Accumulation unit value at end of period.................. $1.437 $1.319 $1.266 $1.146 -- --
Number accumulation units outstanding at end of period (in
thousands)............................................... 115,255 109,735 56,743 10,717 -- --
SMALL COMPANY FUND SUB-ACCOUNT
(INCEPTION AUGUST 9, 1996)
Accumulation unit value at beginning of period............ $1.247 $1.066 $1.000 -- -- --
Accumulation unit value at end of period.................. $1.396 $1.247 $1.066 -- -- --
Number accumulation units outstanding at end of period (in
thousands)............................................... 122,286 108,104 24,397 -- -- --
MIDCAP FUND SUB-ACCOUNT
(INCEPTION JULY 15, 1997)
Accumulation unit value at beginning of period............ $1.097 $1.000 -- -- -- --
Accumulation unit value at end of period.................. $1.238 $1.097 -- -- -- --
Number accumulation units outstanding at end of period (in
thousands)............................................... 25,315 13,437 -- -- -- --
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
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INTRODUCTION
This Prospectus has been designed to provide you with the necessary
information to make a decision on purchasing an individual or group tax deferred
Variable Annuity Contract offered by Hartford Life and Annuity Insurance Company
("Hartford") in the Fixed Account and/or a series of Separate Account One. (See
"Hartford Life and Annuity Insurance Company," page 7; "The Contracts," page 11;
and "The Separate Account," page 8.) Please read the Glossary of Special Terms
on pages 3 and 4 prior to reading this Prospectus to familiarize yourself with
the terms being used.
The Contracts are available for purchase by individuals and groups on both a
non-qualified and qualified basis. The maximum issue age for the Contract is 85
years old. (See "The Contracts," page 11.) Generally, the minimum initial
Premium Payment is $1,000; the minimum payment is $500, if you are in the
InvestEase program the minimum subsequent payment is $50. There is no deduction
for sales expenses from Premium Payments when made. A deduction will be made for
state Premium Taxes for Contracts sold in certain states. (See "Charges Under
the Contract," page 13.)
Generally, the Contracts are purchased by completing and submitting an
application or an order to purchase, along with the initial Premium Payment, to
Hartford for its approval. Generally, a Contract Owner may exercise his right to
cancel the Contract within ten days of receipt of the Contract by returning the
Contract to Hartford at its Administrative Office. If the Contract Owner
exercises his right to cancel, Hartford will return either the Contract Value or
the original Premium Payments to the Contract Owner. The duration of the right
to cancel period and Hartford's obligation to either return the Contract Value
or the original Premium Payment will depend on state law.
The investment options for the contracts are the Hartford Advisers Fund,
Hartford Bond Fund, Hartford Capital Appreciation Fund, Hartford Dividend and
Growth Fund, Hartford Growth and Income Fund, Hartford Index Fund, Hartford
International Advisers Fund, Hartford International Opportunities Fund, Hartford
MidCap Fund, Hartford Mortgage Securities Fund, Hartford Small Company Fund,
Hartford Stock Fund, Hartford Money Market Fund, and such other funds as shall
be offered from time to time (the "Funds"), and the Fixed Account. (See "The
Funds," page 8, and "The Fixed Account," page 10.) With certain limitations,
Contract Owners may allocate their Premium Payments and Contract Values to one
or a combination of these investment options and transfer among the investment
options. (See "Transfers Between Sub-Accounts/Fixed Account," page 12.)
An Annual Maintenance Fee in the amount of $30.00 is deducted from Contract
Values each Contract Year (not applicable to Contracts with Account Values of
$50,000 or more or under other circumstances at the sole discretion of Hartford)
and there is a 1.25% per annum mortality and expense risk charge applied against
all Contract Values held in the Separate Account. (See "Charges Under the
Contract," page 13). Finally, the Funds are subject to certain fees, charges and
expenses (see the accompanying Funds' prospectus).
The Contracts may be surrendered, or portions of the value of the Contracts
may be withdrawn, at any time prior to the Annuity Commencement Date. (See
"Surrender Benefits," page 16). However, a contingent deferred sales charge may
be assessed against Contract Values when they are surrendered. Contingent
deferred sales charges will not be assessed in certain instances, including
withdrawals up to the annual withdrawal amount and the payment of Death
Benefits. (See "Charges Under the Contract," page 13.)
The Contract provides for a minimum death benefit in the event of the death
of the Annuitant or Contract Owner before Annuity payments have commenced (see
"Death Benefits," page 15). Various annuity options are available under the
Contract for election by the Contract Owner on either a fixed or variable basis.
In the absence of an annuity option election, the Contract Value (less
applicable Premium Taxes) will be applied on the Annuity Commencement Date to
provide a life annuity with 120 monthly payments certain (see "Settlement
Provisions," page 17).
HARTFORD, THE SEPARATE
ACCOUNT, THE FUNDS AND
THE FIXED ACCOUNT
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company is a stock life insurance
company engaged in the business of writing life insurance and annuities, both
individual and group, in all states of the United States 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.
<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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HARTFORD RATINGS
<TABLE>
<CAPTION>
EFFECTIVE
RATING DATE OF BASIS OF
AGENCY RATING RATING RATING
- ---------------- ---------- --------- -------------------------
<S> <C> <C> <C>
A.M. Best and Financial soundness and
Company, Inc.... 9/9/97 A+ operating performance.
Standard & Insurer financial
Poor's.......... 1/23/98 AA strength
Duff & Phelps... 1/23/98 AA+ Claims paying ability
</TABLE>
THE SEPARATE ACCOUNT
The Separate Account was established on May 20, 1991. It is the Separate
Account in which Hartford sets aside and invests the assets attributable to
variable annuity Contracts, including the Contracts sold under this Prospectus.
Separate Account assets are held by Hartford under a safekeeping arrangement.
Although the Separate Account is an integral part of Hartford, it is registered
as a unit investment trust under the Investment Company Act of 1940. This
registration does not, however, involve Commission supervision of the management
or the investment practices or policies of the Separate Account or Hartford. The
Separate Account meets the definition of "separate account" under federal
securities law.
Your investment in the Separate Account is allocated to one or more
Sub-Accounts as per your specifications. Each Sub-Account is invested
exclusively in the assets of one underlying Fund. Hartford reserves the right,
subject to compliance with the law, to substitute the shares of any other
registered investment company for the shares of any Fund already purchased or to
be purchased in the future by the Separate Account provided that the
substitution has been approved by the Commission.
Net Premium Payments and proceeds of transfers between Sub-Accounts are
applied to purchase shares in the appropriate Fund at net asset value determined
as of the end of the Valuation Period during which the payments were received or
the transfer made. All distributions from the Fund are reinvested at net asset
value. The value of your investment will therefore vary in accordance with the
net income and fluctuation in the individual investments within the underlying
Fund portfolio or portfolios. During the Variable Annuity payout period, both
your Annuity payments and reserve values will vary in accordance with these
factors.
Under Connecticut law, the assets of the Separate Account attributable to
the Contracts offered under this Prospectus are held for the benefit of the
owners of, and the persons entitled to payments under, those Contracts. Income,
gains, and losses, whether or not realized, from assets allocated to the
Separate Account, are, in accordance with the Contracts, credited to or charged
against the Separate Account. Also, the assets in the Separate Account are not
chargeable with liabilities arising out of any other business Hartford may
conduct. Contract Values allocated to the Separate Account is not affected by
the rate of return of Hartford's General Account, nor by the investment
performance of any of Hartford's other separate accounts. The Separate Account
may be subject to liabilities arising from a Sub-Account of the Separate Account
whose assets are attributable to other variable annuity Contracts or variable
life insurance policies offered by the Separate Account which are not described
in this Prospectus. However, all obligations arising under the Contracts are
general corporate obligations of Hartford.
Hartford does not guarantee the investment results of the Separate Accounts
or any of the underlying investments. There is no assurance that the value of a
Contract during the years prior to retirement or the aggregate amount of the
Variable Annuity payments will equal the total of Premium Payments made under
the Contract. Since each underlying Fund has different investment objectives,
each is subject to different risks. These risks are more fully described in the
accompanying Funds' prospectus.
THE FUNDS
All of the Funds are sponsored by Hartford and are incorporated under the
laws of the State of Maryland. HL Investment Advisors, Inc. ("HL Advisors")
serves as the investment adviser to each of the Funds.
Wellington Management Company, LLP serves as sub-investment adviser for
Hartford Advisers Fund, Hartford Capital Appreciation Fund, Hartford Dividend
and Growth Fund, Hartford Growth and Income Fund, Hartford International
Advisers Fund, Hartford International Opportunities Fund, Hartford MidCap Fund,
Hartford Small Company Fund, and Hartford Stock Fund.
In addition, HL Advisors has entered into an investment services agreement
with The Hartford Investment Management Company ("HIMCO"), pursuant to which
HIMCO will provide certain investment services to Hartford Bond Fund, Hartford
Index Fund, Hartford Mortgage Securities Fund and Hartford Money Market Fund.
A full description of the Funds, their investment policies and restrictions,
risks, charges and expenses and all other aspects of their operation is
contained in the accompanying Funds' prospectus, which should be read in
conjunction with this Prospectus before investing, and in the Funds' Statement
of Additional Information which may be ordered from Hartford. The Funds may not
be available in all states.
Depending on where you purchase the Contract, other investment options may
be available.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
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The investment objectives of each of the Funds are as follows:
HARTFORD ADVISERS FUND
Seeks maximum long-term total rate of return by investing in common stocks
and other equity securities, bonds and other debt securities, and money market
instruments.
HARTFORD BOND FUND
Seeks maximum current income consistent with preservation of capital by
investing primarily in fixed-income securities. Up to 20% of the total assets of
this Fund may be invested in debt securities rated in the highest category below
investment grade ("Ba" by Moody's Investor Services, Inc. or "BB" by Standard &
Poor's) or, if unrated, are determined to be of comparable quality by the Fund's
investment adviser. Securities rated below investment grade are commonly
referred to as "high yield-high risk securities" or "junk bonds." For more
information concerning the risks associated with investing in such securities,
please refer to the section in the accompanying prospectus for the Funds
entitled "Hartford Bond Fund, Inc. -- Investment Policies."
HARTFORD CAPITAL APPRECIATION FUND
Seeks 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.
HARTFORD GROWTH AND INCOME FUND
Seeks growth of capital and current income by investing primarily in equity
securities with earnings growth potential and steady or rising dividends.
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.*
HARTFORD INTERNATIONAL ADVISERS FUND
Seeks maximum long-term total return consistent with prudent investment risk
by investing in a portfolio of equity, debt and money market securities.
Securities in which the Fund invests primarily will be denominated in non-U.S.
currencies and will be traded in non-U.S. markets.
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 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 growth of capital by investing primarily in equity securities selected
on the basis of potential for capital appreciation.
HARTFORD STOCK FUND
Seeks long-term growth by investing primarily in equity securities.
HARTFORD MONEY MARKET FUND
Seeks maximum current income consistent with liquidity and preservation of
capital.
VOTING RIGHTS SEPARATE ACCOUNT -- As the owner, Hartford has the right to vote
at the Funds' shareholder meetings. However, to the extent required by federal
securities laws or regulations, Hartford will:
1. Vote all Fund shares attributable to a Contract according to instructions
received from the Contract Owner, and
2. Vote shares attributable to a Contract for which no voting instructions are
received in the same proportion as shares for which instructions are
received.
If any federal securities laws or regulations, or their present
interpretation change to permit Hartford to vote Fund shares in its own right,
Hartford may elect to do so.
Hartford will send proxy materials and a form of instruction by means of
which you can instruct Hartford with respect to the voting of the Fund shares
held for your account.
In connection with the voting of Fund shares held by it, Hartford will
arrange for the handling and tallying of proxies received from Contract Owners.
Hartford as such, shall have no right, except as hereinafter provided, to vote
any Fund shares held by it hereunder which may be registered in its name or the
names of its nominees. Hartford will, however, vote the Fund shares held by it
in accordance with the instructions received from the Contract Owners for
* "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 ("INDEX FUND") IS NOT
SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S AND STANDARD &
POOR'S MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF INVESTING IN THE
INDEX FUND.
<PAGE>
10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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whose accounts the Fund shares are held. If a Contract Owner desires to attend
any meeting at which shares held for the Contract Owner's benefit may be voted,
the Contract Owner may request Hartford to furnish a proxy or otherwise arrange
for the exercise of voting rights with respect to the Fund shares held for such
Contract Owner's account. Hartford will vote shares for which no instructions
have been given and shares which are not attributable to Contract Owners (i.e.
shares owned by Hartford) in the same proportion as it votes shares of that Fund
for which it has received instructions. During the Annuity period under a
Contract the number of votes will decrease as the assets held to fund Annuity
benefits decrease.
The Funds are available only to serve as the underlying investment for
variable annuity and variable life insurance Contracts issued by Hartford. It is
conceivable that in the future it may be disadvantageous for variable annuity
separate accounts and variable life insurance separate accounts to invest in the
Funds simultaneously. Although Hartford and the Funds do not currently foresee
any such disadvantages either to variable annuity Contract Owners or to variable
life insurance Policyowners, the Funds' Board of Directors intends to monitor
events in order to identify any material conflicts between such Contract Owners
and Policyowners and to determine what action, if any, should be taken in
response thereto. If the Board of Directors of the Funds were to conclude that
separate funds should be established for variable life and variable annuity
separate accounts, the variable annuity Contract Owners would not bear any
expenses attendant to the establishment of such separate funds.
THE FIXED ACCOUNT
THAT PORTION OF THE CONTRACT RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN
ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT,
AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION. THE FOLLOWING DISCLOSURE ABOUT
THE FIXED ACCOUNT MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF
THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURE.
Premium Payments and Contract Values allocated to the Fixed Account become a
part of the general assets of Hartford. Hartford invests the assets of the
General Account in accordance with applicable law governing the investments of
Insurance Company General Accounts.
Currently, Hartford guarantees that it will credit interest at a rate of not
less than 3% per year, compounded annually, to amounts allocated to the Fixed
Account under the Contracts. However, Hartford reserves the right to change the
rate according to state insurance law. Hartford may credit interest at a rate in
excess of 3% per year. There is no specific formula for the determination of
excess interest credits. Some of the factors that Hartford may consider in
determining whether to credit excess interest to amounts allocated to the Fixed
Account and the amount thereof, are general economic trends, rates of return
currently available and anticipated on Hartford's investments, regulatory and
tax requirements and competitive factors. ANY INTEREST CREDITED TO AMOUNTS
ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3% PER YEAR WILL BE DETERMINED IN
THE SOLE DISCRETION OF HARTFORD. THE OWNER ASSUMES THE RISK THAT INTEREST
CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF 3%
FOR ANY GIVEN YEAR.
From time to time, Hartford may credit increased interest rates to Contract
Owners under certain programs established at the discretion of Hartford.
Contract Owners may enroll in a special pre-authorized transfer program known as
Hartford's Dollar Cost Averaging Bonus Program (the "Program"). Under this
Program, Contract Owners who enroll may allocate a minimum of $5,000 of their
Premium Payment into the Program (Hartford may allow a lower minimum Premium
Payment for qualified plan transfers or rollovers, including IRAs) and
pre-authorize transfers to any of the Sub-Accounts under either the 6 Month
Transfer Program or 12 Month Transfer Program. The 6 Month Transfer Program and
the 12 Month Transfer Program will generally have different credited interest
rates. Under the 6 Month Transfer Program, the interest rate can accrue up to 6
months and all Premium Payments and accrued interest must be transferred to the
selected Sub-Accounts in 3 to 6 months. Under the 12 Month Transfer Program, the
interest rate can accrue up to 12 months and all Premium Payments and accrued
interest must be transferred to the selected Sub-Accounts in 7 to 12 months.
This will be accomplished by monthly transfers for the period selected and a
final transfer of the entire amount remaining in the Program.
The pre-authorized transfers will begin within 15 days after the initial
Program Premium Payment and complete enrollment instructions are received by
Hartford. If complete Program enrollment instructions are not received by
Hartford within 15 days of receipt of the initial Program Premium Payment, the
Program will be voided and the entire balance in the Program will be credited
with the non-Program interest rate then in effect for the Fixed Account.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
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Any subsequent Premium Payments received by Hartford within the Program
period selected will be allocated to the Sub-Accounts over the remainder of that
Program transfer period, unless otherwise directed by the Contract Owner.
A Contract Owner may only have one dollar cost averaging program in place at
one time, this means one standard dollar cost averaging plan or one Dollar Cost
Averaging Bonus Program.
Contract Owners may elect to terminate the pre-authorized transfers by
calling or writing Hartford of their intent to cancel their enrollment in the
Program. Upon cancellation of enrollment in the Program, Contract Owners will no
longer receive the increased interest rate. Hartford reserves the right to
discontinue, modify or amend the Program or any other interest rate program
established by Hartford. Any change to the Program will not affect Contract
Owners currently enrolled in the Program. This Program may not be available in
all states; please contact Hartford to determine if it is available in your
state.
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, Growth and Income 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 and the Annual Maintenance Fee
are not deducted. Therefore, non-standardized total return for a Sub-Account is
higher than standardized total return for a Sub-Account.
The Bond Fund and Mortgage Securities Fund Sub-Accounts may advertise yield
in addition to total return. The yield will be computed in the following manner:
The net investment income per unit earned during a recent one month period is
divided by the unit value on the last day of the period. This figure reflects
the recurring charges at the Separate Account level including the Annual
Maintenance Fee.
The Money Market Fund Sub-Account may advertise yield and effective yield.
The yield of a Sub-Account is based upon the income earned by the Sub-Account
over a seven-day period and then annualized, i.e. the income earned in the
period is assumed to be earned every seven days over a 52-week period and stated
as a percentage of the investment. Effective yield is calculated similarly but
when annualized, the income earned by the investment is assumed to be reinvested
in Sub-Account units and thus compounded in the course of a 52-week period.
Yield and effective yield reflect the recurring charges at the Separate Account
level including the Annual Maintenance Fee.
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.
THE CONTRACTS
CONTRACTS OFFERED
The Contracts are individual or group tax deferred Variable Annuity
Contracts designed for retirement planning purposes and may be purchased by any
individual,
<PAGE>
12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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group or trust, including any trustee or custodian for a retirement plan
qualified under Sections 401(a) or 403(a) of the Code; annuity purchase plans
adopted by public school systems and certain tax-exempt organizations according
to Section 403(b) of the Code; Individual Retirement Annuities adopted according
to Section 408 of the Code; employee pension plans established for employees by
a state, a political subdivision of a state, or an agency or instrumentality of
either a state or a political subdivision of a state, and certain eligible
deferred compensation plans as defined in Section 457 of the Code ("Qualified
Contracts"). The maximum issue age for the Contract is 85 years old.
PREMIUM PAYMENTS AND INITIAL ALLOCATIONS
Generally, the minimum initial Premium Payment is $1,000; the minimum
subsequent payment is $500, if you are in the InvestEase program the minimum
subsequent payment is $50. Certain plans may make smaller periodic payments.
Each Premium Payment may be split among the various Sub-Accounts and/or the
Fixed Account subject to minimum amounts then in effect.
REFUND RIGHTS -- If you are not satisfied with your purchase you may cancel the
Contract by returning it within ten days (or longer in some states) after you
receive it. A written request for cancellation must accompany the Contract. In
such event, Hartford will, without deduction for any charges normally assessed
thereunder, pay you an amount equal to the Contract Value on the date of receipt
of the request for cancellation. You bear the investment risk during the period
prior to Hartford's receipt of request for cancellation. Hartford will refund
the premium paid only for Individual Retirement Annuities (if returned within
seven days of receipt) and in those states where required by law.
CREDITING AND VALUATION -- The balance of the initial Premium Payment remaining
after the deduction of any applicable Premium Tax is credited to your Contract
within two business days of receipt of a properly completed application or an
order to purchase a Contract and the initial Premium Payment by Hartford at its
Administrative Office. It will be credited to the Sub-Account(s) and/or the
Fixed Account in accordance with your election. If the application or other
information is incomplete when received, the balance of the initial Premium
Payment, after deduction of any applicable Premium Tax, will be credited to the
Sub-Account(s) or the Fixed Account within five business days of receipt. If the
initial Premium Payment is not credited within five business days, the Premium
Payment will be immediately returned unless you have been informed of the delay
and request that the Premium Payment not be returned.
The number of Accumulation Units in each Sub-Account to be credited to a
Contract will be determined by dividing the portion of the Premium Payment being
credited to each Sub-Account by the value of an Accumulation Unit in that
Sub-Account on that date.
Subsequent Premium Payments are priced on the Valuation Day received by
Hartford at its Administrative Office.
CONTRACT VALUE
The value of the Sub-Account investments under your Contract at any time
prior to the commencement of Annuity payments can be determined by multiplying
the total number of Accumulation Units credited to your Contract in each
Sub-Account by the then current Accumulation Unit values for the applicable
Sub-Account. The value of the Fixed Account under your Contract will be the
amount allocated to the Fixed Account plus interest credited. You will be
advised at least semiannually of the number of Accumulation Units credited to
each Sub-Account, the current Accumulation Unit values, the Fixed Account value,
and the total value of your Contract.
ACCUMULATION UNIT VALUES -- The Accumulation Unit value for each Sub-Account
will vary to reflect the investment experience of the applicable Fund and will
be determined on each Valuation Day by multiplying the Accumulation Unit value
of the particular Sub-Account on the preceding Valuation Day by a "Net
Investment Factor" for that Sub-Account for the Valuation Period then ended. The
"Net Investment Factor" for each of the Sub-Accounts is equal to (a) the net
asset value per share of the corresponding Fund at the end of the Valuation
Period (plus the per share amount of any dividends or capital gains distributed
by that Fund if the ex-dividend date occurs in the Valuation Period then ended)
divided by the net asset value per share of the corresponding Fund at the
beginning of the Valuation Period, minus (b) the mortality and expense risk
charge and the administration charge described below. You should refer to the
prospectus for each of the Funds which accompanies this Prospectus for a
description of how the assets of each Fund are valued since each determination
has a direct bearing on the Accumulation Unit value of the Sub-Account and
therefore the value of a Contract. The Accumulation Unit Value is affected by
the performance of the underlying Fund(s), expenses and deduction of the charges
described in this Prospectus.
VALUATION OF FUND SHARES -- The shares of the Fund are valued at net asset value
on each Valuation Day. A complete description of the valuation method used in
valuing Fund shares may be found in the accompanying Funds' prospectus.
VALUATION OF THE FIXED ACCOUNT -- Hartford will determine the value of the Fixed
Account by crediting interest to amounts allocated to the Fixed Account.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
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TRANSFERS BETWEEN SUB-ACCOUNTS/
FIXED ACCOUNT
You may transfer the values of your Sub-Account allocations from one or more
Sub-Accounts to another free of charge. However, Hartford reserves the right to
limit the number of transfers to 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 (800) 862-6668 or by the agent of record by calling (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 callers provide certain information for
identification purposes. All transfer instructions by telephone are tape
recorded.
Hartford may permit the Contract Owner to pre-authorize transfers among
Sub-Accounts and between Sub-Accounts and the Fixed Account under certain
circumstances. Transfers between the Sub-Accounts may be made both before and
after Annuity payments commence (limited to once a quarter) provided that the
minimum allocation to any Sub-Account may not be less than $500. No minimum
balance is required in any Sub-Account.
It is the responsibility of the Contract Owner or Participant to verify the
accuracy of all confirmations of transfers and to promptly advise Hartford of
any inaccuracies within 30 days of receipt of the confirmation. Hartford will
send the Contract Owner a confirmation of the transfer within five days from the
date of any instruction.
Transfers from the Fixed Account into a Sub-Account may be made at any time
during the Contract Year. The maximum amount which may be transferred from the
Fixed Account during any Contract Year is the greater of 30% of the Fixed
Account balance as of the last Contract Anniversary or the greatest amount of
any prior transfer from the Fixed Account. If Hartford permits pre-authorized
transfers from the Fixed Account to the Sub-Accounts, this restriction is
inapplicable. Also, if any interest rate is renewed at a rate of at least one
percentage point less than the previous rate, the Contract Owner may elect to
transfer up to 100% of the funds receiving the reduced rate within 60 days of
notification of the interest rate decrease. Generally, transfers may not be made
from any Sub-Account into the Fixed Account for the six-month period following
any transfer from the Fixed Account into one or more of the Sub-Accounts.
Hartford reserves the right to modify the limitations on transfers from the
Fixed Account and to defer transfers from the Fixed Account for up to six months
from the date of request.
Subject to the exceptions set forth in the following two paragraphs, 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 the Fixed Account and could include, but not be limited to, the
requirement of a minimum time period between each transfer, not accepting
transfer requests of an agent acting under a power of attorney on behalf of more
than one Contract Owner, or limiting the dollar amount that may be transferred
between the Sub-Accounts and the Fixed Account by a Contract Owner at any one
time. Such restrictions may be applied in any manner reasonably designed to
prevent any use of the transfer right which is considered by Hartford to be to
the disadvantage of other Contract Owners.
Currently, 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.
CHARGES UNDER THE CONTRACT
CONTINGENT DEFERRED SALES CHARGES ("SALES CHARGES")
PURPOSE OF SALES CHARGES -- Sales Charges cover expenses relating to the sale
and distribution of the Contracts, including commissions paid to distributing
organizations and its sales personnel, the cost of preparing sales literature
and other promotional activities. If these charges are not sufficient to cover
sales and distribution expenses, Hartford will pay them from its general assets,
including surplus. Surplus might include profits resulting from unused mortality
and expense risk charges.
ASSESSMENT OF SALES CHARGES -- There is no deduction for sales expenses from
Premium Payments when made, however, a Sales Charge may be assessed against
Premium Payments when surrendered. The length of time from receipt of a Premium
Payment to the time of surrender determines the percentage of the Sales Charge.
Premium payments are deemed to be surrendered in the order in which they were
received.
During the first seven years from each Premium Payment, a Sales Charge will
be assessed against the surrender of Premium Payments. During this time, all
surrenders in excess of the Annual Withdrawal Amount will be first from Premium
Payments and then from earnings.
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14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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The Annual Withdrawal Amount is first from earnings and then from Premium
Payments. After the seventh Contract Year, all surrenders will first be taken
from earnings and then from Premium Payments and a Sales Charge will not be
assessed against the surrender of earnings. If an amount equal to all earnings
has been surrendered, a Sales Charge will not be assessed against Premium
Payments received more than seven years prior to surrender, but will be assessed
against Premium Payments received less than seven years prior to surrender. For
additional information, see Federal Tax Considerations, page 20.
Upon receipt of a request for a full surrender, Hartford will assess any
applicable Sales Charge against the surrender proceeds representing the lesser
of: (1) aggregate Premium Payments not previously withdrawn or (2) the Contract
Value, less the Annual Withdrawal Amount available at the time of the full
surrender, less the Annual Maintenance Fee, if applicable. Taking the Annual
Withdrawal Amount prior to the full surrender may, depending upon the amount of
investment gain experienced, reduce the amount of any Sales Charge paid.
The Sales Charge is a percentage of the amount surrendered (not to exceed
the aggregate amount of the Premium Payments made) and equals:
<TABLE>
<CAPTION>
LENGTH OF TIME
FROM PREMIUM PAYMENT
(NUMBER OF YEARS) CHARGE
-------------------- -----
<S> <C>
1 6%
2 6%
3 5%
4 5%
5 4%
6 3%
7 2%
8 or more 0%
</TABLE>
PAYMENTS NOT SUBJECT TO SALES CHARGES
ANNUAL WITHDRAWAL AMOUNT -- During the first seven years from each Premium
Payment, on a non-cumulative basis, a Contract Owner may make a partial
surrender of Contract Values of up to 10% of the aggregate Premium Payments, as
determined on the date of the requested surrender, without the application of
the Sales Charge. After the seventh year from each Premium Payment, also on a
non-cumulative basis, the Contract Owner may make a partial surrender of 10% of
Premium Payments made during the seven years prior to the surrender and 100% of
the Contract Value less the Premium Payments made during the seven years prior
to the surrender.
EXTENDED WITHDRAWAL PRIVILEGE -- This privilege allows Annuitants who attain age
70 1/2 with a Contract held under an Individual Retirement Account or 403(b)
plan to surrender an amount equal to the required minimum distribution for the
stated Contract without incurring a Sales Charge or not subject to a Sales
Charge.
WAIVERS OF SALES CHARGES
CONFINEMENT IN A HOSPITAL, LONG TERM CARE FACILITY OR NURSING HOME -- Hartford
will waive any Sales Charge applicable to a partial or full surrender if the
Annuitant is confined, at the recommendation of a physician for medically
necessary reasons, for at least 180 calendar days to: a hospital recognized as a
general hospital by the proper authority of the state in which it is located; or
a hospital recognized as a general hospital by the Joint Commission on the
Accreditation of Hospitals; or a facility certified as a hospital or long-term
care facility; or a nursing home licensed by the state in which it is located
and offers the services of a registered nurse 24 hours a day.
The Annuitant cannot be confined at the time the Contract was purchased in
order to receive this waiver and the Contract Owner(s) must have been the
Contract Owner(s) continuously since the Contract issue date; must provide
written proof of confinement satisfactory to Hartford; and must request the
partial or full surrender within 91 calendar days of the last day of
confinement.
This waiver may not be available in all states. Please contact your
registered representative or Hartford to determine availability.
DEATH OF THE ANNUITANT OR CONTRACT OWNER OR PAYMENTS UNDER AN ANNUITY OPTION
- -- No Sales Charge otherwise applicable will be assessed in the event of death
of the Annuitant, death of the Contract Owner or if payments are made under an
Annuity option (other than a surrender out of Annuity Option 4) provided for
under the Contract.
OTHER PLANS OR PROGRAMS -- Certain plans or programs established by Hartford
from time to time may have different surrender privileges.
MORTALITY AND EXPENSE RISK CHARGE
For assuming these risks under the Contracts, Hartford will make a daily
charge at the rate of 1.25% per annum against all Contract Values held in the
Sub-Accounts during the life of the Contract (estimated at .90% for mortality
and .35% for expense). Although Variable Annuity payments made under the
Contracts will vary in accordance with the investment performance of the
underlying Fund shares held in the Sub-Account(s), the payments will not be
affected by (a) Hartford's actual mortality experience among Annuitants before
or after the Annuity Commencement Date or (b) Hartford's actual expenses, if
greater than the deductions provided for in the Contracts because of the expense
and mortality undertakings by Hartford.
There are two types of mortality undertakings: those made during the
accumulation or deferral phase and those
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
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made during the annuity payout phase. The mortality undertaking made by Hartford
in the accumulation phase is that Hartford may experience a loss resulting from
the assumption of the mortality risk relative to the guaranteed death benefit in
event of the death of an Annuitant or Contract Owner before commencement of
Annuity payments, in periods of declining value or in periods where the
contingent deferred sales charges would have been applicable. The mortality
undertakings provided by Hartford during the annuity payout phase are to make
monthly Annuity payments (determined in accordance with the 1983a Individual
Annuity Mortality Table and other provisions contained in the Contract) to
Annuitants regardless of how long an Annuitant may live, and regardless of how
long all Annuitants as a group may live. Hartford also assumes the liability for
payment of a minimum death benefit under the Contract. These mortality
undertakings are based on Hartford's determination of expected mortality rates
among all Annuitants. If actual experience among Annuitants during the Annuity
payment period deviates from Hartford's actuarial determination of expected
mortality rates among Annuitants because, as a group, their longevity is longer
than anticipated, Hartford must provide amounts from its general funds to
fulfill its contractual obligations. Hartford will bear the loss in such a
situation.
During the accumulation phase, Hartford also provides an expense
undertaking. Hartford assumes the risk that the contingent deferred sales
charges and the Annual Maintenance Fee for maintaining the Contracts prior to
the Annuity Commencement Date may be insufficient to cover the actual cost of
providing such items.
ANNUAL MAINTENANCE FEE
Each year, on each Contract Anniversary on or before the Annuity
Commencement Date, Hartford will deduct an Annual Maintenance Fee, if
applicable, from Contract Values to reimburse it for expenses relating to the
maintenance of the Contract, the Fixed Account, and the Sub-Account(s)
thereunder. If during a Contract Year the Contract is surrendered for its full
value, Hartford will deduct the Annual Maintenance Fee at the time of such
surrender. The fee is a flat fee which will be due in the full amount regardless
of the time of the Contract Year that Contract Values are surrendered. The
Annual Maintenance Fee is $30.00 per Contract Year for Contracts with less than
$50,000 Contract Value on the Contract Anniversary. Fees will be deducted on a
pro rata basis according to the value in each Sub-Account and the Fixed Account
under a Contract.
WAIVERS OF THE ANNUAL MAINTENANCE FEE -- Annual Maintenance Fees are waived for
Contracts with Contract Value equal to or greater than $50,000. In addition,
Hartford will waive one Annual Maintenance Fee for Contract Owners who own one
or more Contracts with a combined Contract Value of $50,000 up to $100,000. If
the Contract Owner has multiple contracts with a combined Contract Value of
$100,000 or greater, Hartford will waive the Annual Maintenance Fee on all
Contracts. However, Hartford reserves the right to limit the number of Annual
Maintenance Fee waivers to a total of six Contracts. Hartford reserves the right
to waive the Annual Maintenance Fee under other conditions.
PREMIUM TAXES
Charges are also deducted for premium tax, if applicable, imposed by state
or other governmental entity. Certain states impose a premium tax, currently
ranging up to 3.5%. Some states assess the tax at the time purchase payments are
made; others assess the tax at the time of annuitization. Hartford will pay
Premium Taxes at the time imposed under applicable law. At its sole discretion,
Hartford may deduct Premium Taxes at the time Hartford pays such taxes to the
applicable taxing authorities, at the time the Contract is surrendered, at the
time a death benefit is paid, or at the time the Contract annuitizes.
EXCEPTIONS TO CHARGES UNDER THE CONTRACTS
Hartford may offer, at its discretion, reduced fees and charges including,
but not limited to, the contingent deferred sales charges, the mortality and
expense risk charge and the maintenance fee for certain sales (including
employer sponsored savings plans) under circumstances which may result in
savings of certain costs and expenses. Reductions in these fees and charges will
not be unfairly discriminatory against any Contract Owner.
DEATH BENEFITS
The Contract provides that in the event the Annuitant dies before the
selected Annuity Commencement Date, the Contingent Annuitant will become the
Annuitant. If (1) the Annuitant dies before the Annuity Commencement Date and
either (a) there is no designated Contingent Annuitant or (b) the Contingent
Annuitant predeceases the Annuitant, or (2) if any Contract Owner dies before
the Annuity Commencement Date, the Beneficiary as determined under the Contract
Control Provisions, will receive the Death Benefit as determined on the date of
receipt of Due Proof of Death by Hartford in its Home Office. With regard to
Joint Contract Owners, at the first death of a joint Contract Owner prior to the
Annuity Commencement Date, the Beneficiary will be the surviving Contract Owner
notwithstanding that the Beneficiary designation may be different.
GUARANTEED DEATH BENEFIT -- If the Annuitant dies before the Annuity
Commencement Date and there is no designated Contingent Annuitant surviving, or
if the Contract Owner dies before the Annuity Commencement Date, the Beneficiary
will receive the greatest of (a) the Contract Value determined as of the day
written proof of death of such person is received by Hartford, or (b) 100% of
the total Premium Payments made to such Contract, reduced by the dollar amount
of any partial surrenders since the issue date,
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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or (c) the Maximum Anniversary Value immediately preceding the date of death.
The Maximum Anniversary Value is equal to the greatest Anniversary Value
attained from the following:
As of the date of receipt of Due Proof of Death, Hartford will calculate an
Anniversary Value for each Contract Anniversary prior to the deceased's attained
age 81. The Anniversary Value is equal to the Contract Value on a Contract
Anniversary, increased by the dollar amount of any Premium Payments made since
that anniversary and reduced by the dollar amount of any partial surrenders
since that anniversary.
If the Annuitant or Contract Owner, as applicable, dies after the Annuity
Commencement Date, then the Death Benefit will equal the present value of any
remaining payments under the elected Annuity Option. In computing such present
value for the portion of such remaining payments attributable to the Separate
Account, Hartford will assume a net investment rate of 5.0% per year.
PAYMENT OF DEATH BENEFIT -- The calculated Death Benefit will remain invested in
the Separate Account in accordance with the allocation instructions given by the
Contract Owner until the proceeds are paid or Hartford receives new instructions
from the Beneficiary. During the time period between Hartford's receipt of
written notification of Due Proof of Death and Hartford's receipt of the
completed settlement instructions, the calculated Death Benefit will remain
invested in the Sub-Account(s) previously elected by the Contract Owner and will
be subject to market fluctuations. The death benefit may be taken in one sum,
payable within 7 days after the date Due Proof of Death is received, or under
any of the settlement options then being offered by Hartford provided, however,
that: (a) in the event of the death of any Contract Owner prior to the Annuity
Commencement Date, the entire interest in the Contract will be distributed
within 5 years after the death of the Contract Owner and (b) in the event of the
death of any Contract Owner or Annuitant which occurs on or after the Annuity
Commencement Date, any remaining interest in the Contract will be paid at least
as rapidly as under the method of distribution in effect at the time of death,
or, if the benefit is payable over a period not extending beyond the life
expectancy of the Beneficiary or over the life of the Beneficiary, such
distribution must commence within one year of the date of death. The proceeds
due on the death may be applied to provide variable payments, fixed payments, or
a combination of variable and fixed payments.
However, in the event of the Contract Owner's death where the sole
Beneficiary is the spouse of the Contract Owner and the Annuitant or Contingent
Annuitant is living, such spouse may elect, in lieu of receiving the death
benefit, to be treated as the Contract Owner. The Contract Value and the Maximum
Anniversary Value of the Contract will be unaffected by treating the spouse as
the Contract Owner.
If the Contract is owned by a corporation or other non-individual, the Death
Benefit payable upon the death of the Annuitant prior to the Annuity
Commencement Date will be payable only as one sum or under the same settlement
options and in the same manner as if an individual Contract Owner died on the
date of the Annuitant's death.
There may be postponement in the payment of Death Benefits whenever (a) the
New York Stock Exchange is closed, except for holidays or weekends, or trading
on the New York Stock Exchange is restricted as determined by the Commission;
(b) the Commission permits postponement and so orders; or (c) the Commission
determines that an emergency exists making valuation of the amounts or disposal
of securities not reasonably practicable.
GROUP UNALLOCATED CONTRACTS -- Hartford requires that detailed accounting of
cumulative purchase payments, cumulative gross surrenders, and current Contract
Value attached to each Plan Participant be submitted on an annual basis by the
Contract Owner. Failure to submit accurate data satisfactory to Hartford will
give Hartford the right to terminate this extension of benefits.
SURRENDER BENEFITS
FULL SURRENDERS -- At any time prior to the Annuity Commencement Date (and after
the Annuity Commencement Date with respect to values applied to Annuity Option 4
or the Annuity Proceeds Settlement Option), the Contract Owner has the right to
terminate the Contract. In such event, the Termination Value of the Contract may
be taken in the form of a lump sum cash settlement.
Under any of the Annuity options excluding Annuity Options 4 and the Annuity
Proceeds Settlement Option, no surrenders are permitted after Annuity payments
commence. Only full surrenders are allowed out of Annuity Option 4 and any such
surrender will be subject to contingent deferred sales charges, if applicable.
Full or partial withdrawals may be made from the Annuity Proceeds Settlement
Option at any time and contingent deferred sales charges will not be applied.
The Termination Value of the Contract is equal to the Contract Value less
any applicable Premium Taxes, the Annual Maintenance Fee if applicable and any
applicable contingent deferred sales charges. The Termination Value may be more
or less than the amount of the Premium Payments made to a Contract.
PARTIAL SURRENDERS -- The Contract Owner may make a partial surrender of
Contract Values at any time prior to the Annuity Commencement Date so long as
the amount surrendered is at least equal to the minimum amount rules then in
effect. Additionally, if the remaining Contract Value following a surrender is
less than $500, Hartford may terminate the Contract and pay the Termination
Value. For
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
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Contracts issued in Texas, there is an additional requirement that the Contract
will not be terminated when the remaining Contract Value after a surrender is
less than $500 unless there were no Premium Payments made during the previous
two Contract Years.
In requesting a partial withdrawal you should specify the Sub-Account(s)
and/or the Fixed Account from which the partial withdrawal is to be taken.
Otherwise, such withdrawal and any applicable contingent deferred sales charges
will be effected on a pro rata basis according to the value in the Fixed Account
and each Sub-Account under a Contract.
Hartford may permit the Contract Owner to pre-authorize partial surrenders
subject to certain limitations then in effect.
TELEPHONE SURRENDER PRIVILEGES -- Hartford permits partial surrenders by
telephone subject to dollar amount limitations in effect at the time a Contract
Owner requests the surrender. To request partial surrenders by telephone, a
Contract Owner must have completed and returned to Hartford a Telephone
Redemption Program Enrollment Form authorizing telephone surrenders. If there
are joint Contract Owners, both must authorize Hartford to accept telephone
instructions and agree that Hartford may accept telephone instructions for
partial surrenders from either Contract Owner. Partial surrender requests will
not be honored until Hartford receives all required documents in proper form.
Telephone authorization will remain valid until (a) Hartford receives
written notice of revocation by a Contract Owner, or, in the case of joint
Contract Owners, written notice from either Contract Owner; (b) Hartford
discontinues the privilege; or (c) Hartford has reason to believe that a
Contract Owner has entered into a market timing agreement with an investment
adviser and/or broker/dealer.
Hartford may record any telephone calls to verify data concerning
transactions and may adopt other procedures to confirm that telephone
instructions are genuine. Hartford will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
In order to obtain that day's unit values on surrender, Hartford must
receive telephone surrender instructions prior to the close of trading on the
New York Stock Exchange (generally 4:00 p.m.).
Hartford may modify, suspend, or terminate telephone transaction privileges
at any time.
PAYMENT OF SURRENDER BENEFITS -- Payment on any request for a full or partial
surrender from the Sub-Accounts will be made as soon as possible and in any
event no later than seven days after the written request is received by Hartford
at its Administrative Office. Hartford may defer payment of any amounts from the
Fixed Account for up to six months from the date of the request for surrender.
If Hartford defers payment for more than 30 days, Hartford will pay interest of
at least 3% per annum on the amount deferred.
There may be postponement in the payment of Surrender Benefits whenever (a)
the New York Stock Exchange is closed, except for holidays or weekends, or
trading on the New York Stock Exchange is restricted as determined by the
Commission; (b) the Commission permits postponement and so orders; or (c) the
Commission determines that an emergency exists making valuation of the amounts
or disposal of securities not reasonably practicable.
CERTAIN QUALIFIED CONTRACT SURRENDERS -- THERE ARE CERTAIN RESTRICTIONS ON
SECTION 403(b) TAX SHELTERED ANNUITIES. AS OF DECEMBER 31, 1988, ALL SECTION
403(b) ANNUITIES HAVE LIMITS ON FULL AND PARTIAL SURRENDERS. CONTRIBUTIONS TO
THE CONTRACT MADE AFTER DECEMBER 31, 1988 AND ANY INCREASES IN CASH VALUE AFTER
DECEMBER 31, 1988 MAY NOT BE DISTRIBUTED UNLESS THE CONTRACT OWNER/ EMPLOYEE HAS
A) ATTAINED AGE 59 1/2, B) SEPARATED FROM SERVICE, C) DIED, D) BECOME DISABLED
OR E) EXPERIENCED FINANCIAL HARDSHIP. (CASH VALUE INCREASES MAY NOT BE
DISTRIBUTED PRIOR TO AGE 59 1/2 FOR HARDSHIPS.)
DISTRIBUTIONS PRIOR TO AGE 59 1/2 DUE TO FINANCIAL HARDSHIP OR SEPARATION
FROM SERVICE MAY STILL BE SUBJECT TO A PENALTY TAX OF 10%.
HARTFORD WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A
WITHDRAWAL IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR
SITUATION; OR IN MONITORING WITHDRAWAL REQUESTS REGARDING PRE OR POST JANUARY 1,
1989 ACCOUNT VALUES.
ANY SUCH FULL OR PARTIAL SURRENDER DESCRIBED ABOVE MAY AFFECT THE CONTINUING
TAX QUALIFIED STATUS OF SOME CONTRACTS OR PLANS AND MAY RESULT IN ADVERSE TAX
CONSEQUENCES TO THE CONTRACT OWNER. THE CONTRACT OWNER, THEREFORE, SHOULD
CONSULT WITH HIS TAX ADVISER BEFORE UNDERTAKING ANY SUCH SURRENDER. (SEE
"FEDERAL TAX CONSIDERATIONS," PAGE 19.)
SETTLEMENT PROVISIONS
You select an Annuity Commencement Date and an Annuity option which may be
on a fixed or variable basis, or a combination thereof. The Annuity Commencement
Date will not be deferred beyond the Annuitant's 90th birthday.
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18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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The Annuity Commencement Date and/or the Annuity option may be changed from time
to time, but any change must be at least 30 days prior to the date on which
Annuity payments are scheduled to begin. The Contract allows the Contract Owner
to change the Sub-Accounts on which variable payments are based after payments
have commenced once every three months. Any Fixed Annuity allocation may not be
changed.
The Contract contains the four Annuity payment options and the Annuity
Proceeds Settlement Option. Annuity Options 2, 4 and the Annuity Proceeds
Settlement Option are available to Qualified Contracts only if the guaranteed
payment period is less than the life expectancy of the Annuitant at the time the
option becomes effective. Such life expectancy shall be computed on the basis of
the mortality table prescribed by the IRS, or if none is prescribed, the
mortality table then in use by Hartford. With respect to Non-Qualified
Contracts, if you do not elect otherwise, payments in most states will
automatically begin at the Annuitant's age 90 (with the exception of states that
do not allow deferral past age 85) under Annuity Option 2 with 120 monthly
payments certain. For Qualified Contracts and Contracts issued in Texas, if you
do not elect otherwise, payments will begin automatically at the Annuitant's age
90 under Annuity Option 1 to provide a life Annuity. After the Annuity
Commencement Date, the Annuity option elected may not be changed.
Under any of the Annuity options excluding Annuity Options 4 and the Annuity
Proceeds Settlement Option, no surrenders are permitted after Annuity payments
commence. Only full surrenders are allowed out of Annuity Option 4 and any such
surrender will be subject to contingent deferred sales charges, if applicable.
Full or partial withdrawals may be made from the Annuity Proceeds Settlement
Option at any time and contingent deferred sales charges will not be applied.
ANNUITY PAYMENT OPTIONS
OPTION 1 -- Life Annuity
A life Annuity is an Annuity payable during the lifetime of the Annuitant
and terminating with the last payment due preceding the death of the Annuitant.
This options offers the largest payment amount of any of the life Annuity
options since there is no guarantee of a minimum number of payments nor a
provision for a death benefit payable to a Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity payment,
two if he died before the date of the third Annuity payment, etc.
OPTION 2 -- Life Annuity with 120, 180 or
240 Monthly Payments Certain
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that payments will be made for a minimum of 120,
180 or 240 months, as elected. If, at the death of the Annuitant, payments have
been made for less than the minimum elected number of months, then the present
value as of the date of the Annuitant's death, of any remaining guaranteed
payments will be paid in one sum to the Beneficiary or Beneficiaries designated
unless other provisions have been made and approved by Hartford.
OPTION 3 -- Joint and Last Survivor Annuity
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
Based on the options currently offered by Hartford, the Annuitant may elect that
the payment to the survivor be less than the payment made during the joint
lifetime of the Annuitant and a designated second person.
It would be possible under this option for an Annuitant and designated
second person to receive only one payment in the event of the common or
simultaneous death of the parties prior to the due date for the second payment
and so on.
OPTION 4 -- Payments for a Designated Period
An amount payable monthly for the number of years selected which may be from
five to 30 years. Under this option, you may, at any time, surrender the
Contract and receive, within seven days, the Termination Value of the Contract
as determined by Hartford.
In the event of the Annuitant's death prior to the end of the designated
period, the present value as of the date of the Annuitant's death, of any
remaining guaranteed payments will be paid in one sum to the Beneficiary or
Beneficiaries designated unless other provisions have been made and approved by
Hartford.
Annuity Option 4 is an option that does not involve life contingencies and
thus no mortality guarantee. Charges made for the mortality undertakings under
the Contracts thus provide no real benefit to a Contract Owner.
ANNUITY PROCEEDS SETTLEMENT OPTION
Proceeds from the Death Benefit may be left with Hartford for a period not
to exceed five years from the date of the Contract Owner's death prior to the
Annuity Commencement Date. These proceeds will remain in the Sub-Account(s) to
which they were allocated at the time of death unless the Beneficiary elects to
reallocate them. Full or partial withdrawals may be made at any time. In the
event of withdrawals, the remaining value will equal the Contract Value of the
proceeds left with Hartford, minus any withdrawals.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
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Hartford may offer other annuity or settlement options from time to time.
VARIABLE AND FIXED ANNUITY PAYMENTS -- When an Annuity is effected under a
Contract, unless otherwise specified, Contract Values (less applicable Premium
Taxes) held in the Sub-Accounts will be applied to provide a Variable Annuity
based on the pro rata amount in the various Sub-Accounts. Fixed Account Contract
Values will be applied to provide a Fixed Annuity. YOU SHOULD CONSIDER THE
QUESTION OF ALLOCATION OF CONTRACT VALUES (LESS APPLICABLE PREMIUM TAXES) AMONG
SUB-ACCOUNTS OF THE SEPARATE ACCOUNT AND THE GENERAL ACCOUNT OF HARTFORD TO MAKE
CERTAIN THAT ANNUITY PAYMENTS ARE BASED ON THE INVESTMENT ALTERNATIVE BEST
SUITED TO YOUR NEEDS FOR RETIREMENT.
The minimum monthly Annuity payment is $50.00. No election may be made which
results in a first payment of less than $50.00. If at any time Annuity payments
are or become less than $50.00, Hartford has the right to change the frequency
of payment to intervals that will result in payments of at least $50.00. For New
York Contracts, the minimum monthly Annuity payment is $20.00.
When Annuity payments are to commence, the value of the Contract is
determined as the sum of (1) the value of the Fixed Account no earlier than the
close of business on the fifth Valuation Day preceding the date the first
Annuity payment is due plus (2) the product of (a) the value of the Accumulation
Unit of each Sub-Account on that same day and (b) the number of Accumulation
Units credited to each Sub-Account as of the date the Annuity is to commence.
All annuity payments under any option will occur on the same day of the
month as the Annuity Commencement Date, based on the payment frequency selected
by the Contract Owner. Available payment frequencies include monthly, quarterly,
semi-annual and annual. The payment frequency may not be changed after payout
has begun.
VARIABLE ANNUITY -- The Contract contains tables indicating the minimum dollar
amount of the first monthly payment under the optional variable forms of Annuity
for each $1,000 of value of a Sub-Account under a Contract. The first monthly
payment varies according to the form and type of Variable Payment Annuity
selected. The Contract contains Variable Payment Annuity tables derived from the
1983(a) Individual Annuity Mortality Table with ages set back one year and with
an assumed investment rate ("A.I.R.") of 5% per annum. The total first monthly
Variable Annuity payment is determined by multiplying the value (expressed in
thousands of dollars) of a Sub-Account (less any applicable Premium Taxes) by
the amount of the first monthly payment per $1,000 of value obtained from the
tables in the Contracts.
The amount of the first monthly Variable Annuity payment is divided by the
value of an Annuity Unit for the appropriate Sub-Account no earlier than the
close of business on the fifth Valuation Day preceding the day on which the
payment is due in order to determine the number of Annuity Units represented by
the first payment. This number of Annuity Units remains fixed during the Annuity
payment period, and in each subsequent month the dollar amount of the Variable
Annuity payment is determined by multiplying this fixed number of Annuity Units
by the then current Annuity Unit value.
The value of the Annuity Unit for each Sub-Account in the Separate Account
for any day is determined by multiplying the value for the preceding day by the
product of (1) the net investment factor for the day for which the Annuity Unit
value is being calculated, and (2) a factor to neutralize the assumed investment
rate of 5.00% per annum. The Annuity Unit value used in calculating the amount
of the Variable Annuity payments will be based on an Annuity Unit value
determined as of the close of business on a day no earlier than the fifth
Valuation Day preceding the date of the Annuity payment.
LEVEL VARIABLE ANNUITY PAYMENTS WOULD BE PRODUCED IF THE INVESTMENT RATE
REMAINED CONSTANT AND EQUAL TO THE A.I.R. IN FACT, PAYMENTS WILL VARY UP OR DOWN
AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE A.I.R.
FIXED ANNUITY -- Fixed Annuity payments are determined at annuitization by
multiplying the Contract Value (less applicable Premium Taxes) by a rate to be
determined by Hartford which is no less than the rate specified in the Fixed
Payment Annuity tables in the Contract. The Annuity payment will remain level
for the duration of the Annuity.
OTHER INFORMATION
ASSIGNMENT -- Ownership of a Contract described herein is generally assignable.
However, if the Contracts are issued pursuant to some form of Qualified Plan, it
is possible that the ownership of the Contracts may not be transferred or
assigned depending on the type of tax-qualified retirement plan involved. An
assignment of a Non-Qualified Contract may subject the Contract values or
assignment proceeds to income taxes and certain penalty taxes.
CONTRACT MODIFICATION -- The Annuitant may not be changed; however, the
Contingent Annuitant may be changed at any time prior to the Annuity
Commencement Date by written notice to Hartford.
Hartford reserves the right to modify the Contract, but only if such
modification: (i) is necessary to make the Contract or the Separate Account
comply with any law or
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20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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regulation issued by a governmental agency to which Hartford is subject; or (ii)
is necessary to assure continued qualification of the Contract under the Code or
other federal or state laws relating to retirement annuities or annuity
Contracts; or (iii) is necessary to reflect a change in the operation of the
Separate Account or the Sub-Account(s) or (iv) provides additional Separate
Account options or (v) withdraws Separate Account options. In the event of any
such modification Hartford will provide notice to the Contract Owner or to the
payee(s) during the Annuity period. Hartford may also make appropriate
endorsement in the Contract to reflect such modification.
FEDERAL TAX CONSIDERATIONS
What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED AND THE TYPE OF PLAN UNDER
WHICH THE CONTRACT IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A PERSON,
TRUSTEE OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A CONTRACT DESCRIBED
HEREIN.
It should be understood that any detailed description of the federal income
tax consequences regarding the purchase of these Contracts cannot be made in
this Prospectus and that special tax rules may be applicable with respect to
certain purchase situations not discussed herein. In addition, no attempt is
made here to consider any applicable state or other tax laws. For detailed
information, a qualified tax adviser should always be consulted. The discussion
here and in Appendix I, commencing on page 25, is based on Hartford's
understanding of existing federal income tax laws as they are currently
interpreted.
B. TAXATION OF HARTFORD AND
THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under subchapter M of Chapter 1 of the Code.
Investment income and any realized capital gains on the assets of the Separate
Account are reinvested and are taken into account in determining the value of
the Accumulation and Annuity Units (See "Accumulation Unit Values" commencing on
page 12). As a result, such investment income and realized capital gains are
automatically applied to increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL
PROVISIONS AFFECTING PURCHASERS OTHER
THAN QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC.
Section 72 contains provisions for Contract Owners which are non-natural
persons. Non-natural persons include corporations, trusts, limited liability
companies and partnerships. The annual net increase in the value of the Contract
is currently includable in the gross income of a non-natural person, unless the
non-natural person holds the Contract as an agent for a natural person. There
are additional exceptions from current inclusion for (i) certain annuities held
by structured settlement companies, (ii) certain annuities held by an employer
with respect to a terminated qualified retirement plan and (iii) certain
immediate annuities. A non-natural person which is a tax-exempt entity for
federal tax purposes will not be subject to income tax as a result of this
provision.
If the Contract Owner is not an individual, the primary Annuitant shall be
treated as the Contract Owner for purposes of making distributions which are
required to be made upon the death of the Contract Owner. If there is a change
in the primary Annuitant, such change shall be treated as the death of the
Contract Owner.
2. OTHER CERTIFICATE OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract
until an amount is received or deemed received, e.g., in the form of a lump sum
payment (full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are
summarized briefly below. Also summarized are special rules affecting
distributions from Contracts obtained in a tax-free exchange for other annuity
contracts or life insurance contracts which were purchased prior to August 14,
1982.
A. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of the
Code.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
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ii. To the extent that the value of the Contract (ignoring any surrender
charges except on a full surrender) exceeds the "investment in the
contract," such excess constitutes the "income on the contract."
iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a partial surrender) is deemed to come first from any such
"income on the contract" and then from "investment in the contract," and for
these purposes such "income on the contract" shall be computed by reference
to any aggregation rule in subparagraph 2.c. below. As a result, any such
amount received or deemed received (1) shall be includable in gross income
to the extent that such amount does not exceed any such "income on the
contract," and (2) shall not be includable in gross income to the extent
that such amount does exceed any such "income on the contract." If at the
time that any amount is received or deemed received there is no "income on
the contract" (e.g., because the gross value of the Contract does not exceed
the "investment in the contract" and no aggregation rule applies), then such
amount received or deemed received will not be includable in gross income,
and will simply reduce the "investment in the Contract."
iv. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not
apply, however, to certain transfers of property between spouses or incident
to divorce.
B. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the Annuity
Commencement Date, any additional payments (including surrenders) will be
entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the contract
as of the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and shall
be fully includable in gross income. However, upon a full surrender after
such date, only the excess of the amount received (after any surrender
charge) over the remaining "investment in the contract" shall be includable
in gross income (except to the extent that the aggregation rule referred to
in the next subparagraph c. may apply).
C. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same Contract Owner within the same calendar year (other than
certain contracts held in connection with a tax-qualified retirement
arrangement) will be treated as one annuity Contract for the purpose of
determining the taxation of distributions prior to the Annuity Commencement
Date. An annuity contract received in a tax-free exchange for another annuity
contract or life insurance contract may be treated as a new Contract for this
purpose. Hartford believes that for any annuity subject to such aggregation, the
values under the Contracts and the investment in the contracts will be added
together to determine the taxation under subparagraph 2.a., above, of amounts
received or deemed received prior to the Annuity Commencement Date. Withdrawals
will first be treated as withdrawals of income until all of the income from all
such Contracts is withdrawn. As of the date of this Prospectus, there are no
regulations interpreting this provision.
D. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY PAYMENTS.
i. If any amount is received or deemed received on the Contract (before or
after the Annuity Commencement Date), the Code applies a penalty tax equal
to ten percent of the portion of the amount includable in gross income,
unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has attained the
age of 59 1/2.
2. Distributions made on or after the death of the holder or where the
holder is not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of substantially equal
periodic payments for the life (or life expectancy) of the recipient (or
the joint
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22 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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lives or life expectancies of the recipient and the recipient's
Beneficiary).
5. Distributions of amounts which are allocable to the "investment in the
contract" prior to August 14, 1982 (see next subparagraph e.).
E. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED PRIOR TO
AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life insurance or
annuity Contract purchased prior to August 14, 1982, then any amount received or
deemed received prior to the Annuity Commencement Date shall be deemed to come
(1) first from the amount of the "investment in the contract" prior to August
14, 1982 ("pre-8/14/82 investment") carried over from the prior Contract, (2)
then from the portion of the "income on the contract" (carried over to, as well
as accumulating in, the successor Contract) that is attributable to such
pre-8/14/82 investment, (3) then from the remaining "income on the Contract" and
(4) last from the remaining "investment in the contract." As a result, to the
extent that such amount received or deemed received does not exceed such
pre-8/14/82 investment, such amount is not includable in gross income., In
addition, to the extent that such amount received or deemed received does not
exceed the sum of (a) such pre-8/14/82 investment and (b) the "income on the
contract" attributable thereto, such amount is not subject to the 10% penalty
tax. In all other respects, amounts received or deemed received from such post-
exchange Contracts are generally subject to the rules described in this
subparagraph 3.
F. REQUIRED DISTRIBUTIONS
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary provisions in ii
or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Contract has been distributed, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution being used as of the date of
such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract will be distributed within 5 years after
such death; and
3. If the Contract Owner is not an individual, then for purposes of 1. or
2. above, the primary annuitant under the Contract shall be treated as
the Contract Owner, and any change in the primary annuitant shall be
treated as the death of the Contract Owner. The primary annuitant is the
individual, the events in the life of whom are of primary importance in
affecting the timing or amount of the payout under the Contract.
ii. Alternative Election to Satisfy DistributionRequirements
If any portion of the interest of a Contract Owner described in i. above is
payable to or for the benefit of a designated beneficiary, such beneficiary
may elect to have the portion distributed over a period that does not
extend beyond the life or life expectancy of the beneficiary. The election
and payments must begin within a year of the death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for the
benefit of his or her spouse, and the Annuitant or Contingent Annuitant is
living, such spouse shall be treated as the Contract Owner of such portion
for purposes of section i. above.
3. DIVERSIFICATION REQUIREMENTS.
Section 817 of the Code provides that a variable annuity contract will not
be treated as an annuity contract for any period during which the investments
made by the separate account or underlying fund are not adequately diversified
in accordance with regulations prescribed by the Treasury Department. If a
Contract is not treated as an annuity contract, the Contract Owner will be
subject to income tax on the annual increases in cash value.
The Treasury Department has issued diversification regulations which
generally require, among other things, that no more than 55% of the value of the
total assets of the segregated asset account underlying a variable contract is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. In determining whether the
diversification standards are met, all securities of the same issuer, all
interests in the same real property project, and all interests in the same
commodity are each treated as a single investment. In addition, in the case of
government securities, each government agency or instrumentality shall be
treated as a separate issuer.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may comply within a reasonable period and avoid the
taxation of contract income on an ongoing basis. However, either the company or
the Contract Owner must agree to pay the tax due for the period during which the
diversification requirements were not met.
Hartford monitors the diversification of investments in the separate
accounts and tests for diversification as
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
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required by the Code. Hartford intends to administer all contracts subject to
the diversification requirements in a manner that will maintain adequate
diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT.
In order for a variable annuity contract to qualify for tax deferral, assets
in the segregated asset accounts supporting the variable contract must be
considered to be owned by the insurance company and not by the variable contract
owner . The Internal Revenue Service ("IRS") has issued several rulings which
discuss investor control. The IRS has ruled that certain incidents of ownership
by the contract owner, such as the ability to select and control investments in
a separate account, will cause the contract owner to be treated as the owner of
the assets for tax purposes.
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted that the temporary regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary regulations
provide that in appropriate cases a segregated asset account may include
multiple sub-accounts, but do not specify the extent to which policyholders may
direct their investments to particular sub-accounts without being treated as the
owners of the underlying assets. Guidance on this and other issues will be
provided in regulations or revenue rulings under Section 817(d), relating to the
definition of variable contract." The final regulations issued under Section 817
did not provide guidance regarding investor control, and as of the date of this
prospectus, no other such guidance has been issued. Further, Hartford does not
know if or in what form such guidance will be issued. In addition, although
regulations are generally issued with prospective effect, it is possible that
regulations may be issued with retroactive effect. Due to the lack of specific
guidance regarding the issue of investor control, there is necessarily some
uncertainty regarding whether a Contract Owner could be considered the owner of
the assets for tax purposes. Hartford reserves the right to modify the
contracts, as necessary, to prevent Contract Owners from being considered the
owners of the assets in the separate accounts.
D. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will
be subject to federal income tax withholding, pursuant to Section 3405 of the
Code. The application of this provision is summarized below:
1. NON-PERIODIC DISTRIBUTIONS.
The portion of a non-periodic distribution which constitutes taxable income
will be subject to federal income tax withholding unless the recipient elects
not to have taxes withheld. If an election not to have taxes withheld is not
provided, 10% of the taxable distribution will be withheld as federal income
tax. Election forms will be provided at the time distributions are requested. If
the necessary election forms are not submitted to Hartford, Hartford will
automatically withhold 10% of the taxable distribution.
2. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN ONE
YEAR).
The portion of a periodic distribution which constitutes taxable income will
be subject to federal income tax withholding as if the recipient were married
claiming three exemptions. A recipient may elect not to have income taxes
withheld or have income taxes withheld at a different rate by providing a
completed election form. Election forms will be provided at the time
distributions are requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I commencing on page 25 for information relative
to the types of plans for which it may be used and the general explanation of
the tax features of such plans.
F. ANNUITY PURCHASES BY NONRESIDENT
ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to annuity purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will generally be
subject to U.S. federal income tax and withholding on annuity distributions at a
30% rate, unless a lower treaty rate applies. In addition, purchasers may be
subject to state premium tax, other state and/or municipal taxes, and taxes that
may be imposed by the purchaser's country of citizenship or residence.
Prospective purchasers are advised to consult with a qualified tax adviser
regarding U.S., state, and foreign taxation with respect to an annuity purchase.
MISCELLANEOUS
HOW CONTRACTS ARE SOLD
Hartford Securities Distribution Company, Inc. ("HSD") serves as principal
underwriter for the securities issued with respect to the Separate Account. HSD
is a wholly-owned subsidiary of Hartford Life Insurance Company. The principal
business address of HSD is the same as Hartford's.
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24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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The securities will be sold by salespersons of HSD who represent Hartford as
insurance and variable annuity agents and who are registered representatives or
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of
1934 as a Broker-Dealer and is a member of the National Association of
Securities Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 6% of Premium
Payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation. Broker-dealers or financial
institutions are compensated according to a schedule set forth by HSD and any
applicable rules or regulations for variable insurance compensation.
Compensation is generally based on premium payments made by policyholders or
contract owners. This compensation is usually paid from the sales charges
described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or surrender variable insurance products.
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the Contract with
an additional 5.0% of the Premium Payment. This additional percentage of Premium
Payment in no way affects present or future charges, rights, benefits or current
values of other Contract Owners. The following class of individuals are eligible
for this feature: (1) current or retired officers, directors, trustees and
employees (and their families) of the ultimate parent and affiliates of
Hartford; and (2) employees and registered representatives (and their families)
of registered broker-dealers (or financial institutions affiliated therewith)
that have a sales agreement with Hartford and its principal underwriter to sell
the Contract.
LEGAL MATTERS AND EXPERTS
There are no material legal proceedings pending to which the Separate
Account is a party.
Counsel with respect to federal laws and regulations applicable to the issue
and sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
Senior Vice President, General Counsel, and Corporate Secretary, Hartford Life
and Annuity Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.
The audited financial statements included in this registration statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory-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.
ADDITIONAL INFORMATION
Inquiries will be answered by calling your representative or by writing:
Hartford Life and Annuity Insurance Company
Attn.: Individual Annuity Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: (800) 862-6668 (Contract Owner)
(800) 862-7155 (Investment Representatives)
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
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APPENDIX I
INFORMATION REGARDING TAX-QUALIFIED PLANS
The tax rules applicable to tax-qualified contract owners, including
restrictions on contributions and distributions, taxation of distributions and
tax penalties, vary according to the type of plan as well as the terms and
conditions of the plan itself. Various tax penalties may apply to contributions
in excess of applicable limits, distributions prior to age 59 1/2 (subject to
certain exceptions), distributions which do not conform to applicable
commencement and minimum distribution rules, and certain other transactions with
respect to tax-qualified plans. Therefore, this summary does not attempt to
provide more than general information about the tax rules associated with use of
a Contract by a tax-qualified retirement plan. Contract owners, plan
participants and beneficiaries are cautioned that the rights and benefits of any
person to benefits may be controlled by the terms and conditions of the
tax-qualified retirement plan itself, regardless of the terms and conditions of
a Contract, but that Hartford is not bound by the terms and conditions of such
plans to the extent such terms conflict with a Contract, unless Hartford
specifically consents to be bound. Additionally, some tax-qualified retirement
plans are subject to distribution and other requirements which are not
incorporated into Hartford's administrative procedures. Contract owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions comply with applicable law.
Because of the complexity of these rules, owners, participants and beneficiaries
are encouraged to consult their own tax advisors as to specific tax
consequences.
A. TAX-QUALIFIED PENSION OR
PROFIT-SHARING PLANS
Provisions of the Code permit eligible employers to establish tax-qualified
pension or profit sharing plans (described in Section 401(a) and 401(k), if
applicable, and exempt from taxation under Section 501(a) of the Code), and
Simplified Employee Pension Plans (described in Section 408(k)). Such plans are
subject to limitations on the amount that may be contributed, the persons who
may be eligible to participate and the time when distributions must commence.
Employers intending to use these contracts in connection with tax-qualified
pension or profit-sharing plans should seek competent tax and other legal
advice.
B. TAX SHELTERED ANNUITIES UNDER
SECTION 403(b)
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations, as
specified in Section 501(c)(3) of the Code, to purchase annuity contracts, and,
subject to certain limitations, to exclude such contributions from gross income.
Generally, such contributions may not exceed the lesser of $10,000 (indexed) or
20% of an employee's "includable compensation" for such employee's most recent
full year of employment, subject to other adjustments. Special provisions under
the Code may allow some employees to elect a different overall limitation.
Tax-sheltered annuity programs under Section 403(b) are subject to a
PROHIBITION AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO
CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT, unless such
distribution is made:
(1) after the participating employee attains age 59 1/2;
(2) upon separation from service;
(3) upon death or disability; or
(4) in the case of hardship (and in the case of hardship, any income
attributable to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions attributable
to cash values or other amounts held under a Section 403(b) contract as of
December 31, 1988.
C. DEFERRED COMPENSATION PLANS UNDER
SECTION 457
Employees and independent contractors performing services for eligible
employers may have contributions made to an Eligible Deferred Compensation Plan
of their employer in accordance with the employer's plan and Section 457 of the
Code. Section 457 places limitations on contributions to Eligible Deferred
Compensation Plans maintained by a State or other tax-exempt organization. For
these purposes, the term "State" means a State, a political sub-division of a
State, and an agency or instrumentality of a State or political sub-division of
a State. Generally, the limitation is 33 1/3% of includable compensation
(typically 25% of gross compensation) or, for 1998, $8,000 (indexed), whichever
is less. Such a plan may also provide for additional "catch-up" deferrals during
the three taxable years ending before a Participant attains normal retirement
age.
An employee electing to participate in an Eligible Deferred Compensation
Plan should understand that his or her rights and benefits are governed strictly
by the terms of the plan and that the employer is the legal owner of any
contract issued with respect to the plan. The employer, as
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26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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owner of the contract(s), retains all voting and redemption rights which may
accrue to the contract(s) issued with respect to the plan. The participating
employee should look to the terms of his or her plan for any charges in regard
to participating therein other than those disclosed in this Prospectus.
Participants should also be aware that effective August 20, 1996, the Small
Business Job Protection Act of 1996 requires that all assets and income of an
Eligible Deferred Compensation Plan established by a governmental employer which
is a State, a political subdivision of a State, or any agency or instrumentality
of a State or political subdivision of a State, must be held in trust (or under
certain specified annuity contracts or custodial accounts) for the exclusive
benefit of participants and their beneficiaries. Special transition rules apply
to such Eligible governmental Deferred Compensation Plans already in existence
on August 20, 1996, and provide that such plans need not establish a trust
before January 1, 1999. However, this requirement of a trust does not apply to
amounts under an Eligible Deferred Compensation Plan of a tax-exempt (non-
governmental) organization, and such amounts will be subject to the claims of
such tax-exempt employer's general creditors.
In general, distributions from an Eligible Deferred Compensation Plan are
prohibited under Section 457 of the Code unless made after the participating
employee attains age 70 1/2, separates from service, dies, or suffers an
unforeseeable financial emergency. Present federal tax law does not allow
tax-free transfers or rollovers for amounts accumulated in a Section 457 plan
except for transfers to other Section 457 plans in limited cases.
D. INDIVIDUAL RETIREMENT ANNUITIES
UNDER SECTION 408
Section 408 of the Code permits eligible individuals to establish individual
retirement programs through the purchase of Individual Retirement Annuities
("IRAs"). IRAs are subject to limitations on the amount that may be contributed,
the contributions that may be deducted from taxable income, the persons who may
be eligible and the time when distributions may commence. Also, distributions
from certain qualified plans may be "rolled-over" on a tax-deferred basis into
an IRA.
The Contracts may be offered as SIMPLE IRAs in connection with a SIMPLE IRA
plan of an employer. Special rollover rules apply to SIMPLE IRAs. Amounts can be
rolled over from one SIMPLE IRA to another SIMPLE IRA. However, amounts can be
rolled over from a SIMPLE IRA to a regular IRA only after two years have expired
since the participant first commenced participation in your employer's SIMPLE
IRA plan. Amounts cannot be rolled over to a SIMPLE IRA from a qualified plan or
a regular IRA. Hartford is a non-designated financial institution.
Beginning in 1998, the Contracts may be offered as ROTH IRAs under Section
408A of the Code. Contributions to a ROTH IRA are not deductible. Subject to
special limitations, a regular IRA may be converted into a ROTH IRA or a
distribution from a regular IRA may be rolled over to a ROTH IRA. However, a
conversion or a rollover from a regular IRA to a ROTH IRA is not excludable from
gross income. If certain conditions are met, qualified distributions from a ROTH
IRA are tax-free.
E. FEDERAL TAX PENALTIES AND WITHHOLDING
Distributions from retirement plans are generally taxed under Section 72 of
the Code. Under these rules, a portion of each distribution may be excludable
from income. The excludable amount is the portion of the distribution which
bears the same ratio as the after-tax contributions bear to the expected return.
1. PREMATURE DISTRIBUTION
Distributions from a tax-qualified plan before the Participant attains age
59 1/2 are generally subject to an additional penalty tax equal to 10% of the
taxable portion of the distribution. The 10% penalty does not apply to
distributions made after the employee's death, on account of disability, for
eligible medical expenses and distributions in the form of a life annuity and,
except in the case of an IRA, certain distributions after separation from
service after age 55. For these purposes, a life annuity means a scheduled
series of substantially equal periodic payments for the life or life expectancy
of the Participant (or the joint lives or life expectancies of the Participant
and Beneficiary).
In addition, effective for distributions made from an IRA after December 31,
1997, there is no such penalty tax on distributions that do not exceed the
amount of certain qualifying higher education expenses, as defined by Section
72(t)(7) of the Code, or which are qualified first-time homebuyer distributions
meeting the requirements of Section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that the
10% penalty tax discussed above is increased to 25% with respect to non-exempt
premature distributions made from your SIMPLE IRA during the first two years
following the date you first commenced participation in any SIMPLE IRA plan of
your employer.
2. MINIMUM DISTRIBUTION TAX
If the amount distributed is less than the minimum required distribution for
the year, the Participant is subject to a 50% tax on the amount that was not
properly distributed.
An individual's interest in a tax-qualified retirement plan generally must
be distributed, or begin to be distributed, not later than April 1 of the
calendar year following the later of (i) the calendar year in which the
individual
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
- --------------------------------------------------------------------------------
attains age 70 1/2 or (ii) the calendar year in which the individual retires
from service with the employer sponsoring the plan ("required beginning date").
However, the required beginning date for an individual who is a five (5) percent
owner (as defined in the Code), or who is the owner of an IRA, is April 1 of the
calendar year following the calendar year in which the individual attains age
70 1/2. The entire interest of the Participant must be distributed beginning no
later than the required beginning date over a period which may not extend beyond
a maximum of the life expectancy of the Participant and a designated
Beneficiary. Each annual distribution must equal or exceed a "minimum
distribution amount" which is determined by dividing the account balance by the
applicable life expectancy. This account balance is generally based upon the
account value as of the close of business on the last day of the previous
calendar year. In addition, minimum distribution incidental benefit rules may
require a larger annual distribution.
If an individual dies before reaching his or her required beginning date,
the individual's entire interest must generally be distributed within five years
of the individual's death. However, this rule will be deemed satisfied, if
distributions begin before the close of the calendar year following the
individual's death to a designated Beneficiary (or over a period not extending
beyond the life expectancy of the beneficiary). If the Beneficiary is the
individual's surviving spouse, distributions may be delayed until the individual
would have attained age 70 1/2.
If an individual dies after reaching his or her required beginning date or
after distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect at
the time of the individual's death.
3. WITHHOLDING
In general, distributions from IRAs and plans described in Section 457 of
the Code are subject to regular wage withholding rules. Periodic distributions
from other tax-qualified retirement plans that are made for a specified period
of 10 or more years or for the life or life expectancy of the participant (or
the joint lives or life expectancies of the participant and beneficiary) are
generally subject to federal income tax withholding as if the recipient were
married claiming three exemptions. The recipient of periodic distributions may
generally elect not to have withholding apply or to have income taxes withheld
at a different rate by providing a completed election form.
Other distributions from such other tax-qualified retirement plans are
generally subject to mandatory income tax withholding at the flat rate of 20%
unless such distributions are:
a) the non-taxable portion of the distribution;
b) required minimum distributions; or
c) direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code Section 401(a)(31).
<PAGE>
28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
TO
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION
------------------------------------------------------------------------
<S> <C>
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY..............
SAFEKEEPING OF ASSETS...................................................
INDEPENDENT PUBLIC ACCOUNTANTS..........................................
DISTRIBUTION OF CONTRACTS...............................................
CALCULATION OF YIELD AND RETURN.........................................
PERFORMANCE COMPARISONS.................................................
FINANCIAL STATEMENTS....................................................
</TABLE>
<PAGE>
This form must be completed for all tax sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The Hartford Variable Annuity Contract which you have recently purchased is
subject to certain restrictions imposed by the Tax Reform Act of 1986.
Contributions to the Contract after December 31, 1988 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:
a. attained age 59 1/2,
b. separated from service,
c. died, or
d. become disabled.
Distributions of post December 31, 1988 contributions (excluding any income
thereon) may also be made if you have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made prior to age 59 1/2
because of financial hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Hartford Variable Annuity. Please refer to your
Plan.
Please complete the following and return to:
Hartford Life and Annuity Insurance Company
Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Name of Contract Owner/Participant
- -------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City or Plan/School District
- --------------------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
Contract No:
- --------------------------------------------------------------------------------
Signature:
- --------------------------------------------------------------------------------
<PAGE>
To obtain a Statement of Additional Information, please complete the form
below and mail to:
Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Please send a Statement of Additional Information for The Director to me at
the following address:
- ----------------------------------------------------
Name
- ------------------------------------------------------------
Address
- ------------------------------------------------------------
City/State Zip Code
<PAGE>
PART B
<PAGE>
-2-
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT ONE
THE DIRECTOR VARIABLE ANNUITY
This Statement of Additional Information is not a prospectus. The
information contained herein should be read in conjunction with the
Prospectus.
To obtain a Prospectus, send a written request to Hartford Life and Annuity
Insurance Company Attn: Individual Annuity Services, P.O. Box 5085,
Hartford, CT 06102-5085.
Date of Prospectus: June 1, 1998
Date of Statement of Additional Information: June 1, 1998
33-73568
<PAGE>
-3-
TABLE OF CONTENTS
SECTION PAGE
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY 4
SAFEKEEPING OF ASSETS 4
INDEPENDENT PUBLIC ACCOUNTANTS 4
DISTRIBUTION OF CONTRACTS 5
CALCULATION OF YIELD AND RETURN 5
PERFORMANCE COMPARISONS 10
<PAGE>
-4-
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both
individual and group, in all states of the United States 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.
HARTFORD RATINGS
<TABLE>
<CAPTION>
RATING AGENCY EFFECTIVE RATING BASIS OF RATING
<S> <C> <C> <C>
A.M. Best and Company, 9/9/97 A+ Financial soundness and
Inc. operating performance
Standard & Poor's 1/23/98 AA Insurer financial strength
Duff & Phelps 1/23/98 AA+ Claims paying ability
</TABLE>
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. The assets are
kept physically segregated and are held separate and apart from Hartford's
general corporate assets. Records are maintained of all purchases and
redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in this registration statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory-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.
<PAGE>
-5-
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.
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as principal
underwriter for the securities issued with respect to the Separate Account and
will offer the Contracts on a continuous basis.
HSD is a wholly-owned subsidiary of Hartford. The principal business address
of HSD is the same as Hartford.
The securities will be sold by salespersons of HSD, who represent Hartford as
insurance and Variable Annuity agents and who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934 as a Broker-Dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD").
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.
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
<PAGE>
-6-
THE MONEY MARKET FUND SUB-ACCOUNT'S YIELD AND EFFECTIVE YIELD WILL VARY IN
RESPONSE TO FLUCTUATIONS IN INTEREST RATES AND IN THE EXPENSES OF THE SUB-
ACCOUNT. THE CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES ON
THE SEPARATE ACCOUNT LEVEL, INCLUDING THE MAXIMUM ANNUAL MAINTENANCE FEE.
The yield and effective yield for the seven day period ending March 31, 1998
for the Money Market Fund Sub-Account was as follows ($30 Annual Maintenance
Fee):
<TABLE>
<CAPTION>
SUB-ACCOUNT YIELD EFFECTIVE YIELD
<S> <C> <C>
Money Market Fund* 3.96% 4.04%
</TABLE>
* Yield and effective yield for the seven day period ending March 31, 1998.
YIELDS OF BOND FUND AND MORTGAGE SECURITIES FUND SUB-ACCOUNTS. As summarized
in the Prospectus under the heading "Performance Related Information," yields
of the above Sub-Accounts will be computed by annualizing a recent month's
net investment income, divided by a Fund share's net asset value on the last
trading day of that month. Net changes in the value of a hypothetical account
will assume the change in the underlying mutual fund's "net asset value per
share" for the same period in addition to the daily expense charge assessed,
at the sub-account level for the respective period. The Sub-Accounts' yields
will vary from time to time depending upon market conditions and, the
composition of the underlying funds' portfolios. Yield should also be
considered relative to changes in the value of the Sub-Accounts' shares and
to the relative risks associated with the investment objectives and policies
of the underlying Fund.
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL, INCLUDING
THE ANNUAL MAINTENANCE FEE.
Yield calculations of the Sub- Accounts used for illustration purposes
reflect the interest earned by the Sub- Accounts, less applicable asset
charges assessed against a Contract Owner's account over the base period.
Yield quotations based on a 30 day period were computed by dividing the
dividends and interests earned during the period by the maximum offering
price per unit on the last day of the period, according to the following
formula:
Example:
Current Yield Formula for the Sub-Account 2[((A- B)/(CD) + 1)6 - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
<PAGE>
-7-
C = The average daily number of units outstanding during the period that
were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the period.
At any time in the future, yields and total return may be higher or lower
than past yields and there can be no assurance that any historical results
will continue.
The method of calculating yields described above for these Sub-Accounts
differs from the method used by the Sub-Accounts prior to May 1, 1988. The
denominator of the fraction used to calculate yield was previously the
average unit value for the period calculated. That denominator will
hereafter be the unit value of the Sub-Accounts on the last trading day of
the period calculated.
<TABLE>
<CAPTION>
SUB-ACCOUNTS YIELD
<S> <C>
Bond Fund** 4.54%
Mortgage Securities Fund** 4.76%
</TABLE>
** Yield quotation based on a 30 day period ended March 31, 1998.
CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the
heading "Performance Related Information," total return is a measure of the
change in value of an investment in a Sub-Account over the period covered.
The formula for total return used herein includes three steps: (1)
calculating the value of the hypothetical initial investment of $1,000 as of
the end of the period by multiplying the total number of units owned at the
end of the period by the unit value per unit on the last trading day of the
period; (2) assuming redemption at the end of the period and deducting any
applicable contingent deferred sales charge and (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 first quarter of the fiscal year ended March 31,
1998. No information is included for the Growth and Income Fund Sub-Account
because as of March 31, 1998, the Sub-Account had not commenced operations.
<PAGE>
-8-
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
10 YEAR OR SINCE
SUB-ACCOUNTS INCEPTION DATE 1 YEAR 5 YEAR INCEPTION*
<S> <C> <C> <C> <C>
Advisers Fund 3/31/83 24.42% 12.09% 10.79%
Bond Fund 8/31/77 3.13% 2.15% 4.74%
Capital Appreciation
Fund 4/2/84 32.74% 16.16% 15.71%
Dividend & Growth
Fund 3/8/94 32.57% na 20.38%
Index Fund 5/1/87 36.48% 17.05% 14.57%
International Advisers 3/1/95 4.85% na 7.66%
Fund
International
Opportunities Fund 7/2/90 3.67% 8.22% 3.68%
MidCap Fund 7/30/97 na na 14.75%
Mortgage Securities 1/1/85 .27% 1.67% 4.38%
Fund
Small Company Fund 8/9/96 31.83% na 15.53%
Stock Fund 8/31/77 35.67% 17.72% 14.17%
Money Market Fund 6/30/80 -4.93% -.32% 1.67%
</TABLE>
* Figures represent performance since inception for Sub-Accounts in existence
for less than 10 years, or performance for 10 years for Sub-Accounts in
existence for more than 10 years.
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated for
one year, five years, and ten years or other periods. Non-standardized total
return is measured in the same manner as the standardized total return
described above, except that the contingent deferred sales charge and the
Annual Maintenance Fee are not deducted. Therefore, non-standardized total
return for a Sub-Account is higher than standardized total return for a
Sub-Account.
<PAGE>
-9-
The following are the non-standardized annualized total return quotations for
the Sub-Accounts for the first quarter of the fiscal year ended March 31,
1998. No information is included for the Growth and Income Fund Sub-Account
because as of March 31, 1998, the Sub-Account had not commenced operations.
NON-STANDARDIZED ANNUALIZED TOTAL RETURN FOR THE QUARTER ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
10 YEAR OR SINCE
SUB-ACCOUNTS INCEPTION DATE 1 YEAR 5 YEAR INCEPTION*
<S> <C> <C> <C> <C>
Advisers Fund 3/31/83 33.42% 15.31% 12.99%
Bond Fund 8/31/77 12.13% 5.85% 7.23%
Capital Appreciation
Fund 4/2/84 41.74% 19.10% 17.61%
Dividend & Growth
Fund 3/8/94 41.57% na 23.84%
Index Fund 5/1/87 45.48% 20.15% 16.58%
International Advisers 3/1/95 13.85% na 12.49%
Fund
International
Opportunities Fund 7/2/90 12.67% 11.31% 6.73%
MidCap Fund 7/30/97 na na 23.75%
Mortgage Securities 1/1/85 9.27% 5.37% 6.85%
Fund
Small Company Fund 8/9/96 40.83% na 22.18%
Stock Fund 8/31/77 44.67% 20.74% 16.25%
Money Market Fund 6/30/80 4.07% 3.44% 4.38%
</TABLE>
*Figures represent performance since inception for Sub-Accounts in existence for
less than 10 years, or performance for 10 years for Sub-Accounts in existence
for more than 10 years.
<PAGE>
-10-
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 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
<PAGE>
-11-
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%).
<PAGE>
THE DIRECTOR SELECT
SEPARATE ACCOUNT ONE
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102-5085
TELEPHONE: 1-800-862-6668 (CONTRACT
OWNERS)
[LOGO] 1-800-862-7155 (INVESTMENT REPRESENTATIVES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Prospectus describes The Director SELECT, an individual and group flexible
premium tax deferred variable annuity contract designed for retirement planning
purposes ("Contracts").
The Contracts are issued by Hartford Life and Annuity Insurance Company
("Hartford"). Payments for the Contracts will be held in a series of Hartford
Life andAnnuity Insurance Company Separate Account One (the "Separate Account")
or in the Fixed Account of Hartford. Allocations to and transfers to and from
the Fixed Account are not permitted in certain states.
The following Sub-Accounts are available under the Contracts. Opposite each
Sub-Account is the name of the underlying investment for that Sub-Account.
<TABLE>
<S> <C> <C>
Mentor Perpetual International -- shares of Mentor VIP Perpetual International Portfolio of
Sub-Account the Mentor Variable Investment Portfolios ("Mentor VIP
Perpetual International Portfolio")
Mentor Capital Growth Sub-Account -- shares of the Mentor VIP Capital Growth Portfolio of the
Mentor Variable Investment Portfolios ("Mentor VIP Capital
Growth Portfolio")
Mentor Growth Sub-Account -- shares of the Mentor VIP Growth Portfolio of the Mentor
Variable Investment Portfolios ("Mentor VIP Growth
Portfolio")
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")
Growth and Income Fund Sub-Account -- shares of Class IA of Hartford Growth and Income HLS Fund,
Inc. ("Hartford Growth and Income 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 -- shares of Class IA of Hartford International Opportunities
Sub-Account 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 Fund, Inc.
("Hartford Small Company Fund")
Stock Fund Sub-Account -- shares of Class IA of Hartford Stock HLS Fund, Inc.
("Hartford Stock Fund")
</TABLE>
This Prospectus sets forth the information concerning the Separate Account and
the Fixed Account that investors should know before investing. This Prospectus
should be kept for future reference. Additional information about the Separate
Account and the Fixed Account has been filed with the Securities and Exchange
Commission and is available without charge upon request. To obtain the Statement
of Additional Information send a written request to, or call Hartford, Attn.:
Individual Annuity Services, P.O. Box 5085, Hartford, CT 06102-5085. The Table
of Contents for the Statement of Additional Information may be found on page 30
of this Prospectus. The Statement of Additional Information is incorporated by
reference to this Prospectus.
- --------------------------------------------------------------------------------
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED
BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS DATED: JUNE 1, 1998
STATEMENT OF ADDITIONAL INFORMATION DATED: JUNE 1, 1998
<PAGE>
2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GLOSSARY OF SPECIAL TERMS............................................. 3
FEE TABLE............................................................. 5
ACCUMULATION UNIT VALUES.............................................. 7
INTRODUCTION.......................................................... 8
HARTFORD, THE SEPARATE ACCOUNT, THE FUNDS AND THE FIXED ACCOUNT....... 8
Hartford Life and Annuity Insurance Company......................... 8
The Separate Account................................................ 9
The Funds........................................................... 9
The Fixed Account................................................... 11
PERFORMANCE RELATED INFORMATION....................................... 12
THE CONTRACTS......................................................... 13
Contracts Offered................................................... 13
Premium Payments and Initial Allocations............................ 13
Contract Value...................................................... 14
Transfers Between the Sub-Accounts/Fixed Account.................... 14
Charges Under the Contract.......................................... 15
Death Benefits...................................................... 17
Surrender Benefits.................................................. 18
Settlement Provisions............................................... 19
Other Information................................................... 21
FEDERAL TAX CONSIDERATIONS............................................ 21
A. General.......................................................... 21
B. Taxation of Hartford and the Separate Account.................... 21
C. Taxation of Annuities -- General Provisions Affecting Purchasers
Other Than Qualified Retirement Plans............................ 22
D. Federal Income Tax Withholding................................... 25
E. General Provisions Affecting Qualified Retirement Plans.......... 25
F. Annuity Purchases by Nonresident Aliens and Foreign
Corporations....................................................... 25
MISCELLANEOUS......................................................... 25
How Contracts are Sold.............................................. 25
Legal Matters and Experts........................................... 26
Additional Information.............................................. 26
APPENDIX I INFORMATION REGARDING TAX-QUALIFIED PLANS.................. 27
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION.............. 30
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
- --------------------------------------------------------------------------------
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT: An accounting unit of measure used to calculate values before
Annuity payments begin.
ADMINISTRATIVE OFFICE OF HARTFORD: Currently located at 200 Hopmeadow Street,
Simsbury, CT. All correspondence concerning the Contract should be sent to P.O.
Box 5085, Hartford, CT 06102-5085, Attn.: Individual Annuity Services, except
for overnight or express mail packages, which should be sent to: 200 Hopmeadow
Street, Simsbury, CT 06089.
ANNUAL MAINTENANCE FEE: An annual $30 charge on a Contract having a Contract
value of less than $50,000, as determined on the most recent Contract
Anniversary or upon full surrender of the Contract. The charge is deducted
proportionately from the investment options in use at the time of such
deduction.
ANNUAL WITHDRAWAL AMOUNT: The amount which can be withdrawn in any Contract Year
prior to incurring surrender charges.
ANNUITANT: The person or Participant upon whose life the Contract is issued.
ANNUITY: A Contract issued by an insurance company that provides, in exchange
for Premium Payments, a series of income payments. This Prospectus describes a
deferred annuity Contract in which Premium Payments accumulate tax-deferred
until a partial or full surrender is taken or until the Annuity Commencement
Date. Annuity payments under the Contract will begin as of the Annuity
Commencement Date in accordance with the Annuity payment option selected.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to commence.
Under a group unallocated Contract, the date for each Participant is determined
by the Contract Owner in accordance with the terms of the Plan.
ANNUITY UNIT: An accounting unit of measure used to calculate the value of
Annuity payments.
BENEFICIARY: The person(s) who receive Contract Values in the event of the
Annuitant's or Contract Owner's death under certain conditions. Under a group
unallocated Contract, the person named by the Participant within the Plan
documents/enrollment forms who is entitled to receive benefits in case of the
death of the Participant.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: Securities and Exchange Commission.
CONTINGENT ANNUITANT: The person so designated by the Contract Owner, who upon
the Annuitant's death, prior to the Annuity Commencement Date, becomes the
Annuitant.
CONTRACT: For an Annuity issued to an individual, the Contract is the individual
Annuity and any endorsements or riders. For a group Annuity, the Contract is a
certificate evidencing a participatory interest in a group Annuity and any
endorsements or riders. Any reference in this Prospectus to a Contract includes
the certificate.
CONTRACT ANNIVERSARY: The anniversary of the Contract Date.
CONTRACT OWNER(S): The owner(s) of the Contract, trustee or other entity,
sometimes herein referred to as "you".
CONTRACT VALUE: The aggregate value of any Sub-Account Accumulation Units held
under the Contract plus the value of the Fixed Account.
CONTRACT YEAR: A period of 12 months commencing with the Contract Date or any
anniversary thereof.
DEATH BENEFIT: The amount payable upon the death of a Contract Owner, Annuitant
or Participant, in the case of group Contracts before annuity payments have
commenced.
DUE PROOF OF DEATH: A certified copy of a death certificate, an order of a court
of competent jurisdiction, a statement from a physician who attended the
deceased or any other proof acceptable to Hartford.
FIXED ACCOUNT: Part of the General Account of Hartford to which a Contract Owner
may allocate all or a portion of his Premium Payment or Contract Value.
FIXED ANNUITY: An Annuity providing for guaranteed payments which remain fixed
in amount throughout the payment period and which do not vary with the
investment experience of a separate account.
FUNDS: The Funds described commencing on page 9 of this Prospectus and any
additional Funds which may be made available from time to time.
GENERAL ACCOUNT: The General Account of Hartford which consists of all assets of
Hartford other than those allocated to the separate accounts of Hartford.
HARTFORD: Hartford Life and Annuity Insurance Company.
MAXIMUM ANNIVERSARY VALUE: Value used in determining the death benefit. It is
based on a series of calculations of Contract Values on Contract Anniversaries,
premium payments and partial surrenders, as described on page 14.
NON-QUALIFIED CONTRACT: A Contract which is not part of a tax-qualified
retirement plan or arrangement which qualifies for special tax treatment under
the Code.
PARTICIPANT (FOR GROUP UNALLOCATED CONTRACTS ONLY): Any eligible employee of an
employer/Contract Owner participating in the Plan.
PLAN: A voluntary plan of an employer or other person which qualifies for
special tax treatment under the Code.
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
PREMIUM PAYMENT: The payment made to Hartford pursuant to the terms of the
Contract.
PREMIUM TAX: A tax on premiums charged by a state or municipality on Premium
Payments or Contract Values.
QUALIFIED CONTRACT: A Contract which is a part of a tax-qualified retirement
plan or arrangement which qualifies for special tax treatment under the Code,
such as an employer-sponsored Section 401(k) plan or an Individual Retirement
Annuity (IRA).
SEPARATE ACCOUNT: The Hartford separate account entitled "Hartford Life and
Annuity Insurance Company Separate Account One".
SUB-ACCOUNT: Accounts established within the Separate Account with respect to a
Fund.
TERMINATION VALUE: The Contract Value upon termination of the Contract prior to
the Annuity Commencement Date, less any applicable Premium Taxes, the Annual
Maintenance Fee and any applicable contingent deferred sales charges.
UNALLOCATED CONTRACTS: Contracts issued to employers, or other entity, as
Contract Owner under which no allocation of Contract Values is made for a
specific Participant. The Plans will be responsible for the individual
allocations.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined at the close of the New York Stock
Exchange (generally 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
VARIABLE ANNUITY: An Annuity providing for payments varying in amount in
accordance with the investment experience of the assets of the Separate Account.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
- --------------------------------------------------------------------------------
FEE TABLE
SUMMARY
Contract Owner Transaction Expenses
(All Sub-Accounts)
<TABLE>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of premium
payments)....................................................... None
Exchange Fee...................................................... $0
Deferred Sales Load (as a percentage of amounts withdrawn)
First Year (1)................................................ 6%
Second Year................................................... 6%
Third Year.................................................... 5%
Fourth Year................................................... 5%
Fifth Year.................................................... 4%
Sixth Year.................................................... 3%
Seventh Year.................................................. 2%
Eighth Year................................................... 0%
Annual Maintenance Fee (2)........................................ $30
Annual Expenses -- Separate Account (as percentage of average
account value)
Mortality and Expense Risk.................................... 1.250%
</TABLE>
(1) Length of time from premium payment.
(2) The Annual Maintenance Fee is a single $30 charge on a Contract. It is
deducted proportionally from the investment options in use at the time of
the charge. Pursuant to requirements of the Investment Company Act of 1940,
the Annual Maintenance Fee has been reflected in the Examples by a method
intended to show the "average" impact of the Annual Maintenance Fee on an
investment in the Separate Account. The Annual Maintenance Fee is deducted
only when the accumulated value is less than $50,000. In the Example, the
Annual Maintenance Fee is approximated a 0.06% annual asset charge based on
the experience of the Contracts.
Annual Fund Operating Expenses
(as percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT FEES OTHER EXPENSES OPERATING EXPENSES
--------------- -------------- ------------------
<S> <C> <C> <C>
Mentor VIP Perpetual International Portfolio
(1)(2)........................................ 1.000% 0.550% 1.550%
Mentor VIP Capital Growth Portfolio (1)(2)...... 0.800% 0.250% 1.050%
Mentor VIP Growth Portfolio (1)(2).............. 0.700% 0.250% 0.950%
Hartford Bond Fund.............................. 0.490% 0.020% 0.510%
Hartford Stock Fund............................. 0.430% 0.020% 0.450%
Hartford Money Market Fund...................... 0.425% 0.015% 0.440%
Hartford Advisers Fund.......................... 0.610% 0.020% 0.630%
Hartford Capital Appreciation Fund.............. 0.620% 0.020% 0.640%
Hartford Mortgage Securities Fund............... 0.425% 0.025% 0.450%
Hartford Index Fund............................. 0.375% 0.015% 0.390%
Hartford International Opportunities Fund....... 0.680% 0.090% 0.770%
Hartford Dividend & Growth Fund................. 0.660% 0.020% 0.680%
Hartford International Advisers Fund............ 0.750% 0.120% 0.870%
Hartford MidCap Fund (1)........................ 0.750% 0.040% 0.790%
Hartford Small Company Fund..................... 0.750% 0.020% 0.770%
Hartford Growth and Income Fund (1)............. 0.520% 0.150% 0.670%
</TABLE>
- ---------
(1) Each of the Mentor VIP Perpetual International Portfolio, Mentor VIP Capital
Growth Portfolio, and Mentor VIP Growth Portfolio is a new mutual fund.
Operating expenses are estimated based on the expenses the Portfolios expect
to incur during their first year of operation.
(2) Each of the Mentor VIP Perpetual International Portfolio, Mentor VIP Capital
Growth Portfolio, and the Mentor VIP Growth Portfolio has adopted a
distribution plan pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended. Under the plans, a Portfolio may pay fees at an annual
rate of up to 0.25% of the Portfolio's average daily net assets. None of the
Portfolios currently make payment under the plans, though they may do so at
any time in the future.
(3) Hartford MidCap Fund and Hartford Growth and Income Fund are new funds.
"Total Fund Operating Expenses" are based on annualized estimates of such
expenses to be incurred in the current fiscal year. HL Investment Advisors,
Inc. has agreed to waive its fees for the Hartford Growth and Income Fund
until the assets of the Funds (excluding assets contributed by companies
affiliated with HL Investment Advisors, Inc.) reach $20 million. Absent this
waiver, the investment advisory fee would be 0.575% annually and Total Fund
Operating Expenses ratio would be 0.900% (annualized).
<PAGE>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
If you surrender your If you annuitize your If you do not surrender your
Contract at the end of the Contract at the end of the Contract, you would pay the
applicable time period, you applicable time period, you following expenses on a
would pay the following would pay the following $1,000 investment, assuming a
expenses on a $1,000 expenses on a $1,000 5% annual return on assets:
investment, assuming a 5% investment, assuming a 5%
annual return on assets: annual return on assets:
<CAPTION>
5 10 5 10 5 10
SUB-ACCOUNT 1 YEAR 3 YEARS YEARS YEARS 1 YEAR 3 YEARS YEARS YEARS 1 YEAR 3 YEARS YEARS YEARS
------ ------- ------ ------- ------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mentor Perpetual
International............... $ 89 $ 140 $193 $322 $ 29 $ 89 $152 $321 $ 29 $ 90 $153 $322
Mentor Capital Growth........ 84 124 167 272 24 74 127 271 24 74 127 272
Mentor Growth................ 83 121 162 262 23 71 122 261 23 71 122 262
Bond Fund.................... 73 106 139 215 18 57 99 214 19 58 99 215
Stock Fund................... 72 104 136 209 17 55 96 208 18 56 96 209
Money Market Fund............ 72 104 136 208 17 55 95 207 18 56 96 208
Advisers Fund................ 74 109 146 228 19 61 105 227 20 61 106 228
Capital Appreciation Fund.... 74 110 146 229 19 61 105 228 20 62 106 229
Mortgage Securities Fund..... 72 104 136 209 17 55 95 208 18 56 96 209
Index Fund................... 71 102 133 202 17 53 92 201 17 54 93 202
International Opportunities
Fund........................ 75 114 153 243 21 65 112 242 21 66 113 243
Dividend & Growth Fund....... 74 111 148 233 20 62 108 233 20 63 108 233
International Advisers
Fund........................ 76 117 158 253 22 68 117 253 22 69 118 253
MidCap Fund.................. 76 114 N/A N/A 21 66 N/A N/A 22 66 N/A N/A
Small Company Fund........... 75 114 153 243 21 65 112 242 21 66 113 243
Growth and Income Fund....... 74 111 N/A N/A 20 62 N/A N/A 20 63 N/A N/A
</TABLE>
The purpose of this table is to assist the Contract Owner in understanding
various costs and expenses that a Contract Owner will bear directly or
indirectly. The table reflects expenses of the Separate Account and underlying
Funds. Premium taxes may also be applicable.
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
- --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
The following information for the five years ended, has been derived from
the audited financial statements of the separate account, which have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and should be read in conjunction with those
statements which are included in the Statement of Additional Information, which
is incorporated by reference in this Prospectus. The information for the quarter
ended March 31, 1998 is unaudited and is included for informational purposes
only. There is no information regarding the Mentor Perpetual International
Sub-Account, the Mentor Capital Growth Sub-Account, the Mentor Growth
Sub-Account, and the Growth and Income Fund Sub-Account because as of March 31,
1998, the Sub-Accounts had not yet commenced operations.
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31,
-------------- YEAR ENDED DECEMBER 31,
1998 -------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
-------------- ------- ------- ------- ------- -------
BOND FUND SUB-ACCOUNT
<S> <C> <C> <C> <C> <C> <C>
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $2.114 $1.992 $1.880 $1.607 $1.694 $1.556
Accumulation unit value at end of period.................. $2.145 $2.114 $1.922 $1.880 $1.607 $1.694
Number accumulation units outstanding at end of period (in
thousands)............................................... 122,570 107,759 76,247 48,354 33,950 23,803
STOCK FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $4.602 $3.547 $2.887 $2.180 $2.250 $1.993
Accumulation unit value at end of period.................. $5,277 $4.602 $3.547 $2.887 $2.180 $2.250
Number accumulation units outstanding at end of period (in
thousands)............................................... 469,940 440,557 317,416 186,727 110,928 60,431
MONEY MARKET FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $1.650 $1.587 $1.528 $1.462 $1.424 $1.401
Accumulation unit value at end of period.................. $1.667 $1.650 $1.587 $1.528 $1.462 $1.424
Number accumulation units outstanding at end of period (in
thousands)............................................... 115,268 120,947 110,350 66,468 30,871 14,881
ADVISERS FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $3.572 $2.905 $2.523 $1.991 $2.072 $1.870
Accumulation unit value at end of period.................. $3.935 $3.572 $2.905 $2.523 $1.991 $2.072
Number accumulation units outstanding at end of period (in
thousands)............................................... 63,825 999,829 784,326 645,105 414,318 244,980
CAPITAL APPRECIATION FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $4.845 $4.010 $3.364 $2.615 $2.583 $2.165
Accumulation unit value at end of period.................. $5.446 $4.845 $4.010 $3.364 $2.615 $2.583
Number accumulation units outstanding at end of period (in
thousands)............................................... 483,913 461,578 353,466 216,591 116,535 58,645
MORTGAGE SECURITIES FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period............ $2.098 $1.949 $1.878 $1.637 $1.685 $1.604
Accumulation unit value at end of period.................. $2.123 $2.098 $1.949 $1.878 $1.637 $1.685
Number accumulation units outstanding at end of period (in
thousands)............................................... 40,671 38,292 38,304 31,288 20,674 28,380
INDEX FUND SUB-ACCOUNT
(INCEPTION DATE MAY 1, 1987)
Accumulation unit value at beginning of period............ $3.726 $2.845 $2.359 $1.750 $1.755 $1.629
Accumulation unit value at end of period.................. $4.228 $3.726 $2.845 $2.359 $1.750 $1.755
Number accumulation units outstanding at end of period (in
thousands)............................................... 129,470 117,372 77,074 32,779 12,030 7,491
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT
(INCEPTION DATE JULY 2, 1990)
Accumulation unit value at beginning of period............ $1.469 $1.482 $1.329 $1.181 $1.220 $0.924
Accumulation unit value at end of period.................. $1.657 $1.469 $1.482 $1.329 $1.181 $1.220
Number accumulation units outstanding at end of period (in
thousands)............................................... 393,348 396,430 326,954 222,606 175,763 66,084
DIVIDEND & GROWTH FUND SUB-ACCOUNT
(INCEPTION DATE MARCH 8, 1994)
Accumulation unit value at beginning of period............ $2.149 $1.650 $1.359 $1.009 $1.000 --
Accumulation unit value at end of period.................. $2.394 $2.149 $1.650 $1.359 $1.009 --
Number accumulation units outstanding at end of period (in
thousands)............................................... 606,538 541,076 301,767 101,085 21,973 --
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT
(INCEPTION DATE MARCH 1, 1995)
Accumulation unit value at beginning of period............ $1.319 $1.266 $1.146 $1.000 -- --
Accumulation unit value at end of period.................. $1.437 $1.319 $1.266 $1.146 -- --
Number accumulation units outstanding at end of period (in
thousands)............................................... 115,255 109,735 56,743 10,717 -- --
SMALL COMPANY FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 9, 1996)
Accumulation unit value at beginning of period............ $1.247 $1.066 $1.000 -- -- --
Accumulation unit value at end of period.................. $1.396 $1.247 $1.066 -- -- --
Number accumulation units outstanding at end of period (in
thousands)............................................... 122,286 108,104 24,397 -- -- --
MIDCAP FUND SUB-ACCOUNT
(INCEPTION DATE JULY 15, 1997)
Accumulation unit value at beginning of period............ $1.097 $1.000 -- -- -- --
Accumulation unit value at end of period.................. $1.238 $1.097 -- -- -- --
Number accumulation units outstanding at end of period (in
thousands)............................................... 25,315 13,437 -- -- -- --
</TABLE>
<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
INTRODUCTION
This Prospectus has been designed to provide you with the necessary
information to make a decision on purchasing an individual or group tax deferred
Variable Annuity Contract offered by Hartford Life and Annuity Insurance Company
("Hartford") in the Fixed Account and/or a series of Separate Account One. (See
"Hartford Life and Annuity Insurance Company," page 8; "The Contracts," page 13;
and "The Separate Account," page 9.) Please read the Glossary of Special Terms
on pages 3 and 4 prior to reading this Prospectus to familiarize yourself with
the terms being used.
The Contracts are available for purchase by individuals and groups on both a
non-qualified and qualified basis. The maximum issue age for the Contract is 85
years old. (See "The Contracts," page 13.) Generally, the minimum initial
Premium Payment is $1,000; the minimum payment is $500, if you are in the
InvestEase program the minimum subsequent payment is $50. There is no deduction
for sales expenses from Premium Payments when made. A deduction will be made for
state Premium Taxes for Contracts sold in certain states. (See "Charges Under
the Contract," page 15.)
Generally, the Contracts are purchased by completing and submitting an
application or an order to purchase, along with the initial Premium Payment, to
Hartford for its approval. Generally, a Contract Owner may exercise his right to
cancel the Contract within ten days of receipt of the Contract by returning the
Contract to Hartford at its Administrative Office. If the Contract Owner
exercises his right to cancel, Hartford will return either the Contract Value or
the original Premium Payments to the Contract Owner. The duration of the right
to cancel period and Hartford's obligation to either return the Contract Value
or the original Premium Payment will depend on state law.
The investment options for the Contracts are the Mentor VIP Perpetual
International Portfolio, Mentor VIP Capital Growth Portfolio, Mentor VIP Growth
Portfolio, Hartford Advisers Fund, Hartford Bond Fund, Hartford Capital
Appreciation Fund, Hartford Dividend and Growth Fund, Hartford Growth and Income
Fund, Hartford Index Fund, Hartford International Advisers Fund, Hartford
International Opportunities Fund, Hartford MidCap Fund, Hartford Mortgage
Securities Fund, Hartford Small Company Fund, Hartford Stock Fund, Hartford
Money Market Fund, and such other funds as shall be offered from time to time
(the "Funds"), and the Fixed Account. (See "The Funds," page 9, and "The Fixed
Account," page 11.) With certain limitations, Contract Owners may allocate their
Premium Payments and Contract Values to one or a combination of these investment
options and transfer among the investment options. (See "Transfers Between Sub-
Accounts/Fixed Account," page 14.)
An Annual Maintenance Fee in the amount of $30.00 is deducted from Contract
Values each Contract Year (not applicable to Contracts with Account Values of
$50,000 or more or under other circumstances at the sole discretion of Hartford)
and there is a 1.25% per annum mortality and expense risk charge applied against
all Contract Values held in the Separate Account. (See "Charges Under the
Contract," page 15). Finally, the Funds are subject to certain fees, charges and
expenses (see the accompanying Funds' prospectus).
The Contracts may be surrendered, or portions of the value of the Contracts
may be withdrawn, at any time prior to the Annuity Commencement Date. (See
"Surrender Benefits," page 18). However, a contingent deferred sales charge may
be assessed against Contract Values when they are surrendered. Contingent
deferred sales charges will not be assessed in certain instances, including
withdrawals up to the annual withdrawal amount and the payment of Death
Benefits. (See "Charges Under the Contract," page 15.)
The Contract provides for a minimum death benefit in the event of the death
of the Annuitant or Contract Owner before Annuity payments have commenced (see
"Death Benefits," page 17). Various annuity options are available under the
Contract for election by the Contract Owner on either a fixed or variable basis.
In the absence of an annuity option election, the Contract Value (less
applicable Premium Taxes) will be applied on the Annuity Commencement Date to
provide a life annuity with 120 monthly payments certain (see "Settlement
Provisions," page 19).
HARTFORD, THE SEPARATE
ACCOUNT, THE FUNDS AND
THE FIXED ACCOUNT
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company is a stock life insurance
company engaged in the business of writing life insurance and annuities, both
individual and group, in all states of the United States 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.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
HARTFORD RATINGS
<TABLE>
<CAPTION>
EFFECTIVE
RATING DATE OF BASIS OF
AGENCY RATING RATING RATING
- ---------------- ---------- --------- -------------------------
<S> <C> <C> <C>
A.M. Best and Financial soundness and
Company, Inc.... 9/9/97 A+ operating performance.
Standard & Insurer financial
Poor's.......... 1/23/98 AA strength
Duff & Phelps... 1/23/98 AA+ Claims paying ability
</TABLE>
THE SEPARATE ACCOUNT
The Separate Account was established on May 20, 1991. It is the Separate
Account in which Hartford sets aside and invests the assets attributable to
variable annuity Contracts, including the Contracts sold under this Prospectus.
Separate Account assets are held by Hartford under a safekeeping arrangement.
Although the Separate Account is an integral part of Hartford, it is registered
as a unit investment trust under the Investment Company Act of 1940. This
registration does not, however, involve Commission supervision of the management
or the investment practices or policies of the Separate Account or Hartford. The
Separate Account meets the definition of "separate account" under federal
securities law.
Your investment in the Separate Account is allocated to one or more
Sub-Accounts as per your specifications. Each Sub-Account is invested
exclusively in the assets of one underlying Fund. Hartford reserves the right,
subject to compliance with the law, to substitute the shares of any other
registered investment company for the shares of any Fund already purchased or to
be purchased in the future by the Separate Account provided that the
substitution has been approved by the Commission.
Net Premium Payments and proceeds of transfers between Sub-Accounts are
applied to purchase shares in the appropriate Fund at net asset value determined
as of the end of the Valuation Period during which the payments were received or
the transfer made. All distributions from the Fund are reinvested at net asset
value. The value of your investment will therefore vary in accordance with the
net income and fluctuation in the individual investments within the underlying
Fund portfolio or portfolios. During the Variable Annuity payout period, both
your Annuity payments and reserve values will vary in accordance with these
factors.
Under Connecticut law, the assets of the Separate Account attributable to
the Contracts offered under this Prospectus are held for the benefit of the
owners of, and the persons entitled to payments under, those Contracts. Income,
gains, and losses, whether or not realized, from assets allocated to the
Separate Account, are, in accordance with the Contracts, credited to or charged
against the Separate Account. Also, the assets in the Separate Account are not
chargeable with liabilities arising out of any other business Hartford may
conduct. Contract Values allocated to the Separate Account is not affected by
the rate of return of Hartford's General Account, nor by the investment
performance of any of Hartford's other separate accounts. The Separate Account
may be subject to liabilities arising from a Sub-Account of the Separate Account
whose assets are attributable to other variable annuity Contracts or variable
life insurance policies offered by the Separate Account which are not described
in this Prospectus. However, all obligations arising under the Contracts are
general corporate obligations of Hartford.
Hartford does not guarantee the investment results of the Separate Accounts
or any of the underlying investments. There is no assurance that the value of a
Contract during the years prior to retirement or the aggregate amount of the
Variable Annuity payments will equal the total of Premium Payments made under
the Contract. Since each underlying Fund has different investment objectives,
each is subject to different risks. These risks are more fully described in the
accompanying Funds' prospectus.
THE FUNDS
The Mentor VIP Perpetual International Portfolio, Mentor VIP Capital Growth
Portfolio and Mentor VIP Growth Portfolio are series of Mentor Variable
Investment Portfolios, a Massachusetts business trust. Mentor Perpetual
Advisors, LLC is the investment advisor to the Mentor Perpetual International
Portfolio. Mentor Perpetual Advisors is an investment advisory firm organized in
1995 and owned equally by Perpetual, plc, a diversified financial services
holding company, and Mentor Investment Advisors, LLC ("Mentor Advisors"). Mentor
Advisors is the investment advisor to the Mentor VIP Capital Growth Portfolio
and Mentor VIP Growth Portfolio. Mentor Advisors is a wholly-owned subsidiary of
Mentor Investment Group LLC, which in turn is a subsidiary of Wheat First
Butcher Singer, Inc. Wheat First Butcher Singer is a wholly owned subsidiary of
First Union Corporation, a leading financial services company with approximately
$157 billion in assets and $12 billion in total stockholders' equity as of
December 31, 1997. EVEREN Capital Corporation currently has a 20% ownership in
Mentor Investment Group and may acquire additional ownership based principally
on the amount of Mentor Investment Group's revenues attributable to clients of
EVEREN Securities, Inc. and its affiliates.
The Hartford Advisers Fund, Hartford Bond Fund, Hartford Capital
Appreciation Fund, Hartford Dividend and Growth Fund, Hartford Growth and Income
Fund, Hartford Index Fund, Hartford International Advisers Fund, Hartford
International Opportunities Fund, Hartford MidCap Fund, Hartford Mortgage
Securities Fund, Hartford Small Company Fund, Hartford Stock Fund, and Hartford
Money Market Fund are sponsored by Hartford and are incorporated under the laws
of the State of Maryland. HL Investment Advisors, Inc. ("HL Advisors") serves as
the investment adviser to each of the Hartford Funds.
<PAGE>
10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Wellington Management Company, LLP serves as sub-investment adviser for
Hartford Advisers Fund, Hartford Capital Appreciation Fund, Hartford Dividend
and Growth Fund, Hartford Growth and Income Fund, Hartford International
Advisers Fund, Hartford International Opportunities Fund, Hartford MidCap Fund,
Hartford Small Company Fund, and Hartford Stock Fund.
In addition, HL Advisors has entered into an investment services agreement
with The Hartford Investment Management Company ("HIMCO"), pursuant to which
HIMCO will provide certain investment services to Hartford Bond Fund, Hartford
Index Fund, Hartford Mortgage Securities Fund and Hartford Money Market Fund.
A full description of the Funds, their investment policies and restrictions,
risks, charges and expenses and all other aspects of their operation is
contained in the accompanying Funds' prospectus, which should be read in
conjunction with this Prospectus before investing, and in the Funds' Statement
of Additional Information which may be ordered from Hartford. The Funds may not
be available in all states.
Depending on where you purchase the Contract, other investment options may
be available.
The investment objectives of each of the Funds are as follows:
MENTOR VIP PERPETUAL INTERNATIONAL PORTFOLIO
Seeks to provide long-term capital appreciation by investing in a
diversified portfolio of securities of issuers located outside the United
States. The Portfolio's investments will normally include common stocks,
preferred stocks, securities convertible into commons stocks or preferred
stocks, and warrants to purchase common stocks or preferred stocks. The
Portfolio may also invest to a lesser extent in debt securities and other types
of investments if the investment adviser believe that they would help achieve
the Portfolio's objective.
MENTOR VIP CAPITAL GROWTH PORTFOLIO
Seeks to provide long-term appreciation of capital by investing in a wide
variety of securities which the investment advisor believes offers the potential
for capital appreciation over both the immediate and long term.
MENTOR VIP GROWTH PORTFOLIO
Seeks to provide long-term growth of capital through a diversified portfolio
of equity securities. Although the Portfolio may invest in companies of any
size, the Portfolio invests principally in common stocks of small to mid-sized
companies.
HARTFORD ADVISERS FUND
Seeks maximum long-term total rate of return by investing in common stocks
and other equity securities, bonds and other debt securities, and money market
instruments.
HARTFORD BOND FUND
Seeks maximum current income consistent with preservation of capital by
investing primarily in fixed-income securities. Up to 20% of the total assets of
this Fund may be invested in debt securities rated in the highest category below
investment grade ("Ba" by Moody's Investor Services, Inc. or "BB" by Standard &
Poor's) or, if unrated, are determined to be of comparable quality by the Fund's
investment adviser. Securities rated below investment grade are commonly
referred to as "high yield-high risk securities" or "junk bonds." For more
information concerning the risks associated with investing in such securities,
please refer to the section in the accompanying prospectus for the Funds
entitled "Hartford Bond Fund, Inc. -- Investment Policies."
HARTFORD CAPITAL APPRECIATION FUND
Seeks 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.
HARTFORD GROWTH AND INCOME FUND
Seeks growth of capital and current income by investing primarily in equity
securities with earnings growth potential and steady or rising dividends.
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.*
HARTFORD INTERNATIONAL ADVISERS FUND
Seeks maximum long-term total return consistent with prudent investment risk
by investing in a portfolio of equity, debt and money market securities.
Securities in which the Fund invests primarily will be denominated in non-U.S.
currencies and will be traded in non-U.S. markets.
HARTFORD INTERNATIONAL OPPORTUNITIES FUND
Seeks growth of capital by investing primarily in equity securities issued
by non-U.S. companies.
* "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 ("INDEX FUND") IS NOT
SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S AND STANDARD &
POOR'S MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF INVESTING IN THE
INDEX FUND.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
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HARTFORD MIDCAP FUND
Seeks to achieve long-term capital growth through capital appreciation by
investing primarily in equity securities.
HARTFORD MORTGAGE SECURITIES FUND
Seeks maximum current income consistent with safety of principal and
maintenance of liquidity by investing primarily in mortgage-related securities,
including securities issued by the Government National Mortgage Association.
HARTFORD SMALL COMPANY FUND
Seeks growth of capital by investing primarily in equity securities selected
on the basis of potential for capital appreciation.
HARTFORD STOCK FUND
Seeks long-term growth by investing primarily in equity securities.
HARTFORD MONEY MARKET FUND
Seeks maximum current income consistent with liquidity and preservation of
capital.
VOTING RIGHTS SEPARATE ACCOUNT -- As the owner, Hartford has the right to vote
at the Funds' shareholder meetings. However, to the extent required by federal
securities laws or regulations, Hartford will:
1. Vote all Fund shares attributable to a Contract according to instructions
received from the Contract Owner, and
2. Vote shares attributable to a Contract for which no voting instructions are
received in the same proportion as shares for which instructions are
received.
If any federal securities laws or regulations, or their present
interpretation change to permit Hartford to vote Fund shares in its own right,
Hartford may elect to do so.
Hartford will send proxy materials and a form of instruction by means of
which you can instruct Hartford with respect to the voting of the Fund shares
held for your account.
In connection with the voting of Fund shares held by it, Hartford will
arrange for the handling and tallying of proxies received from Contract Owners.
Hartford as such, shall have no right, except as hereinafter provided, to vote
any Fund shares held by it hereunder which may be registered in its name or the
names of its nominees. Hartford will, however, vote the Fund shares held by it
in accordance with the instructions received from the Contract Owners for whose
accounts the Fund shares are held. If a Contract Owner desires to attend any
meeting at which shares held for the Contract Owner's benefit may be voted, the
Contract Owner may request Hartford to furnish a proxy or otherwise arrange for
the exercise of voting rights with respect to the Fund shares held for such
Contract Owner's account. Hartford will vote shares for which no instructions
have been given and shares which are not attributable to Contract Owners (i.e.
shares owned by Hartford) in the same proportion as it votes shares of that Fund
for which it has received instructions. During the Annuity period under a
Contract the number of votes will decrease as the assets held to fund Annuity
benefits decrease.
The Funds are available only to serve as the underlying investment for
variable annuity and variable life insurance Contracts issued by Hartford. It is
conceivable that in the future it may be disadvantageous for variable annuity
separate accounts and variable life insurance separate accounts to invest in the
Funds simultaneously. Although Hartford and the Funds do not currently foresee
any such disadvantages either to variable annuity Contract Owners or to variable
life insurance Policyowners, the Funds' Board of Directors intends to monitor
events in order to identify any material conflicts between such Contract Owners
and Policyowners and to determine what action, if any, should be taken in
response thereto. If the Board of Directors of the Funds were to conclude that
separate funds should be established for variable life and variable annuity
separate accounts, the variable annuity Contract Owners would not bear any
expenses attendant to the establishment of such separate funds.
THE FIXED ACCOUNT
THAT PORTION OF THE CONTRACT RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN
ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT,
AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION. THE FOLLOWING DISCLOSURE ABOUT
THE FIXED ACCOUNT MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF
THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURE.
Premium Payments and Contract Values allocated to the Fixed Account become a
part of the general assets of Hartford. Hartford invests the assets of the
General Account in accordance with applicable law governing the investments of
Insurance Company General Accounts.
Currently, Hartford guarantees that it will credit interest at a rate of not
less than 3% per year, compounded
<PAGE>
12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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annually, to amounts allocated to the Fixed Account under the Contracts.
However, Hartford reserves the right to change the rate according to state
insurance law. Hartford may credit interest at a rate in excess of 3% per year.
There is no specific formula for the determination of excess interest credits.
Some of the factors that Hartford may consider in determining whether to credit
excess interest to amounts allocated to the Fixed Account and the amount
thereof, are general economic trends, rates of return currently available and
anticipated on Hartford's investments, regulatory and tax requirements and
competitive factors. ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED
ACCOUNT IN EXCESS OF 3% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF
HARTFORD. THE OWNER ASSUMES THE RISK THAT INTEREST CREDITED TO FIXED ACCOUNT
ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF 3% FOR ANY GIVEN YEAR.
From time to time, Hartford may credit increased interest rates to Contract
Owners under certain programs established at the discretion of Hartford.
Contract Owners may enroll in a special pre-authorized transfer program known as
Hartford's Dollar Cost Averaging Bonus Program (the "Program"). Under this
Program, Contract Owners who enroll may allocate a minimum of $5,000 of their
Premium Payment into the Program (Hartford may allow a lower minimum Premium
Payment for qualified plan transfers or rollovers, including IRAs) and
pre-authorize transfers to any of the Sub-Accounts under either the 6 Month
Transfer Program or 12 Month Transfer Program. The 6 Month Transfer Program and
the 12 Month Transfer Program will generally have different credited interest
rates. Under the 6 Month Transfer Program, the interest rate can accrue up to 6
months and all Premium Payments and accrued interest must be transferred to the
selected Sub-Accounts in 3 to 6 months. Under the 12 Month Transfer Program, the
interest rate can accrue up to 12 months and all Premium Payments and accrued
interest must be transferred to the selected Sub-Accounts in 7 to 12 months.
This will be accomplished by monthly transfers for the period selected and a
final transfer of the entire amount remaining in the Program.
The pre-authorized transfers will begin within 15 days after the initial
Program Premium Payment and complete enrollment instructions are received by
Hartford. If complete Program enrollment instructions are not received by
Hartford within 15 days of receipt of the initial Program Premium Payment, the
Program will be voided and the entire balance in the Program will be credited
with the non-Program interest rate then in effect for the Fixed Account.
Any subsequent Premium Payments received by Hartford within the Program
period selected will be allocated to the Sub-Accounts over the remainder of that
Program transfer period, unless otherwise directed by the Contract Owner.
A Contract Owner may only have one dollar cost averaging program in place at
one time, this means one standard dollar cost averaging plan or one Dollar Cost
Averaging Bonus Program.
Contract Owners may elect to terminate the pre-authorized transfers by
calling or writing Hartford of their intent to cancel their enrollment in the
Program. Upon cancellation of enrollment in the Program, Contract Owners will no
longer receive the increased interest rate. Hartford reserves the right to
discontinue, modify or amend the Program or any other interest rate program
established by Hartford. Any change to the Program will not affect Contract
Owners currently enrolled in the Program. This Program may not be available in
all states; please contact Hartford to determine if it is available in your
state.
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 Mentor Perpetual International, Mentor Capital Growth, Mentor Growth,
Advisers Fund, Bond Fund, Capital Appreciation Fund, Dividend and Growth Fund,
Growth and Income 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 and the Annual Maintenance Fee
are not deducted. Therefore, non-standardized total return for a Sub-Account is
higher than standardized total return for a Sub-Account.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
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The Bond Fund and Mortgage Securities Fund Sub-Accounts may advertise yield
in addition to total return. The yield will be computed in the following manner:
The net investment income per unit earned during a recent one month period is
divided by the unit value on the last day of the period. This figure reflects
the recurring charges at the Separate Account level including the Annual
Maintenance Fee.
The Money Market Fund Sub-Account may advertise yield and effective yield.
The yield of a Sub-Account is based upon the income earned by the Sub-Account
over a seven-day period and then annualized, i.e. the income earned in the
period is assumed to be earned every seven days over a 52-week period and stated
as a percentage of the investment. Effective yield is calculated similarly but
when annualized, the income earned by the investment is assumed to be reinvested
in Sub-Account units and thus compounded in the course of a 52-week period.
Yield and effective yield reflect the recurring charges at the Separate Account
level including the Annual Maintenance Fee.
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.
THE CONTRACTS
CONTRACTS OFFERED
The Contracts are individual or group tax deferred Variable Annuity
Contracts designed for retirement planning purposes and may be purchased by any
individual, group or trust, including any trustee or custodian for a retirement
plan qualified under Sections 401(a) or 403(a) of the Code; annuity purchase
plans adopted by public school systems and certain tax-exempt organizations
according to Section 403(b) of the Code; Individual Retirement Annuities adopted
according to Section 408 of the Code; employee pension plans established for
employees by a state, a political subdivision of a state, or an agency or
instrumentality of either a state or a political subdivision of a state, and
certain eligible deferred compensation plans as defined in Section 457 of the
Code ("Qualified Contracts"). The maximum issue age for the Contract is 85 years
old.
PREMIUM PAYMENTS AND INITIAL ALLOCATIONS
Generally, the minimum initial Premium Payment is $1,000; the minimum
subsequent payment is $500, if you are in the InvestEase program the minimum
subsequent payment is $50. Certain plans may make smaller periodic payments.
Each Premium Payment may be split among the various Sub-Accounts and/or the
Fixed Account subject to minimum amounts then in effect.
REFUND RIGHTS -- If you are not satisfied with your purchase you may cancel the
Contract by returning it within ten days (or longer in some states) after you
receive it. A written request for cancellation must accompany the Contract. In
such event, Hartford will, without deduction for any charges normally assessed
thereunder, pay you an amount equal to the Contract Value on the date of receipt
of the request for cancellation. You bear the investment risk during the period
prior to Hartford's receipt of request for cancellation. Hartford will refund
the premium paid only for Individual Retirement Annuities (if returned within
seven days of receipt) and in those states where required by law.
CREDITING AND VALUATION -- The balance of the initial Premium Payment remaining
after the deduction of any applicable Premium Tax is credited to your Contract
within two business days of receipt of a properly completed application or an
order to purchase a Contract and the initial Premium Payment by Hartford at its
Administrative Office. It will be credited to the Sub-Account(s) and/or the
Fixed Account in accordance with your election. If the application or other
information is incomplete when received, the balance of the initial Premium
Payment, after deduction of any applicable Premium Tax, will be credited to the
Sub-Account(s) or the Fixed Account within five business days of receipt. If the
initial Premium Payment is not credited within five business days, the Premium
Payment will be immediately returned unless you have been informed of the delay
and request that the Premium Payment not be returned.
The number of Accumulation Units in each Sub-Account to be credited to a
Contract will be determined by dividing the portion of the Premium Payment being
credited to each Sub-Account by the value of an Accumulation Unit in that
Sub-Account on that date.
<PAGE>
14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Subsequent Premium Payments are priced on the Valuation Day received by
Hartford at its Administrative Office.
CONTRACT VALUE
The value of the Sub-Account investments under your Contract at any time
prior to the commencement of Annuity payments can be determined by multiplying
the total number of Accumulation Units credited to your Contract in each
Sub-Account by the then current Accumulation Unit values for the applicable
Sub-Account. The value of the Fixed Account under your Contract will be the
amount allocated to the Fixed Account plus interest credited. You will be
advised at least semiannually of the number of Accumulation Units credited to
each Sub-Account, the current Accumulation Unit values, the Fixed Account value,
and the total value of your Contract.
ACCUMULATION UNIT VALUES -- The Accumulation Unit value for each Sub-Account
will vary to reflect the investment experience of the applicable Fund and will
be determined on each Valuation Day by multiplying the Accumulation Unit value
of the particular Sub-Account on the preceding Valuation Day by a "Net
Investment Factor" for that Sub-Account for the Valuation Period then ended. The
"Net Investment Factor" for each of the Sub-Accounts is equal to (a) the net
asset value per share of the corresponding Fund at the end of the Valuation
Period (plus the per share amount of any dividends or capital gains distributed
by that Fund if the ex-dividend date occurs in the Valuation Period then ended)
divided by the net asset value per share of the corresponding Fund at the
beginning of the Valuation Period, minus (b) the mortality and expense risk
charge and the administration charge described below. You should refer to the
prospectus for each of the Funds which accompanies this Prospectus for a
description of how the assets of each Fund are valued since each determination
has a direct bearing on the Accumulation Unit value of the Sub-Account and
therefore the value of a Contract. The Accumulation Unit Value is affected by
the performance of the underlying Fund(s), expenses and deduction of the charges
described in this Prospectus.
VALUATION OF FUND SHARES -- The shares of the Fund are valued at net asset value
on each Valuation Day. A complete description of the valuation method used in
valuing Fund shares may be found in the accompanying Funds' prospectus.
VALUATION OF THE FIXED ACCOUNT -- Hartford will determine the value of the Fixed
Account by crediting interest to amounts allocated to the Fixed Account.
TRANSFERS BETWEEN SUB-ACCOUNTS/
FIXED ACCOUNT
You may transfer the values of your Sub-Account allocations from one or more
Sub-Accounts to another free of charge. However, Hartford reserves the right to
limit the number of transfers to 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 (800) 862-6668 or by the agent of record by calling (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 callers provide certain information for
identification purposes. All transfer instructions by telephone are tape
recorded.
Hartford may permit the Contract Owner to pre-authorize transfers among
Sub-Accounts and between Sub-Accounts and the Fixed Account under certain
circumstances. Transfers between the Sub-Accounts may be made both before and
after Annuity payments commence (limited to once a quarter) provided that the
minimum allocation to any Sub-Account may not be less than $500. No minimum
balance is required in any Sub-Account.
It is the responsibility of the Contract Owner or Participant to verify the
accuracy of all confirmations of transfers and to promptly advise Hartford of
any inaccuracies within 30 days of receipt of the confirmation. Hartford will
send the Contract Owner a confirmation of the transfer within five days from the
date of any instruction.
Transfers from the Fixed Account into a Sub-Account may be made at any time
during the Contract Year. The maximum amount which may be transferred from the
Fixed Account during any Contract Year is the greater of 30% of the Fixed
Account balance as of the last Contract Anniversary or the greatest amount of
any prior transfer from the Fixed Account. If Hartford permits pre-authorized
transfers from the Fixed Account to the Sub-Accounts, this restriction is
inapplicable. Also, if any interest rate is renewed at a rate of at least one
percentage point less than the previous rate, the Contract Owner may elect to
transfer up to 100% of the funds receiving the reduced rate within 60 days of
notification of the interest rate decrease. Generally, transfers may not be made
from any Sub-Account into the Fixed Account for the six-month period following
any transfer from the Fixed
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
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Account into one or more of the Sub-Accounts. Hartford reserves the right to
modify the limitations on transfers from the Fixed Account and to defer
transfers from the Fixed Account for up to six months from the date of request.
Subject to the exceptions set forth in the following two paragraphs, 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 the Fixed Account and could include, but not be limited to, the
requirement of a minimum time period between each transfer, not accepting
transfer requests of an agent acting under a power of attorney on behalf of more
than one Contract Owner, or limiting the dollar amount that may be transferred
between the Sub-Accounts and the Fixed Account by a Contract Owner at any one
time. Such restrictions may be applied in any manner reasonably designed to
prevent any use of the transfer right which is considered by Hartford to be to
the disadvantage of other Contract Owners.
Currently, 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.
CHARGES UNDER THE CONTRACT
CONTINGENT DEFERRED SALES CHARGES ("SALES CHARGES")
PURPOSE OF SALES CHARGES -- Sales Charges cover expenses relating to the sale
and distribution of the Contracts, including commissions paid to distributing
organizations and its sales personnel, the cost of preparing sales literature
and other promotional activities. If these charges are not sufficient to cover
sales and distribution expenses, Hartford will pay them from its general assets,
including surplus. Surplus might include profits resulting from unused mortality
and expense risk charges.
ASSESSMENT OF SALES CHARGES -- There is no deduction for sales expenses from
Premium Payments when made, however, a Sales Charge may be assessed against
Premium Payments when surrendered. The length of time from receipt of a Premium
Payment to the time of surrender determines the percentage of the Sales Charge.
Premium payments are deemed to be surrendered in the order in which they were
received.
During the first seven years from each Premium Payment, a Sales Charge will
be assessed against the surrender of Premium Payments. During this time, all
surrenders in excess of the Annual Withdrawal Amount will be first from Premium
Payments and then from earnings. The Annual Withdrawal Amount is first from
earnings and then from Premium Payments. After the seventh Contract Year, all
surrenders will first be taken from earnings and then from Premium Payments and
a Sales Charge will not be assessed against the surrender of earnings. If an
amount equal to all earnings has been surrendered, a Sales Charge will not be
assessed against Premium Payments received more than seven years prior to
surrender, but will be assessed against Premium Payments received less than
seven years prior to surrender. For additional information, see Federal Tax
Considerations, page 21.
Upon receipt of a request for a full surrender, Hartford will assess any
applicable Sales Charge against the surrender proceeds representing the lesser
of: (1) aggregate Premium Payments not previously withdrawn or (2) the Contract
Value, less the Annual Withdrawal Amount available at the time of the full
surrender, less the Annual Maintenance Fee, if applicable. Taking the Annual
Withdrawal Amount prior to the full surrender may, depending upon the amount of
investment gain experienced, reduce the amount of any Sales Charge paid.
The Sales Charge is a percentage of the amount surrendered (not to exceed
the aggregate amount of the Premium Payments made) and equals:
<TABLE>
<CAPTION>
LENGTH OF TIME
FROM PREMIUM PAYMENT
(NUMBER OF YEARS) CHARGE
-------------------- -----
<S> <C>
1 6%
2 6%
3 5%
4 5%
5 4%
6 3%
7 2%
8 or more 0%
</TABLE>
PAYMENTS NOT SUBJECT TO SALES CHARGES
ANNUAL WITHDRAWAL AMOUNT -- During the first seven years from each Premium
Payment, on a non-cumulative basis, a Contract Owner may make a partial
surrender of Contract Values of up to 10% of the aggregate Premium Payments, as
determined on the date of the requested surrender, without the application of
the Sales Charge. After the seventh year from each Premium Payment, also on a
non-cumulative basis, the Contract Owner may make a partial surrender of 10% of
Premium Payments made during the seven years prior to the surrender and 100% of
the Contract Value less the Premium Payments made during the seven years prior
to the surrender.
EXTENDED WITHDRAWAL PRIVILEGE -- This privilege allows Annuitants who attain age
70 1/2 with a Contract held under an Individual Retirement Account or 403(b)
plan to
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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surrender an amount equal to the required minimum distribution for the stated
Contract without incurring a Sales Charge or not subject to a Sales Charge.
WAIVERS OF SALES CHARGES
CONFINEMENT IN A HOSPITAL, LONG TERM CARE FACILITY OR NURSING HOME -- Hartford
will waive any Sales Charge applicable to a partial or full surrender if the
Annuitant is confined, at the recommendation of a physician for medically
necessary reasons, for at least 180 calendar days to: a hospital recognized as a
general hospital by the proper authority of the state in which it is located; or
a hospital recognized as a general hospital by the Joint Commission on the
Accreditation of Hospitals; or a facility certified as a hospital or long-term
care facility; or a nursing home licensed by the state in which it is located
and offers the services of a registered nurse 24 hours a day.
The Annuitant cannot be confined at the time the Contract was purchased in
order to receive this waiver and the Contract Owner(s) must have been the
Contract Owner(s) continuously since the Contract issue date; must provide
written proof of confinement satisfactory to Hartford; and must request the
partial or full surrender within 91 calendar days of the last day of
confinement.
This waiver may not be available in all states. Please contact your
registered representative or Hartford to determine availability.
DEATH OF THE ANNUITANT OR CONTRACT OWNER OR PAYMENTS UNDER AN ANNUITY OPTION
- -- No Sales Charge otherwise applicable will be assessed in the event of death
of the Annuitant, death of the Contract Owner or if payments are made under an
Annuity option (other than a surrender out of Annuity Option 4) provided for
under the Contract.
OTHER PLANS OR PROGRAMS -- Certain plans or programs established by Hartford
from time to time may have different surrender privileges.
MORTALITY AND EXPENSE RISK CHARGE
For assuming these risks under the Contracts, Hartford will make a daily
charge at the rate of 1.25% per annum against all Contract Values held in the
Sub-Accounts during the life of the Contract (estimated at .90% for mortality
and .35% for expense). Although Variable Annuity payments made under the
Contracts will vary in accordance with the investment performance of the
underlying Fund shares held in the Sub-Account(s), the payments will not be
affected by (a) Hartford's actual mortality experience among Annuitants before
or after the Annuity Commencement Date or (b) Hartford's actual expenses, if
greater than the deductions provided for in the Contracts because of the expense
and mortality undertakings by Hartford.
There are two types of mortality undertakings: those made during the
accumulation or deferral phase and those made during the annuity payout phase.
The mortality undertaking made by Hartford in the accumulation phase is that
Hartford may experience a loss resulting from the assumption of the mortality
risk relative to the guaranteed death benefit in event of the death of an
Annuitant or Contract Owner before commencement of Annuity payments, in periods
of declining value or in periods where the contingent deferred sales charges
would have been applicable. The mortality undertakings provided by Hartford
during the annuity payout phase are to make monthly Annuity payments (determined
in accordance with the 1983a Individual Annuity Mortality Table and other
provisions contained in the Contract) to Annuitants regardless of how long an
Annuitant may live, and regardless of how long all Annuitants as a group may
live. Hartford also assumes the liability for payment of a minimum death benefit
under the Contract. These mortality undertakings are based on Hartford's
determination of expected mortality rates among all Annuitants. If actual
experience among Annuitants during the Annuity payment period deviates from
Hartford's actuarial determination of expected mortality rates among Annuitants
because, as a group, their longevity is longer than anticipated, Hartford must
provide amounts from its general funds to fulfill its contractual obligations.
Hartford will bear the loss in such a situation.
During the accumulation phase, Hartford also provides an expense
undertaking. Hartford assumes the risk that the contingent deferred sales
charges and the Annual Maintenance Fee for maintaining the Contracts prior to
the Annuity Commencement Date may be insufficient to cover the actual cost of
providing such items.
ANNUAL MAINTENANCE FEE
Each year, on each Contract Anniversary on or before the Annuity
Commencement Date, Hartford will deduct an Annual Maintenance Fee, if
applicable, from Contract Values to reimburse it for expenses relating to the
maintenance of the Contract, the Fixed Account, and the Sub-Account(s)
thereunder. If during a Contract Year the Contract is surrendered for its full
value, Hartford will deduct the Annual Maintenance Fee at the time of such
surrender. The fee is a flat fee which will be due in the full amount regardless
of the time of the Contract Year that Contract Values are surrendered. The
Annual Maintenance Fee is $30.00 per Contract Year for Contracts with less than
$50,000 Contract Value on the Contract Anniversary. Fees will be deducted on a
pro rata basis according to the value in each Sub-Account and the Fixed Account
under a Contract.
WAIVERS OF THE ANNUAL MAINTENANCE FEE -- Annual Maintenance Fees are waived for
Contracts with Contract Value equal to or greater than $50,000. In addition,
Hartford will waive one Annual Maintenance Fee for Contract Owners who own one
or more Contracts with a combined Contract Value of $50,000 up to $100,000. If
the Contract Owner has multiple contracts with a combined Contract Value of
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
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$100,000 or greater, Hartford will waive the Annual Maintenance Fee on all
Contracts. However, Hartford reserves the right to limit the number of Annual
Maintenance Fee waivers to a total of six Contracts. Hartford reserves the right
to waive the Annual Maintenance Fee under other conditions.
PREMIUM TAXES
Charges are also deducted for premium tax, if applicable, imposed by state
or other governmental entity. Certain states impose a premium tax, currently
ranging up to 3.5%. Some states assess the tax at the time purchase payments are
made; others assess the tax at the time of annuitization. Hartford will pay
Premium Taxes at the time imposed under applicable law. At its sole discretion,
Hartford may deduct Premium Taxes at the time Hartford pays such taxes to the
applicable taxing authorities, at the time the Contract is surrendered, at the
time a death benefit is paid, or at the time the Contract annuitizes.
EXCEPTIONS TO CHARGES UNDER THE CONTRACTS
Hartford may offer, at its discretion, reduced fees and charges including,
but not limited to, the contingent deferred sales charges, the mortality and
expense risk charge and the maintenance fee for certain sales (including
employer sponsored savings plans) under circumstances which may result in
savings of certain costs and expenses. Reductions in these fees and charges will
not be unfairly discriminatory against any Contract Owner.
DEATH BENEFITS
The Contract provides that in the event the Annuitant dies before the
selected Annuity Commencement Date, the Contingent Annuitant will become the
Annuitant. If (1) the Annuitant dies before the Annuity Commencement Date and
either (a) there is no designated Contingent Annuitant or (b) the Contingent
Annuitant predeceases the Annuitant, or (2) if any Contract Owner dies before
the Annuity Commencement Date, the Beneficiary as determined under the Contract
Control Provisions, will receive the Death Benefit as determined on the date of
receipt of Due Proof of Death by Hartford in its Home Office. With regard to
Joint Contract Owners, at the first death of a joint Contract Owner prior to the
Annuity Commencement Date, the Beneficiary will be the surviving Contract Owner
notwithstanding that the Beneficiary designation may be different.
GUARANTEED DEATH BENEFIT -- If the Annuitant dies before the Annuity
Commencement Date and there is no designated Contingent Annuitant surviving, or
if the Contract Owner dies before the Annuity Commencement Date, the Beneficiary
will receive the greatest of (a) the Contract Value determined as of the day
written proof of death of such person is received by Hartford, or (b) 100% of
the total Premium Payments made to such Contract, reduced by the dollar amount
of any partial surrenders since the issue date, or (c) the Maximum Anniversary
Value immediately preceding the date of death. The Maximum Anniversary Value is
equal to the greatest Anniversary Value attained from the following:
As of the date of receipt of Due Proof of Death, Hartford will calculate an
Anniversary Value for each Contract Anniversary prior to the deceased's attained
age 81. The Anniversary Value is equal to the Contract Value on a Contract
Anniversary, increased by the dollar amount of any Premium Payments made since
that anniversary and reduced by the dollar amount of any partial surrenders
since that anniversary.
If the Annuitant or Contract Owner, as applicable, dies after the Annuity
Commencement Date, then the Death Benefit will equal the present value of any
remaining payments under the elected Annuity Option. In computing such present
value for the portion of such remaining payments attributable to the Separate
Account, Hartford will assume a net investment rate of 5.0% per year.
PAYMENT OF DEATH BENEFIT -- The calculated Death Benefit will remain invested in
the Separate Account in accordance with the allocation instructions given by the
Contract Owner until the proceeds are paid or Hartford receives new instructions
from the Beneficiary. During the time period between Hartford's receipt of
written notification of Due Proof of Death and Hartford's receipt of the
completed settlement instructions, the calculated Death Benefit will remain
invested in the Sub-Account(s) previously elected by the Contract Owner and will
be subject to market fluctuations. The death benefit may be taken in one sum,
payable within 7 days after the date Due Proof of Death is received, or under
any of the settlement options then being offered by Hartford provided, however,
that: (a) in the event of the death of any Contract Owner prior to the Annuity
Commencement Date, the entire interest in the Contract will be distributed
within 5 years after the death of the Contract Owner and (b) in the event of the
death of any Contract Owner or Annuitant which occurs on or after the Annuity
Commencement Date, any remaining interest in the Contract will be paid at least
as rapidly as under the method of distribution in effect at the time of death,
or, if the benefit is payable over a period not extending beyond the life
expectancy of the Beneficiary or over the life of the Beneficiary, such
distribution must commence within one year of the date of death. The proceeds
due on the death may be applied to provide variable payments, fixed payments, or
a combination of variable and fixed payments.
However, in the event of the Contract Owner's death where the sole
Beneficiary is the spouse of the Contract Owner and the Annuitant or Contingent
Annuitant is living, such spouse may elect, in lieu of receiving the death
benefit, to be treated as the Contract Owner. The Contract Value and the Maximum
Anniversary Value of the Contract will be unaffected by treating the spouse as
the Contract Owner.
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18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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If the Contract is owned by a corporation or other non-individual, the Death
Benefit payable upon the death of the Annuitant prior to the Annuity
Commencement Date will be payable only as one sum or under the same settlement
options and in the same manner as if an individual Contract Owner died on the
date of the Annuitant's death.
There may be postponement in the payment of Death Benefits whenever (a) the
New York Stock Exchange is closed, except for holidays or weekends, or trading
on the New York Stock Exchange is restricted as determined by the Commission;
(b) the Commission permits postponement and so orders; or (c) the Commission
determines that an emergency exists making valuation of the amounts or disposal
of securities not reasonably practicable.
GROUP UNALLOCATED CONTRACTS -- Hartford requires that detailed accounting of
cumulative purchase payments, cumulative gross surrenders, and current Contract
Value attached to each Plan Participant be submitted on an annual basis by the
Contract Owner. Failure to submit accurate data satisfactory to Hartford will
give Hartford the right to terminate this extension of benefits.
SURRENDER BENEFITS
FULL SURRENDERS -- At any time prior to the Annuity Commencement Date (and after
the Annuity Commencement Date with respect to values applied to Annuity Option 4
or the Annuity Proceeds Settlement Option), the Contract Owner has the right to
terminate the Contract. In such event, the Termination Value of the Contract may
be taken in the form of a lump sum cash settlement.
Under any of the Annuity options excluding Annuity Options 4 and the Annuity
Proceeds Settlement Option, no surrenders are permitted after Annuity payments
commence. Only full surrenders are allowed out of Annuity Option 4 and any such
surrender will be subject to contingent deferred sales charges, if applicable.
Full or partial withdrawals may be made from the Annuity Proceeds Settlement
Option at any time and contingent deferred sales charges will not be applied.
The Termination Value of the Contract is equal to the Contract Value less
any applicable Premium Taxes, the Annual Maintenance Fee if applicable and any
applicable contingent deferred sales charges. The Termination Value may be more
or less than the amount of the Premium Payments made to a Contract.
PARTIAL SURRENDERS -- The Contract Owner may make a partial surrender of
Contract Values at any time prior to the Annuity Commencement Date so long as
the amount surrendered is at least equal to the minimum amount rules then in
effect. Additionally, if the remaining Contract Value following a surrender is
less than $500, Hartford may terminate the Contract and pay the Termination
Value. For Contracts issued in Texas, there is an additional requirement that
the Contract will not be terminated when the remaining Contract Value after a
surrender is less than $500 unless there were no Premium Payments made during
the previous two Contract Years.
In requesting a partial withdrawal you should specify the Sub-Account(s)
and/or the Fixed Account from which the partial withdrawal is to be taken.
Otherwise, such withdrawal and any applicable contingent deferred sales charges
will be effected on a pro rata basis according to the value in the Fixed Account
and each Sub-Account under a Contract.
Hartford may permit the Contract Owner to pre-authorize partial surrenders
subject to certain limitations then in effect.
TELEPHONE SURRENDER PRIVILEGES -- Hartford permits partial surrenders by
telephone subject to dollar amount limitations in effect at the time a Contract
Owner requests the surrender. To request partial surrenders by telephone, a
Contract Owner must have completed and returned to Hartford a Telephone
Redemption Program Enrollment Form authorizing telephone surrenders. If there
are joint Contract Owners, both must authorize Hartford to accept telephone
instructions and agree that Hartford may accept telephone instructions for
partial surrenders from either Contract Owner. Partial surrender requests will
not be honored until Hartford receives all required documents in proper form.
Telephone authorization will remain valid until (a) Hartford receives
written notice of revocation by a Contract Owner, or, in the case of joint
Contract Owners, written notice from either Contract Owner; (b) Hartford
discontinues the privilege; or (c) Hartford has reason to believe that a
Contract Owner has entered into a market timing agreement with an investment
adviser and/or broker/dealer.
Hartford may record any telephone calls to verify data concerning
transactions and may adopt other procedures to confirm that telephone
instructions are genuine. Hartford will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
In order to obtain that day's unit values on surrender, Hartford must
receive telephone surrender instructions prior to the close of trading on the
New York Stock Exchange (generally 4:00 p.m.).
Hartford may modify, suspend, or terminate telephone transaction privileges
at any time.
PAYMENT OF SURRENDER BENEFITS -- Payment on any request for a full or partial
surrender from the Sub-Accounts will be made as soon as possible and in any
event no later than seven days after the written request is received by Hartford
at its Administrative Office. Hartford may defer payment of
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
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any amounts from the Fixed Account for up to six months from the date of the
request for surrender. If Hartford defers payment for more than 30 days,
Hartford will pay interest of at least 3% per annum on the amount deferred.
There may be postponement in the payment of Surrender Benefits whenever (a)
the New York Stock Exchange is closed, except for holidays or weekends, or
trading on the New York Stock Exchange is restricted as determined by the
Commission; (b) the Commission permits postponement and so orders; or (c) the
Commission determines that an emergency exists making valuation of the amounts
or disposal of securities not reasonably practicable.
CERTAIN QUALIFIED CONTRACT SURRENDERS -- THERE ARE CERTAIN RESTRICTIONS ON
SECTION 403(b) TAX SHELTERED ANNUITIES. AS OF DECEMBER 31, 1988, ALL SECTION
403(b) ANNUITIES HAVE LIMITS ON FULL AND PARTIAL SURRENDERS. CONTRIBUTIONS TO
THE CONTRACT MADE AFTER DECEMBER 31, 1988 AND ANY INCREASES IN CASH VALUE AFTER
DECEMBER 31, 1988 MAY NOT BE DISTRIBUTED UNLESS THE CONTRACT OWNER/ EMPLOYEE HAS
A) ATTAINED AGE 59 1/2, B) SEPARATED FROM SERVICE, C) DIED, D) BECOME DISABLED
OR E) EXPERIENCED FINANCIAL HARDSHIP. (CASH VALUE INCREASES MAY NOT BE
DISTRIBUTED PRIOR TO AGE 59 1/2 FOR HARDSHIPS.)
DISTRIBUTIONS PRIOR TO AGE 59 1/2 DUE TO FINANCIAL HARDSHIP OR SEPARATION
FROM SERVICE MAY STILL BE SUBJECT TO A PENALTY TAX OF 10%.
HARTFORD WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A
WITHDRAWAL IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR
SITUATION; OR IN MONITORING WITHDRAWAL REQUESTS REGARDING PRE OR POST JANUARY 1,
1989 ACCOUNT VALUES.
ANY SUCH FULL OR PARTIAL SURRENDER DESCRIBED ABOVE MAY AFFECT THE CONTINUING
TAX QUALIFIED STATUS OF SOME CONTRACTS OR PLANS AND MAY RESULT IN ADVERSE TAX
CONSEQUENCES TO THE CONTRACT OWNER. THE CONTRACT OWNER, THEREFORE, SHOULD
CONSULT WITH HIS TAX ADVISER BEFORE UNDERTAKING ANY SUCH SURRENDER. (SEE
"FEDERAL TAX CONSIDERATIONS," PAGE 21.)
SETTLEMENT PROVISIONS
You select an Annuity Commencement Date and an Annuity option which may be
on a fixed or variable basis, or a combination thereof. The Annuity Commencement
Date will not be deferred beyond the Annuitant's 90th birthday. The Annuity
Commencement Date and/or the Annuity option may be changed from time to time,
but any change must be at least 30 days prior to the date on which Annuity
payments are scheduled to begin. The Contract allows the Contract Owner to
change the Sub-Accounts on which variable payments are based after payments have
commenced once every three months. Any Fixed Annuity allocation may not be
changed.
The Contract contains the four Annuity payment options and the Annuity
Proceeds Settlement Option. Annuity Options 2, 4 and the Annuity Proceeds
Settlement Option are available to Qualified Contracts only if the guaranteed
payment period is less than the life expectancy of the Annuitant at the time the
option becomes effective. Such life expectancy shall be computed on the basis of
the mortality table prescribed by the IRS, or if none is prescribed, the
mortality table then in use by Hartford. With respect to Non-Qualified
Contracts, if you do not elect otherwise, payments in most states will
automatically begin at the Annuitant's age 90 (with the exception of states that
do not allow deferral past age 85) under Annuity Option 2 with 120 monthly
payments certain. For Qualified Contracts and Contracts issued in Texas, if you
do not elect otherwise, payments will begin automatically at the Annuitant's age
90 under Annuity Option 1 to provide a life Annuity. After the Annuity
Commencement Date, the Annuity option elected may not be changed.
Under any of the Annuity options excluding Annuity Options 4 and the Annuity
Proceeds Settlement Option, no surrenders are permitted after Annuity payments
commence. Only full surrenders are allowed out of Annuity Option 4 and any such
surrender will be subject to contingent deferred sales charges, if applicable.
Full or partial withdrawals may be made from the Annuity Proceeds Settlement
Option at any time and contingent deferred sales charges will not be applied.
ANNUITY PAYMENT OPTIONS
OPTION 1 -- Life Annuity
A life Annuity is an Annuity payable during the lifetime of the Annuitant
and terminating with the last payment due preceding the death of the Annuitant.
This options offers the largest payment amount of any of the life Annuity
options since there is no guarantee of a minimum number of payments nor a
provision for a death benefit payable to a Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity payment,
two if he died before the date of the third Annuity payment, etc.
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20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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OPTION 2 -- Life Annuity with 120, 180 or
240 Monthly Payments Certain
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that payments will be made for a minimum of 120,
180 or 240 months, as elected. If, at the death of the Annuitant, payments have
been made for less than the minimum elected number of months, then the present
value as of the date of the Annuitant's death, of any remaining guaranteed
payments will be paid in one sum to the Beneficiary or Beneficiaries designated
unless other provisions have been made and approved by Hartford.
OPTION 3 -- Joint and Last Survivor Annuity
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
Based on the options currently offered by Hartford, the Annuitant may elect that
the payment to the survivor be less than the payment made during the joint
lifetime of the Annuitant and a designated second person.
It would be possible under this option for an Annuitant and designated
second person to receive only one payment in the event of the common or
simultaneous death of the parties prior to the due date for the second payment
and so on.
OPTION 4 -- Payments for a Designated Period
An amount payable monthly for the number of years selected which may be from
five to 30 years. Under this option, you may, at any time, surrender the
Contract and receive, within seven days, the Termination Value of the Contract
as determined by Hartford.
In the event of the Annuitant's death prior to the end of the designated
period, the present value as of the date of the Annuitant's death, of any
remaining guaranteed payments will be paid in one sum to the Beneficiary or
Beneficiaries designated unless other provisions have been made and approved by
Hartford.
Annuity Option 4 is an option that does not involve life contingencies and
thus no mortality guarantee. Charges made for the mortality undertakings under
the Contracts thus provide no real benefit to a Contract Owner.
ANNUITY PROCEEDS SETTLEMENT OPTION
Proceeds from the Death Benefit may be left with Hartford for a period not
to exceed five years from the date of the Contract Owner's death prior to the
Annuity Commencement Date. These proceeds will remain in the Sub-Account(s) to
which they were allocated at the time of death unless the Beneficiary elects to
reallocate them. Full or partial withdrawals may be made at any time. In the
event of withdrawals, the remaining value will equal the Contract Value of the
proceeds left with Hartford, minus any withdrawals.
Hartford may offer other annuity or settlement options from time to time.
VARIABLE AND FIXED ANNUITY PAYMENTS -- When an Annuity is effected under a
Contract, unless otherwise specified, Contract Values (less applicable Premium
Taxes) held in the Sub-Accounts will be applied to provide a Variable Annuity
based on the pro rata amount in the various Sub-Accounts. Fixed Account Contract
Values will be applied to provide a Fixed Annuity. YOU SHOULD CONSIDER THE
QUESTION OF ALLOCATION OF CONTRACT VALUES (LESS APPLICABLE PREMIUM TAXES) AMONG
SUB-ACCOUNTS OF THE SEPARATE ACCOUNT AND THE GENERAL ACCOUNT OF HARTFORD TO MAKE
CERTAIN THAT ANNUITY PAYMENTS ARE BASED ON THE INVESTMENT ALTERNATIVE BEST
SUITED TO YOUR NEEDS FOR RETIREMENT.
The minimum monthly Annuity payment is $50.00. No election may be made which
results in a first payment of less than $50.00. If at any time Annuity payments
are or become less than $50.00, Hartford has the right to change the frequency
of payment to intervals that will result in payments of at least $50.00. For New
York Contracts, the minimum monthly Annuity payment is $20.00.
When Annuity payments are to commence, the value of the Contract is
determined as the sum of (1) the value of the Fixed Account no earlier than the
close of business on the fifth Valuation Day preceding the date the first
Annuity payment is due plus (2) the product of (a) the value of the Accumulation
Unit of each Sub-Account on that same day and (b) the number of Accumulation
Units credited to each Sub-Account as of the date the Annuity is to commence.
All annuity payments under any option will occur on the same day of the
month as the Annuity Commencement Date, based on the payment frequency selected
by the Contract Owner. Available payment frequencies include monthly, quarterly,
semi-annual and annual. The payment frequency may not be changed after payout
has begun.
VARIABLE ANNUITY -- The Contract contains tables indicating the minimum dollar
amount of the first monthly payment under the optional variable forms of Annuity
for each $1,000 of value of a Sub-Account under a Contract. The first monthly
payment varies according to the form and type of Variable Payment Annuity
selected. The Contract contains Variable Payment Annuity tables derived from the
1983(a) Individual Annuity Mortality Table with ages set back one year and with
an assumed investment rate ("A.I.R.") of 5% per annum. The total first monthly
Variable Annuity payment is determined by multiplying the value (expressed in
thousands of dollars) of a Sub-Account (less any applicable Premium Taxes) by
the amount of the
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first monthly payment per $1,000 of value obtained from the tables in the
Contracts.
The amount of the first monthly Variable Annuity payment is divided by the
value of an Annuity Unit for the appropriate Sub-Account no earlier than the
close of business on the fifth Valuation Day preceding the day on which the
payment is due in order to determine the number of Annuity Units represented by
the first payment. This number of Annuity Units remains fixed during the Annuity
payment period, and in each subsequent month the dollar amount of the Variable
Annuity payment is determined by multiplying this fixed number of Annuity Units
by the then current Annuity Unit value.
The value of the Annuity Unit for each Sub-Account in the Separate Account
for any day is determined by multiplying the value for the preceding day by the
product of (1) the net investment factor for the day for which the Annuity Unit
value is being calculated, and (2) a factor to neutralize the assumed investment
rate of 5.00% per annum. The Annuity Unit value used in calculating the amount
of the Variable Annuity payments will be based on an Annuity Unit value
determined as of the close of business on a day no earlier than the fifth
Valuation Day preceding the date of the Annuity payment.
LEVEL VARIABLE ANNUITY PAYMENTS WOULD BE PRODUCED IF THE INVESTMENT RATE
REMAINED CONSTANT AND EQUAL TO THE A.I.R. IN FACT, PAYMENTS WILL VARY UP OR DOWN
AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE A.I.R.
FIXED ANNUITY -- Fixed Annuity payments are determined at annuitization by
multiplying the Contract Value (less applicable Premium Taxes) by a rate to be
determined by Hartford which is no less than the rate specified in the Fixed
Payment Annuity tables in the Contract. The Annuity payment will remain level
for the duration of the Annuity.
OTHER INFORMATION
ASSIGNMENT -- Ownership of a Contract described herein is generally assignable.
However, if the Contracts are issued pursuant to some form of Qualified Plan, it
is possible that the ownership of the Contracts may not be transferred or
assigned depending on the type of tax-qualified retirement plan involved. An
assignment of a Non-Qualified Contract may subject the Contract values or
assignment proceeds to income taxes and certain penalty taxes.
CONTRACT MODIFICATION -- The Annuitant may not be changed; however, the
Contingent Annuitant may be changed at any time prior to the Annuity
Commencement Date by written notice to Hartford.
Hartford reserves the right to modify the Contract, but only if such
modification: (i) is necessary to make the Contract or the Separate Account
comply with any law or regulation issued by a governmental agency to which
Hartford is subject; or (ii) is necessary to assure continued qualification of
the Contract under the Code or other federal or state laws relating to
retirement annuities or annuity Contracts; or (iii) is necessary to reflect a
change in the operation of the Separate Account or the Sub-Account(s) or (iv)
provides additional Separate Account options or (v) withdraws Separate Account
options. In the event of any such modification Hartford will provide notice to
the Contract Owner or to the payee(s) during the Annuity period. Hartford may
also make appropriate endorsement in the Contract to reflect such modification.
FEDERAL TAX CONSIDERATIONS
What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED AND THE TYPE OF PLAN UNDER
WHICH THE CONTRACT IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A PERSON,
TRUSTEE OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A CONTRACT DESCRIBED
HEREIN.
It should be understood that any detailed description of the federal income
tax consequences regarding the purchase of these Contracts cannot be made in
this Prospectus and that special tax rules may be applicable with respect to
certain purchase situations not discussed herein. In addition, no attempt is
made here to consider any applicable state or other tax laws. For detailed
information, a qualified tax adviser should always be consulted. The discussion
here and in Appendix I, commencing on page 27, is based on Hartford's
understanding of existing federal income tax laws as they are currently
interpreted.
B. TAXATION OF HARTFORD AND
THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under subchapter M of Chapter 1 of the Code.
Investment income and any realized capital gains on the assets of the Separate
Account are reinvested and are taken into account in determining the value of
the Accumulation and Annuity Units
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(See "Accumulation Unit Values" commencing on page 7). As a result, such
investment income and realized capital gains are automatically applied to
increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL
PROVISIONS AFFECTING PURCHASERS OTHER
THAN QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC.
Section 72 contains provisions for Contract Owners which are non-natural
persons. Non-natural persons include corporations, trusts, limited liability
companies and partnerships. The annual net increase in the value of the Contract
is currently includable in the gross income of a non-natural person, unless the
non-natural person holds the Contract as an agent for a natural person. There
are additional exceptions from current inclusion for (i) certain annuities held
by structured settlement companies, (ii) certain annuities held by an employer
with respect to a terminated qualified retirement plan and (iii) certain
immediate annuities. A non-natural person which is a tax-exempt entity for
federal tax purposes will not be subject to income tax as a result of this
provision.
If the Contract Owner is not an individual, the primary Annuitant shall be
treated as the Contract Owner for purposes of making distributions which are
required to be made upon the death of the Contract Owner. If there is a change
in the primary Annuitant, such change shall be treated as the death of the
Contract Owner.
2. OTHER CERTIFICATE OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract
until an amount is received or deemed received, e.g., in the form of a lump sum
payment (full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are
summarized briefly below. Also summarized are special rules affecting
distributions from Contracts obtained in a tax-free exchange for other annuity
contracts or life insurance contracts which were purchased prior to August 14,
1982.
A. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of the
Code.
ii. To the extent that the value of the Contract (ignoring any surrender
charges except on a full surrender) exceeds the "investment in the
contract," such excess constitutes the "income on the contract."
iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a partial surrender) is deemed to come first from any such
"income on the contract" and then from "investment in the contract," and for
these purposes such "income on the contract" shall be computed by reference
to any aggregation rule in subparagraph 2.c. below. As a result, any such
amount received or deemed received (1) shall be includable in gross income
to the extent that such amount does not exceed any such "income on the
contract," and (2) shall not be includable in gross income to the extent
that such amount does exceed any such "income on the contract." If at the
time that any amount is received or deemed received there is no "income on
the contract" (e.g., because the gross value of the Contract does not exceed
the "investment in the contract" and no aggregation rule applies), then such
amount received or deemed received will not be includable in gross income,
and will simply reduce the "investment in the Contract."
iv. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not
apply, however, to certain transfers of property between spouses or incident
to divorce.
B. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the Annuity
Commencement Date, any additional payments (including surrenders) will be
entirely includable in gross income.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
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ii. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the contract
as of the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and shall
be fully includable in gross income. However, upon a full surrender after
such date, only the excess of the amount received (after any surrender
charge) over the remaining "investment in the contract" shall be includable
in gross income (except to the extent that the aggregation rule referred to
in the next subparagraph c. may apply).
C. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same Contract Owner within the same calendar year (other than
certain contracts held in connection with a tax-qualified retirement
arrangement) will be treated as one annuity Contract for the purpose of
determining the taxation of distributions prior to the Annuity Commencement
Date. An annuity contract received in a tax-free exchange for another annuity
contract or life insurance contract may be treated as a new Contract for this
purpose. Hartford believes that for any annuity subject to such aggregation, the
values under the Contracts and the investment in the contracts will be added
together to determine the taxation under subparagraph 2.a., above, of amounts
received or deemed received prior to the Annuity Commencement Date. Withdrawals
will first be treated as withdrawals of income until all of the income from all
such Contracts is withdrawn. As of the date of this Prospectus, there are no
regulations interpreting this provision.
D. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY PAYMENTS.
i. If any amount is received or deemed received on the Contract (before or
after the Annuity Commencement Date), the Code applies a penalty tax equal
to ten percent of the portion of the amount includable in gross income,
unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has attained the
age of 59 1/2.
2. Distributions made on or after the death of the holder or where the
holder is not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of substantially equal
periodic payments for the life (or life expectancy) of the recipient (or
the joint lives or life expectancies of the recipient and the
recipient's Beneficiary).
5. Distributions of amounts which are allocable to the "investment in the
contract" prior to August 14, 1982 (see next subparagraph e.).
E. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED PRIOR TO
AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life insurance or
annuity Contract purchased prior to August 14, 1982, then any amount received or
deemed received prior to the Annuity Commencement Date shall be deemed to come
(1) first from the amount of the "investment in the contract" prior to August
14, 1982 ("pre-8/14/82 investment") carried over from the prior Contract, (2)
then from the portion of the "income on the contract" (carried over to, as well
as accumulating in, the successor Contract) that is attributable to such
pre-8/14/82 investment, (3) then from the remaining "income on the Contract" and
(4) last from the remaining "investment in the contract." As a result, to the
extent that such amount received or deemed received does not exceed such
pre-8/14/82 investment, such amount is not includable in gross income., In
addition, to the extent that such amount received or deemed received does not
exceed the sum of (a) such pre-8/14/82 investment and (b) the "income on the
contract" attributable thereto, such amount is not subject to the 10% penalty
tax. In all other respects, amounts received or deemed received from such post-
exchange Contracts are generally subject to the rules described in this
subparagraph 3.
F. REQUIRED DISTRIBUTIONS
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary provisions in ii
or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Contract has been distributed, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution being used as of the date of
such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract will be distributed within 5 years after
such death; and
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24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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3. If the Contract Owner is not an individual, then for purposes of 1. or
2. above, the primary annuitant under the Contract shall be treated as
the Contract Owner, and any change in the primary annuitant shall be
treated as the death of the Contract Owner. The primary annuitant is the
individual, the events in the life of whom are of primary importance in
affecting the timing or amount of the payout under the Contract.
ii. Alternative Election to Satisfy DistributionRequirements
If any portion of the interest of a Contract Owner described in i. above is
payable to or for the benefit of a designated beneficiary, such beneficiary
may elect to have the portion distributed over a period that does not
extend beyond the life or life expectancy of the beneficiary. The election
and payments must begin within a year of the death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for the
benefit of his or her spouse, and the Annuitant or Contingent Annuitant is
living, such spouse shall be treated as the Contract Owner of such portion
for purposes of section i. above.
3. DIVERSIFICATION REQUIREMENTS.
Section 817 of the Code provides that a variable annuity contract will not
be treated as an annuity contract for any period during which the investments
made by the separate account or underlying fund are not adequately diversified
in accordance with regulations prescribed by the Treasury Department. If a
Contract is not treated as an annuity contract, the Contract Owner will be
subject to income tax on the annual increases in cash value.
The Treasury Department has issued diversification regulations which
generally require, among other things, that no more than 55% of the value of the
total assets of the segregated asset account underlying a variable contract is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. In determining whether the
diversification standards are met, all securities of the same issuer, all
interests in the same real property project, and all interests in the same
commodity are each treated as a single investment. In addition, in the case of
government securities, each government agency or instrumentality shall be
treated as a separate issuer.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may comply within a reasonable period and avoid the
taxation of contract income on an ongoing basis. However, either the company or
the Contract Owner must agree to pay the tax due for the period during which the
diversification requirements were not met.
Hartford monitors the diversification of investments in the separate
accounts and tests for diversification as required by the Code. Hartford intends
to administer all contracts subject to the diversification requirements in a
manner that will maintain adequate diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT.
In order for a variable annuity contract to qualify for tax deferral, assets
in the segregated asset accounts supporting the variable contract must be
considered to be owned by the insurance company and not by the variable contract
owner . The Internal Revenue Service ("IRS") has issued several rulings which
discuss investor control. The IRS has ruled that certain incidents of ownership
by the contract owner, such as the ability to select and control investments in
a separate account, will cause the contract owner to be treated as the owner of
the assets for tax purposes.
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted that the temporary regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary regulations
provide that in appropriate cases a segregated asset account may include
multiple sub-accounts, but do not specify the extent to which policyholders may
direct their investments to particular sub-accounts without being treated as the
owners of the underlying assets. Guidance on this and other issues will be
provided in regulations or revenue rulings under Section 817(d), relating to the
definition of variable contract." The final regulations issued under Section 817
did not provide guidance regarding investor control, and as of the date of this
prospectus, no other such guidance has been issued. Further, Hartford does not
know if or in what form such guidance will be issued. In addition, although
regulations are generally issued with prospective effect, it is possible that
regulations may be issued with retroactive effect. Due to the lack of specific
guidance regarding the issue of investor control, there is necessarily some
uncertainty regarding whether a Contract Owner could be considered the owner of
the assets for tax purposes. Hartford reserves the right to modify the
contracts, as necessary, to prevent Contract Owners from being considered the
owners of the assets in the separate accounts.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
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D. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will
be subject to federal income tax withholding, pursuant to Section 3405 of the
Code. The application of this provision is summarized below:
1. NON-PERIODIC DISTRIBUTIONS.
The portion of a non-periodic distribution which constitutes taxable income
will be subject to federal income tax withholding unless the recipient elects
not to have taxes withheld. If an election not to have taxes withheld is not
provided, 10% of the taxable distribution will be withheld as federal income
tax. Election forms will be provided at the time distributions are requested. If
the necessary election forms are not submitted to Hartford, Hartford will
automatically withhold 10% of the taxable distribution.
2.PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN ONE
YEAR).
The portion of a periodic distribution which constitutes taxable income will
be subject to federal income tax withholding as if the recipient were married
claiming three exemptions. A recipient may elect not to have income taxes
withheld or have income taxes withheld at a different rate by providing a
completed election form. Election forms will be provided at the time
distributions are requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I commencing on page 27 for information relative
to the types of plans for which it may be used and the general explanation of
the tax features of such plans.
F. ANNUITY PURCHASES BY NONRESIDENT
ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to annuity purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will generally be
subject to U.S. federal income tax and withholding on annuity distributions at a
30% rate, unless a lower treaty rate applies. In addition, purchasers may be
subject to state premium tax, other state and/or municipal taxes, and taxes that
may be imposed by the purchaser's country of citizenship or residence.
Prospective purchasers are advised to consult with a qualified tax adviser
regarding U.S., state, and foreign taxation with respect to an annuity purchase.
MISCELLANEOUS
HOW CONTRACTS ARE SOLD
Hartford Securities Distribution Company, Inc. ("HSD") serves as principal
underwriter for the securities issued with respect to the Separate Account. HSD
is a wholly-owned subsidiary of Hartford Life Insurance Company. The principal
business address of HSD is the same as Hartford's.
The securities will be sold by salespersons of HSD who represent Hartford as
insurance and variable annuity agents and who are registered representatives or
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of
1934 as a Broker-Dealer and is a member of the National Association of
Securities Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 6% of Premium
Payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation. Broker-dealers or financial
institutions are compensated according to a schedule set forth by HSD and any
applicable rules or regulations for variable insurance compensation.
Compensation is generally based on premium payments made by policyholders or
contract owners. This compensation is usually paid from the sales charges
described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or surrender variable insurance products.
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the Contract with
an additional 5.0% of the Premium Payment. This additional percentage of Premium
Payment in no way affects present or future charges, rights, benefits or current
values of other Contract Owners. The following class of individuals are eligible
for this feature: (1) current or retired officers, directors, trustees and
employees (and their families) of the ultimate parent and affiliates of
Hartford; and (2) employees and registered representatives (and their
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26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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families) of registered broker-dealers (or financial institutions affiliated
therewith) that have a sales agreement with Hartford and its principal
underwriter to sell the Contract.
LEGAL MATTERS AND EXPERTS
There are no material legal proceedings pending to which the Separate
Account is a party.
Counsel with respect to federal laws and regulations applicable to the issue
and sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
Senior Vice President, General Counsel, and Corporate Secretary, Hartford Life
and Annuity Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.
The audited financial statements included in this registration statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory-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.
ADDITIONAL INFORMATION
Inquiries will be answered by calling your representative or by writing:
Hartford Life and Annuity Insurance Company
Attn.: Individual Annuity Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: (800) 862-6668 (Contract Owner)
(800) 862-7155 (Investment Representatives)
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
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APPENDIX I
INFORMATION REGARDING TAX-QUALIFIED PLANS
The tax rules applicable to tax-qualified contract owners, including
restrictions on contributions and distributions, taxation of distributions and
tax penalties, vary according to the type of plan as well as the terms and
conditions of the plan itself. Various tax penalties may apply to contributions
in excess of applicable limits, distributions prior to age 59 1/2 (subject to
certain exceptions), distributions which do not conform to applicable
commencement and minimum distribution rules, and certain other transactions with
respect to tax-qualified plans. Therefore, this summary does not attempt to
provide more than general information about the tax rules associated with use of
a Contract by a tax-qualified retirement plan. Contract owners, plan
participants and beneficiaries are cautioned that the rights and benefits of any
person to benefits may be controlled by the terms and conditions of the
tax-qualified retirement plan itself, regardless of the terms and conditions of
a Contract, but that Hartford is not bound by the terms and conditions of such
plans to the extent such terms conflict with a Contract, unless Hartford
specifically consents to be bound. Additionally, some tax-qualified retirement
plans are subject to distribution and other requirements which are not
incorporated into Hartford's administrative procedures. Contract owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions comply with applicable law.
Because of the complexity of these rules, owners, participants and beneficiaries
are encouraged to consult their own tax advisors as to specific tax
consequences.
A. TAX-QUALIFIED PENSION OR
PROFIT-SHARING PLANS
Provisions of the Code permit eligible employers to establish tax-qualified
pension or profit sharing plans (described in Section 401(a) and 401(k), if
applicable, and exempt from taxation under Section 501(a) of the Code), and
Simplified Employee Pension Plans (described in Section 408(k)). Such plans are
subject to limitations on the amount that may be contributed, the persons who
may be eligible to participate and the time when distributions must commence.
Employers intending to use these contracts in connection with tax-qualified
pension or profit-sharing plans should seek competent tax and other legal
advice.
B. TAX SHELTERED ANNUITIES UNDER
SECTION 403(b)
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations, as
specified in Section 501(c)(3) of the Code, to purchase annuity contracts, and,
subject to certain limitations, to exclude such contributions from gross income.
Generally, such contributions may not exceed the lesser of $10,000 (indexed) or
20% of an employee's "includable compensation" for such employee's most recent
full year of employment, subject to other adjustments. Special provisions under
the Code may allow some employees to elect a different overall limitation.
Tax-sheltered annuity programs under Section 403(b) are subject to a
PROHIBITION AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO
CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT, unless such
distribution is made:
(1) after the participating employee attains age 59 1/2;
(2) upon separation from service;
(3) upon death or disability; or
(4) in the case of hardship (and in the case of hardship, any income
attributable to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions attributable
to cash values or other amounts held under a Section 403(b) contract as of
December 31, 1988.
C. DEFERRED COMPENSATION PLANS UNDER
SECTION 457
Employees and independent contractors performing services for eligible
employers may have contributions made to an Eligible Deferred Compensation Plan
of their employer in accordance with the employer's plan and Section 457 of the
Code. Section 457 places limitations on contributions to Eligible Deferred
Compensation Plans maintained by a State or other tax-exempt organization. For
these purposes, the term "State" means a State, a political sub-division of a
State, and an agency or instrumentality of a State or political sub-division of
a State. Generally, the limitation is 33 1/3% of includable compensation
(typically 25% of gross compensation) or, for 1998, $8,000 (indexed), whichever
is less. Such a plan may also provide for additional "catch-up" deferrals during
the three taxable years ending before a Participant attains normal retirement
age.
An employee electing to participate in an Eligible Deferred Compensation
Plan should understand that his or her rights and benefits are governed strictly
by the terms of the plan and that the employer is the legal owner of any
contract issued with respect to the plan. The employer, as
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28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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owner of the contract(s), retains all voting and redemption rights which may
accrue to the contract(s) issued with respect to the plan. The participating
employee should look to the terms of his or her plan for any charges in regard
to participating therein other than those disclosed in this Prospectus.
Participants should also be aware that effective August 20, 1996, the Small
Business Job Protection Act of 1996 requires that all assets and income of an
Eligible Deferred Compensation Plan established by a governmental employer which
is a State, a political subdivision of a State, or any agency or instrumentality
of a State or political subdivision of a State, must be held in trust (or under
certain specified annuity contracts or custodial accounts) for the exclusive
benefit of participants and their beneficiaries. Special transition rules apply
to such Eligible governmental Deferred Compensation Plans already in existence
on August 20, 1996, and provide that such plans need not establish a trust
before January 1, 1999. However, this requirement of a trust does not apply to
amounts under an Eligible Deferred Compensation Plan of a tax-exempt (non-
governmental) organization, and such amounts will be subject to the claims of
such tax-exempt employer's general creditors.
In general, distributions from an Eligible Deferred Compensation Plan are
prohibited under Section 457 of the Code unless made after the participating
employee attains age 70 1/2, separates from service, dies, or suffers an
unforeseeable financial emergency. Present federal tax law does not allow
tax-free transfers or rollovers for amounts accumulated in a Section 457 plan
except for transfers to other Section 457 plans in limited cases.
D. INDIVIDUAL RETIREMENT ANNUITIES
UNDER SECTION 408
Section 408 of the Code permits eligible individuals to establish individual
retirement programs through the purchase of Individual Retirement Annuities
("IRAs"). IRAs are subject to limitations on the amount that may be contributed,
the contributions that may be deducted from taxable income, the persons who may
be eligible and the time when distributions may commence. Also, distributions
from certain qualified plans may be "rolled-over" on a tax-deferred basis into
an IRA.
The Contracts may be offered as SIMPLE IRAs in connection with a SIMPLE IRA
plan of an employer. Special rollover rules apply to SIMPLE IRAs. Amounts can be
rolled over from one SIMPLE IRA to another SIMPLE IRA. However, amounts can be
rolled over from a SIMPLE IRA to a regular IRA only after two years have expired
since the participant first commenced participation in your employer's SIMPLE
IRA plan. Amounts cannot be rolled over to a SIMPLE IRA from a qualified plan or
a regular IRA. Hartford is a non-designated financial institution.
Beginning in 1998, the Contracts may be offered as ROTH IRAs under Section
408A of the Code. Contributions to a ROTH IRA are not deductible. Subject to
special limitations, a regular IRA may be converted into a ROTH IRA or a
distribution from a regular IRA may be rolled over to a ROTH IRA. However, a
conversion or a rollover from a regular IRA to a ROTH IRA is not excludable from
gross income. If certain conditions are met, qualified distributions from a ROTH
IRA are tax-free.
E. FEDERAL TAX PENALTIES AND WITHHOLDING
Distributions from retirement plans are generally taxed under Section 72 of
the Code. Under these rules, a portion of each distribution may be excludable
from income. The excludable amount is the portion of the distribution which
bears the same ratio as the after-tax contributions bear to the expected return.
1. PREMATURE DISTRIBUTION
Distributions from a tax-qualified plan before the Participant attains age
59 1/2 are generally subject to an additional penalty tax equal to 10% of the
taxable portion of the distribution. The 10% penalty does not apply to
distributions made after the employee's death, on account of disability, for
eligible medical expenses and distributions in the form of a life annuity and,
except in the case of an IRA, certain distributions after separation from
service after age 55. For these purposes, a life annuity means a scheduled
series of substantially equal periodic payments for the life or life expectancy
of the Participant (or the joint lives or life expectancies of the Participant
and Beneficiary).
In addition, effective for distributions made from an IRA after December 31,
1997, there is no such penalty tax on distributions that do not exceed the
amount of certain qualifying higher education expenses, as defined by Section
72(t)(7) of the Code, or which are qualified first-time homebuyer distributions
meeting the requirements of Section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that the
10% penalty tax discussed above is increased to 25% with respect to non-exempt
premature distributions made from your SIMPLE IRA during the first two years
following the date you first commenced participation in any SIMPLE IRA plan of
your employer.
2. MINIMUM DISTRIBUTION TAX
If the amount distributed is less than the minimum required distribution for
the year, the Participant is subject to a 50% tax on the amount that was not
properly distributed.
An individual's interest in a tax-qualified retirement plan generally must
be distributed, or begin to be distributed, not later than April 1 of the
calendar year following the later of (i) the calendar year in which the
individual
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
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attains age 70 1/2 or (ii) the calendar year in which the individual retires
from service with the employer sponsoring the plan ("required beginning date").
However, the required beginning date for an individual who is a five (5) percent
owner (as defined in the Code), or who is the owner of an IRA, is April 1 of the
calendar year following the calendar year in which the individual attains age
70 1/2. The entire interest of the Participant must be distributed beginning no
later than the required beginning date over a period which may not extend beyond
a maximum of the life expectancy of the Participant and a designated
Beneficiary. Each annual distribution must equal or exceed a "minimum
distribution amount" which is determined by dividing the account balance by the
applicable life expectancy. This account balance is generally based upon the
account value as of the close of business on the last day of the previous
calendar year. In addition, minimum distribution incidental benefit rules may
require a larger annual distribution.
If an individual dies before reaching his or her required beginning date,
the individual's entire interest must generally be distributed within five years
of the individual's death. However, this rule will be deemed satisfied, if
distributions begin before the close of the calendar year following the
individual's death to a designated Beneficiary (or over a period not extending
beyond the life expectancy of the beneficiary). If the Beneficiary is the
individual's surviving spouse, distributions may be delayed until the individual
would have attained age 70 1/2.
If an individual dies after reaching his or her required beginning date or
after distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect at
the time of the individual's death.
3. WITHHOLDING
In general, distributions from IRAs and plans described in Section 457 of
the Code are subject to regular wage withholding rules. Periodic distributions
from other tax-qualified retirement plans that are made for a specified period
of 10 or more years or for the life or life expectancy of the participant (or
the joint lives or life expectancies of the participant and beneficiary) are
generally subject to federal income tax withholding as if the recipient were
married claiming three exemptions. The recipient of periodic distributions may
generally elect not to have withholding apply or to have income taxes withheld
at a different rate by providing a completed election form.
Other distributions from such other tax-qualified retirement plans are
generally subject to mandatory income tax withholding at the flat rate of 20%
unless such distributions are:
a) the non-taxable portion of the distribution;
b) required minimum distributions; or
c) direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code Section 401(a)(31).
<PAGE>
30 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
TO
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION
------------------------------------------------------------------------
<S> <C>
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY..............
SAFEKEEPING OF ASSETS...................................................
INDEPENDENT PUBLIC ACCOUNTANTS..........................................
DISTRIBUTION OF CONTRACTS...............................................
CALCULATION OF YIELD AND RETURN.........................................
PERFORMANCE COMPARISONS.................................................
FINANCIAL STATEMENTS....................................................
</TABLE>
<PAGE>
This form must be completed for all tax sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The Hartford Variable Annuity Contract which you have recently purchased is
subject to certain restrictions imposed by the Tax Reform Act of 1986.
Contributions to the Contract after December 31, 1988 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:
a. attained age 59 1/2,
b. separated from service,
c. died, or
d. become disabled.
Distributions of post December 31, 1988 contributions (excluding any income
thereon) may also be made if you have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made prior to age 59 1/2
because of financial hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Hartford Variable Annuity. Please refer to your
Plan.
Please complete the following and return to:
Hartford Life and Annuity Insurance Company
Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Name of Contract Owner/Participant
- -------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City or Plan/School District
- --------------------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
Contract No:
- --------------------------------------------------------------------------------
Signature:
- --------------------------------------------------------------------------------
<PAGE>
To obtain a Statement of Additional Information, please complete the form
below and mail to:
Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Please send a Statement of Additional Information for The Director SELECT to
me at the following address:
- ----------------------------------------------------
Name
- ------------------------------------------------------------
Address
- ------------------------------------------------------------
City/State Zip Code
<PAGE>
PART B
HLA DIRECTOR SELECT
<PAGE>
-2-
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT ONE
THE DIRECTOR SELECT VARIABLE ANNUITY
This Statement of Additional Information is not a prospectus. The
information contained herein should be read in conjunction with the
Prospectus.
To obtain a Prospectus, send a written request to Hartford Life and Annuity
Insurance Company Attn: Individual Annuity Services, P.O. Box 5085,
Hartford, CT 06102-5085.
Date of Prospectus: June 1, 1998
Date of Statement of Additional Information: June 1, 1998
33-73568
<PAGE>
-3-
TABLE OF CONTENTS
SECTION PAGE
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY 4
SAFEKEEPING OF ASSETS 4
INDEPENDENT PUBLIC ACCOUNTANTS 4
DISTRIBUTION OF CONTRACTS 5
CALCULATION OF YIELD AND RETURN 5
PERFORMANCE COMPARISONS 10
FINANCIAL STATEMENTS 14
<PAGE>
-4-
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both
individual and group, in all states of the United States 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.
HARTFORD RATINGS
<TABLE>
<CAPTION>
RATING AGENCY EFFECTIVE RATING BASIS OF RATING
<S> <C> <C> <C>
A.M. Best and Company, 9/9/97 A+ Financial soundness and
Inc. operating performance
Standard & Poor's 1/23/98 AA Insurer financial strength
Duff & Phelps 1/23/98 AA+ Claims paying ability
</TABLE>
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. The assets are
kept physically segregated and are held separate and apart from Hartford's
general corporate assets. Records are maintained of all purchases and
redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory-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
<PAGE>
-5-
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.
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as principal
underwriter for the securities issued with respect to the Separate Account and
will offer the Contracts on a continous basis.
HSD is a wholly-owned subsidiary of Hartford. The principal business address
of HSD is the same as Hartford.
The securities will be sold by salespersons of HSD, who represent Hartford as
insurance and Variable Annuity agents and who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934 as a Broker-Dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD").
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.
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
<PAGE>
-6-
THE MONEY MARKET FUND SUB-ACCOUNT'S YIELD AND EFFECTIVE YIELD WILL VARY IN
RESPONSE TO FLUCTUATIONS IN INTEREST RATES AND IN THE EXPENSES OF THE SUB-
ACCOUNT. THE CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES ON
THE SEPARATE ACCOUNT LEVEL, INCLUDING THE MAXIMUM ANNUAL MAINTENANCE FEE.
The yield and effective yield for the seven day period ending March 31, 1998
for the Money Market Fund Sub-Account was as follows ($30 Annual Maintenance
Fee):
<TABLE>
<CAPTION>
SUB-ACCOUNT YIELD EFFECTIVE YIELD
<S> <C> <C>
Money Market Fund* 3.96% 4.04%
</TABLE>
* Yield and effective yield for the seven day period ending March 31, 1998.
YIELDS OF BOND FUND AND MORTGAGE SECURITIES FUND SUB-ACCOUNTS. As summarized
in the Prospectus under the heading "Performance Related Information," yields
of the above Sub-Accounts will be computed by annualizing a recent month's
net investment income, divided by a Fund share's net asset value on the last
trading day of that month. Net changes in the value of a hypothetical account
will assume the change in the underlying mutual fund's "net asset value per
share" for the same period in addition to the daily expense charge assessed,
at the sub-account level for the respective period. The Sub-Accounts' yields
will vary from time to time depending upon market conditions and, the
composition of the underlying funds' portfolios. Yield should also be
considered relative to changes in the value of the Sub-Accounts' shares and
to the relative risks associated with the investment objectives and policies
of the underlying Fund.
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL, INCLUDING
THE ANNUAL MAINTENANCE FEE.
Yield calculations of the Sub- Accounts used for illustration purposes
reflect the interest earned by the Sub- Accounts, less applicable asset
charges assessed against a Contract Owner's account over the base period.
Yield quotations based on a 30 day period were computed by dividing the
dividends and interests earned during the period by the maximum offering
price per unit on the last day of the period, according to the following
formula:
Example:
Current Yield Formula for the Sub-Account 2[((A- B)/(CD) + 1)6 - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
<PAGE>
-7-
C = The average daily number of units outstanding during the period that
were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the period.
At any time in the future, yields and total return may be higher or lower
than past yields and there can be no assurance that any historical results
will continue.
The method of calculating yields described above for these Sub-Accounts
differs from the method used by the Sub-Accounts prior to May 1, 1988. The
denominator of the fraction used to calculate yield was previously the
average unit value for the period calculated. That denominator will
hereafter be the unit value of the Sub-Accounts on the last trading day of
the period calculated.
<TABLE>
<CAPTION>
SUB-ACCOUNTS YIELD
<S> <C>
Bond Fund** 4.54%
Mortgage Securities Fund** 4.76%
</TABLE>
** Yield quotation based on a 30 day period ended March 31, 1998.
CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the
heading "Performance Related Information," total return is a measure of the
change in value of an investment in a Sub-Account over the period covered.
The formula for total return used herein includes three steps: (1)
calculating the value of the hypothetical initial investment of $1,000 as of
the end of the period by multiplying the total number of units owned at the
end of the period by the unit value per unit on the last trading day of the
period; (2) assuming redemption at the end of the period and deducting any
applicable contingent deferred sales charge and (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 first quarter of the fiscal year ended March 31,
1998. No information is included for the Growth and Income Fund Sub-Account
because as of March 31, 1998, the Sub-Account had not commenced operations.
<PAGE>
-8-
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR THE QUARTER ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
10 YEAR OR SINCE
SUB-ACCOUNTS INCEPTION DATE 1 YEAR 5 YEAR INCEPTION*
<S> <C> <C> <C> <C>
Mentor Perpetual
International 3/2/98 na na -8.22%
Mentor Capital Growth 3/2/98 na na -9.10%
Mentor Growth 3/2/98 na na -9.10%
Advisers Fund 3/31/83 24.42% 12.09% 10.79%
Bond Fund 8/31/77 3.13% 2.15% 4.74%
Capital Appreciation
Fund 4/2/84 32.74% 16.16% 15.71%
Dividend & Growth
Fund 3/8/94 32.57% na 20.38%
Index Fund 5/1/87 36.48% 17.05% 14.57%
International Advisers 3/1/95 4.85% na 7.66%
Fund
International
Opportunities Fund 7/2/90 3.67% 8.22% 3.68%
MidCap Fund 7/30/97 na na 14.75%
Mortgage Securities 1/1/85 .27% 1.67% 4.38%
Fund
Small Company Fund 8/9/96 31.83% na 15.53%
Stock Fund 8/31/77 35.67% 17.72% 14.17%
Money Market Fund 6/30/80 -4.93% -.32% 1.67%
</TABLE>
* Figures represent performance since inception for Sub-Accounts in existence
for less than 10 years, or performance for 10 years for Sub-Accounts in
existence for more than 10 years.
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated for
one year, five years, and ten years or other periods. Non-standardized total
return is measured in the same manner as the standardized total return
described above, except that the contingent deferred sales charge and the
Annual Maintenance Fee are not deducted. Therefore, non-standardized total
return for a Sub-Account is higher than standardized total return for a
Sub-Account.
<PAGE>
-9-
The following are the non-standardized annualized total return quotations for
the Sub-Accounts for the first quarter of the fiscal year ended March 31,
1998. No information is included for the Growth and Income Fund Sub-Account
because as of March 31, 1998, the Sub-Account had not commenced operations.
NON-STANDARDIZED ANNUALIZED TOTAL RETURN FOR THE QUARTER ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
10 YEAR OR SINCE
SUB-ACCOUNTS INCEPTION DATE 1 YEAR 5 YEAR INCEPTION*
<S> <C> <C> <C> <C>
Mentor Perpetual
Portfolio 3/2/98 na na .78%
Mentor Capital Growth 3/2/98 na na -.10%
Mentor Growth 3/2/98 na na -.10%
Advisers Fund 3/31/83 33.42% 15.31% 12.99%
Bond Fund 8/31/77 12.13% 5.85% 7.23%
Capital Appreciation
Fund 4/2/84 41.74% 19.10% 17.61%
Dividend & Growth
Fund 3/8/94 41.57% na 23.84%
Index Fund 5/1/87 45.48% 20.15% 16.58%
International Advisers 3/1/95 13.85% na 12.49%
Fund
International
Opportunities Fund 7/2/90 12.67% 11.31% 6.73%
MidCap Fund 7/30/97 na na 23.75%
Mortgage Securities 1/1/85 9.27% 5.37% 6.85%
Fund
Small Company Fund 8/9/96 40.83% na 22.18%
Stock Fund 8/31/77 44.67% 20.74% 16.25%
Money Market Fund 6/30/80 4.07% 3.44% 4.38%
</TABLE>
*Figures represent performance since inception for Sub-Accounts in existence for
less than 10 years, or performance for 10 years for Sub-Accounts in existence
for more than 10 years.
<PAGE>
-10-
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 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
<PAGE>
-11-
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%).
<PAGE>
<TABLE>
<CAPTION>
SEPARATE ACCOUNT ONE MORTGAGE
HARTFORD LIFE & ANNUITY INSURANCE COMPANY MONEY CAPITAL SECURITIES
STATEMENT OF ASSETS & LIABILITIES BOND FUND STOCK FUND MARKET FUND ADVISERS FUND APPRECIATION FUND FUND
MARCH 31, 1998 (UNAUDITED) SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Hartford Bond Fund, Inc.
Shares 247,350,101
Cost $ 253,373,535
Market Value:.......................... $263,612,875 -- -- -- -- --
Hartford Stock Fund, Inc.
Shares 435,850,809
Cost $1,704,590,836
Market Value:.......................... -- $2,482,893,430 -- -- -- --
HVA Money Market Fund, Inc.
Shares 192,481,551
Cost $ 192,481,551
Market Value:.......................... -- -- $192,481,550 -- -- --
Hartford Advisers Fund, Inc.
Shares 1,553,222,387
Cost $3,137,303,872
Market Value:.......................... -- -- -- $4,190,570,703 -- --
Hartford Capital Appreciation
Fund, Inc.
Shares 564,590,017
Cost $2,042,038,078
Market Value:.......................... -- -- -- -- $2,637,134,476 --
Hartford Mortgage Securities
Fund, Inc.
Shares 79,193,300
Cost $ 85,255,309
Market Value:.......................... -- -- -- -- -- $86,550,199
Hartford Index Fund, Inc.
Shares 171,315,319
Cost $ 397,484,314
Market Value:.......................... -- -- -- -- -- --
Hartford International Opportunities
Fund, Inc.
Shares 475,491,690
Cost $ 603,169,193
Market Value:.......................... -- -- -- -- -- --
Hartford Dividend and Growth
Fund, Inc.
Shares 690,852,119
Cost $1,100,339,704
Market Value:.......................... -- -- -- -- -- --
Hartford International Advisers
Fund, Inc.
Shares 148,814,206
Cost $ 170,734,454
Market Value:.......................... -- -- -- -- -- --
Hartford Small Company
Shares 128,447,598
Cost $ 152,482,456
Market Value:.......................... -- -- -- -- -- --
Hartford MidCap Fund
Shares 24,343,613
Cost $ 27,509,948
Market Value:.......................... -- -- -- -- -- --
Due from Hartford Life and
Annuity Insurance Company............ 818,899 1,628,067 -- 1,815,450 915,588 70,925
Receivable from fund shares sold....... -- -- 527,850 -- -- --
----------- ------------- ----------- ------------- ------------- ----------
TOTAL ASSETS........................... 264,431,774 2,484,521,497 193,009,400 4,192,386,153 2,638,050,064 86,621,124
----------- ------------- ----------- ------------- ------------- ----------
LIABILITIES
Due to Hartford Life and Annuity
Insurance Company.................... -- -- 529,724 -- -- --
Payable for fund shares purchased...... 818,837 1,631,228 -- 1,817,053 753,953 71,634
----------- ------------- ----------- ------------- ------------- ----------
TOTAL LIABILITIES...................... 818,837 1,631,228 529,724 1,817,053 753,953 71,634
----------- ------------- ----------- ------------- ------------- ----------
NET ASSETS (VARIABLE ANNUITY
CONTRACT LIABILITIES).................. 263,612,937 2,482,890,269 192,479,676 4,190,569,100 2,637,296,111 86,549,490
----------- ------------- ----------- ------------- ------------- ----------
----------- ------------- ----------- ------------- ------------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEPARATE ACCOUNT ONE INTERNATIONAL DIVIDEND INTERNATIONAL SMALL
HARTFORD LIFE & ANNUITY INSURANCE COMPANY OPPORTUNITIES AND GROWTH ADVISERS COMPANY MIDCAP
STATEMENT OF ASSETS & LIABILITIES INDEX FUND FUND FUND FUND FUND FUND
MARCH 31, 1998 (UNAUDITED) SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Hartford Bond Fund, Inc.
Shares 247,350,101
Cost $ 253,373,535
Market Value:.......................... -- -- -- -- -- --
Hartford Stock Fund, Inc.
Shares 435,850,809
Cost $1,704,590,836
Market Value:.......................... -- -- -- -- -- --
HVA Money Market Fund, Inc.
Shares 192,481,551
Cost $ 192,481,551
Market Value:.......................... -- -- -- -- -- --
Hartford Advisers Fund, Inc.
Shares 1,553,222,387
Cost $3,137,303,872
Market Value:.......................... -- -- -- -- -- --
Hartford Capital Appreciation
Fund, Inc.
Shares 564,590,017
Cost $2,042,038,078
Market Value:.......................... -- -- -- -- -- --
Hartford Mortgage Securities
Fund, Inc.
Shares 79,193,300
Cost $ 85,255,309
Market Value:.......................... -- -- -- -- -- --
Hartford Index Fund, Inc.
Shares 171,315,319
Cost $ 397,484,314
Market Value:.......................... $547,801,632 -- -- -- -- --
Hartford International Opportunities
Fund, Inc.
Shares 475,491,690
Cost $ 603,169,193
Market Value:.......................... -- $652,319,917 -- -- -- --
Hartford Dividend and Growth
Fund, Inc.
Shares 690,852,119
Cost $1,100,339,704
Market Value:.......................... -- -- $1,453,467,193 -- -- --
Hartford International Advisers
Fund, Inc.
Shares 148,814,206
Cost $ 170,734,454
Market Value:.......................... -- -- -- $165,724,708 -- --
Hartford Small Company
Shares 128,447,598
Cost $ 152,482,456
Market Value:.......................... -- -- -- -- $170,817,707 --
Hartford MidCap Fund
Shares 24,343,613
Cost $ 27,509,948
Market Value:.......................... -- -- -- -- -- $31,328,332
Due from Hartford Life and Annuity
Insurance Company.................... 347,459 -- 1,191,987 106,332 261,488 236,808
Receivable from fund shares sold....... -- 132,866 -- -- -- --
----------- ----------- ------------- ----------- ----------- ----------
TOTAL ASSETS........................... 548,149,091 652,452,783 1,454,659,180 165,831,040 171,079,195 31,565,140
----------- ----------- ------------- ----------- ----------- ----------
LIABILITIES
Due to Hartford Life and Annuity
Insurance Company.................... -- 133,178 -- -- -- --
Payable for fund shares purchased...... 343,351 -- 1,192,175 106,238 262,352 236,640
----------- ----------- ------------- ----------- ----------- ----------
TOTAL LIABILITIES...................... 343,351 133,178 1,192,175 106,238 262,352 236,640
----------- ----------- ------------- ----------- ----------- ----------
NET ASSETS (VARIABLE ANNUITY
CONTRACT LIABILITIES).................. 547,805,740 652,319,605 1,453,467,005 165,724,802 170,816,843 31,328,500
----------- ----------- ------------- ----------- ----------- ----------
----------- ----------- ------------- ----------- ----------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEPARATE ACCOUNT ONE CAPITAL MORTGAGE
HARTFORD LIFE & ANNUITY INSURANCE COMPANY MONEY APPRECIATION SECURITIES
STATEMENT OF OPERATIONS BOND FUND STOCK FUND MARKET FUND ADVISERS FUND FUND FUND
MARCH 31, 1998 (UNAUDITED) SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends ......................... $634,440 $700,625 $2,528,855 $2,107,645 $471,665 $566,344
Capital gains income ............... -- 76,061,613 1,315 130,454,479 150,932,848 --
Net realized and unrealized
gain (loss) on investments:
Net realized gain(loss) on security
transactions .................... (9,901) -- -- -- (66,911) 373
Net unrealized appreciation
(depreciation) of investments
during the period ................ 3,555,355 240,129,082 -- 255,679,648 142,580,339 677,509
----------- ------------ ---------- ----------- ------------ ----------
Net gain (losses) on investments .... 3,545,454 240,129,082 -- 255,679,648 142,513,428 677,882
----------- ------------ ---------- ----------- ------------ ----------
Expenses:
Mortality and expense undertakings .. (767,157) (6,806,761) (601,425) (11,822,649) (7,344,823) (257,974)
----------- ------------ ---------- ----------- ------------ ----------
Net increase (decrease) in net
assets resulting from operations... $3,412,737 $310,084,559 $1,928,745 $376,419,123 $286,573,118 $986,252
----------- ------------ ---------- ----------- ------------ ----------
----------- ------------ ---------- ----------- ------------ ----------
</TABLE>
<TABLE>
<CAPTION>
SEPARATE ACCOUNT ONE INTERNATIONAL DIVIDEND INTERNATIONAL SMALL
HARTFORD LIFE & ANNUITY INSURANCE COMPANY OPPORTUNITES AND GROWTH ADVISERS COMPANY MIDCAP
STATEMENT OF OPERATIONS INDEX FUND FUND FUND FUND FUND FUND
MARCH 31, 1998 (UNAUDITED) SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends .......................... $390,766 $351,493 $2,397,037 $16,822,117 -- $ 574
Capital gains income ............... 11,566,682 39,050,857 44,842,140 4,004,303 2,433,792 --
Net Realized and unrealized
gain (loss) on investments:
Net realized gain(loss) on security
transactions ...................... -- (291,162) -- (13,744) (1,383) --
Net unrealized appreciation
(depreciation) of investments
during the period ................ 52,138,833 36,219,751 99,816,055 (7,085,127) 15,708,013 3,178,699
------------- ----------- ------------ ----------- ------------ ------------
Net gain(losses) on investments .... 52,138,833 35,928,589 99,816,055 (7,098,871) 15,708,013 3,178,699
------------- ----------- ------------ ----------- ------------ ------------
Expenses:
Mortality and expense undertakings.. (1,487,367) (1,860,686) (3,957,142) (471,821) (455,207) (68,030)
------------- ----------- ------------ ----------- ------------ ------------
Net increase (decrease) in net
assets resulting from operations.. 62,608,914 73,470,253 143,098,090 13,255,728 17,686,598 3,111,243
------------- ----------- ------------ ----------- ------------ ------------
------------- ----------- ------------ ----------- ------------ ------------
</TABLE>
<PAGE>
SEPARATE ACCOUNT ONE
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
CAPITAL MORTGAGE
MONEY APPRECIATION SECURITIES
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss)................. $(132,717) $(6,106,136) $1,927,430 $(9,715,004) $(6,873,158) $308,370
Capital gains income......................... -- 76,061,613 1,315 130,454,479 150,932,848 --
Net realized gain (loss) on security
transactions............................... (9,901) -- -- -- (66,911) 373
Net unrealized appreciation (depreciation)
of investments during the period........... 3,555,355 240,129,082 -- 255,679,648 142,580,339 677,509
----------- ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations.................. 3,412,737 310,084,559 1,928,745 376,419,123 286,573,118 986,252
----------- ----------- ----------- ------------ ----------- -----------
Unit transactions:
Purchases................................... 16,234,758 101,617,879 16,604,340 165,939,991 96,772,283 2,921,209
Net transfers............................... 19,218,154 60,883,627 (16,019,196) 118,764,106 40,625,177 3,670,866
Surrenders.................................. (3,753,112) (19,681,443) (9,995,195) (46,695,374) (24,650,084) (1,557,445)
Net annuity transactions.................... 125,078 398,122 127,408 414,712 51,834 193,689
----------- ----------- ----------- ------------ ----------- -----------
Total increase (decrease) in net assets
resulting from unit....................... 31,824,878 143,218,185 (9,282,643) 238,423,435 112,799,210 5,228,319
----------- ----------- ----------- ------------ ----------- -----------
Total increase (decrease) in net assets..... 35,237,615 453,302,744 (7,353,898) 614,842,558 399,372,328 6,214,571
Net Assets:
Beginning of period....................... 28,375,322 2,029,587,525 199,833,574 3,575,726,542 2,237,923,783 80,334,919
----------- ----------- ----------- ------------ ----------- -----------
End of Period............................. $263,612,937 $2,482,890,269 $192,479,676 $4,190,569,100 $2,637,296,111 $86,549,490
----------- ----------- ----------- ------------ ----------- -----------
----------- ----------- ----------- ------------ ----------- -----------
</TABLE>
<PAGE>
SEPARATE ACCOUNT ONE
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
INTERNATIONAL DIVIDEND INTERNATIONAL SMALL
OPPORTUNITIES AND GROWTH ADVISERS COMPANY MIDCAP
INDEX FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss)................ $(1,096,601) $(1,509,193) $(1,560,105) $16,350,296 $(455,207) $(67,456)
Capital gains income........................ 11,566,682 39,050,857 44,842,140 4,004,303 2,433,792 --
Net realized gain (loss) on security
transactions.............................. -- (291,162) -- (13,744) (1,383) --
Net unrealized appreciation (depreciation)
of investments during the period.......... 52,138,833 36,219,751 99,816,055 (7,085,127) 15,708,013 3,178,699
----------- ---------- ----------- ----------- ---------- -----------
Net increase (decrease) in net assets
resulting from operations................. 62,608,914 73,470,253 143,098,090 13,255,728 17,685,215 3,111,243
----------- ---------- ----------- ----------- ---------- -----------
Unit transactions:
Purchases................................... 28,581,914 11,146,165 86,742,227 6,116,124 11,927,222 6,790,376
Net transfers............................... 23,042,986 (8,904,454) 71,546,262 2,983,351 7,282,577 6,796,880
Surrenders.................................. (4,141,587) (6,224,852) (12,130,500) (1,418,728) (899,202) (108,307)
Net annuity transactions.................... 196,498 164,443 755,656 1,922 38,849 --
----------- ---------- ----------- ----------- ---------- -----------
Total increase (decrease) in net assets
resulting from unit....................... 47,679,811 (3,818,698) 146,913,645 7,682,669 18,349,446 13,478,949
----------- ---------- ----------- ----------- ---------- -----------
Total increase (decrease) in net assets..... 110,288,725 69,651,555 290,011,735 20,938,397 36,034,661 16,590,192
Net Assets:
Beginning of period......................... 437,517,015 582,668,050 1,163,455,270 144,786,405 134,782,182 14,738,308
----------- ---------- ----------- ----------- ---------- -----------
End of Period............................... $547,805,740 $652,319,605 $1,453,467,005 $165,724,802 $170,816,843 $31,328,500
----------- ---------- ----------- ----------- ---------- -----------
----------- ---------- ----------- ----------- ---------- -----------
</TABLE>
<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>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
(IN MILLIONS) 1998 1997
- --------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
REVENUES
Premiums and other considerations $ 563 $ 310
Net investment income 352 337
Net realized capital gains -- 4
- --------------------------------------------------------------------------------
TOTAL REVENUES 915 651
- --------------------------------------------------------------------------------
BENEFITS, CLAIMS AND EXPENSES
Benefits, claims and claim adjustment expenses 398 342
Amortization of deferred policy acquisition costs 94 81
Dividends to policyholders 107 54
Other insurance expenses 188 73
- --------------------------------------------------------------------------------
TOTAL BENEFITS, CLAIMS AND EXPENSES 787 550
- --------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE 128 101
Income tax expense 45 38
- --------------------------------------------------------------------------------
NET INCOME $ 83 $ 63
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
(IN MILLIONS, EXCEPT FOR SHARE DATA) 1998 1997
- --------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
INVESTMENTS
Fixed maturities, available for sale, at fair
value (amortized cost of $14,336 and $13,885) $ 14,609 $ 14,176
Equity securities, available for sale, at
fair value 188 180
Policy loans, at outstanding balance 3,760 3,756
Other investments, at cost 235 47
- --------------------------------------------------------------------------------
Total investments 18,792 18,159
Cash 52 54
Premiums and amounts receivable 23 18
Accrued investment income 353 330
Reinsurance recoverable 6,040 6,325
Deferred policy acquisition costs 3,430 3,315
Deferred income tax 454 348
Other assets 207 352
Separate account assets 77,457 69,055
- --------------------------------------------------------------------------------
TOTAL ASSETS $106,808 $ 97,956
- --------------------------------------------------------------------------------
LIABILITIES
Future policy benefits $ 3,325 $ 3,270
Other policyholder funds 20,980 21,034
Other liabilities 2,622 2,254
Separate account liabilities 77,457 69,055
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 104,384 95,613
- --------------------------------------------------------------------------------
STOCKHOLDER'S EQUITY
Common stock - authorized 1,000; issued and
outstanding, par value $5,690 6 6
Capital surplus 1,045 1,045
Accumulated other comprehensive income
Net unrealized capital gains on securities,
net of tax 177 179
Total accumulated other comprehensive income 177 179
Retained earnings 1,196 1,113
- --------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 2,424 2,343
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $106,808 $ 97,956
- --------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE
INCOME
----------------------
NET
UNREALIZED CAPITAL TOTAL
COMMON CAPITAL GAINS (LOSSES) ON RETAINED STOCKHOLDERS'
(IN MILLIONS) (UNAUDITED) STOCK SURPLUS SECURITIES, NET OF TAX EARNINGS EQUITY
- ----------------------------------------- -------- -------- ---------------------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 $ 6 $ 1,045 $ 179 $ 1,113 $ 2,343
COMPREHENSIVE INCOME
Net income -- -- -- 83 83
-----------
Other comprehensive income, net of tax:
Change in unrealized capital gains
(losses) on securities (1) (2) -- -- (2) -- (2)
-----------
Total other comprehensive income (2)
-----------
TOTAL COMPREHENSIVE INCOME 81
------- -------- -------------------- --------- -----------
BALANCE, MARCH 31, 1998 $ 6 $ 1,045 $ 177 $ 1,196 $ 2,424
------- -------- -------------------- --------- -----------
------- -------- -------------------- --------- -----------
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE
INCOME
----------------------
NET
UNREALIZED CAPITAL TOTAL
COMMON CAPITAL GAINS (LOSSES) ON RETAINED STOCKHOLDERS'
(IN MILLIONS) (UNAUDITED) STOCK SURPLUS SECURITIES, NET OF TAX EARNINGS EQUITY
- ----------------------------------------- -------- -------- ---------------------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 $ 6 $ 1,045 $ 30 $ 811 $ 1,892
COMPREHENSIVE INCOME
Net income -- -- -- 63 63
-----------
Other comprehensive income, net of tax:
Change in unrealized capital gains
(losses) on securities (1) (2) -- -- (87) -- (87)
-----------
Total other comprehensive income (87)
-----------
TOTAL COMPREHENSIVE INCOME 24
------- -------- -------------------- --------- -----------
BALANCE, MARCH 31, 1997 $ 6 $ 1,045 $ (57) $ 874 $ 1,868
------- -------- -------------------- --------- -----------
------- -------- -------------------- --------- -----------
</TABLE>
(1) UNREALIZED GAIN (LOSS) ON SECURITIES IS NET OF TAX EXPENSE (BENEFIT) OF $95
AND $(34) FOR MARCH 31, 1998 AND 1997, RESPECTIVELY.
(2) NET OF RECLASSIFICATION ADJUSTMENT FOR GAINS REALIZED IN NET INCOME OF $0
AND $4 FOR MARCH 31, 1998 AND 1997, RESPECTIVELY.
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
(IN MILLIONS) 1998 1997
- --------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 83 $ 63
ADJUSTMENTS TO NET INCOME:
Depreciation and amortization (5) 5
Net realized capital gains -- (4)
(Increase) decrease in deferred income taxes (102) 21
Increase in deferred policy acquisition costs (115) (128)
(Increase) decrease in premiums receivable and agents'
balances (5) 32
(Increase) decrease in accrued investment income (23) 57
Decrease in other assets 104 25
Decrease (increase) in reinsurance recoverables 23 (112)
Increase in liabilities for future policy benefits 55 158
Increase in other liabilities 74 227
- --------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATING ACTIVITIES 89 344
- --------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of fixed maturity investments (2,014) (1,525)
Sales of fixed maturity investments 1,162 985
Maturities and principal paydowns of fixed maturity
investments 459 664
Net (purchases) sales of other investments (118) 111
Net sales (purchases) of short-term investments 211 (102)
- --------------------------------------------------------------------------------------------
CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES (300) 133
- --------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net receipts from (disbursements for) investment and universal
life-type contracts credited to (charged against) policyholder
accounts 209 (447)
- --------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 209 (447)
- --------------------------------------------------------------------------------------------
(Decrease) increase in cash (2) 30
Cash - beginning of period 54 43
- --------------------------------------------------------------------------------------------
CASH - END OF PERIOD $ 52 $ 73
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
NET CASH PAID DURING THE PERIOD FOR:
Income taxes $ 56 $ 41
</TABLE>
4
<PAGE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT FOR SHARE DATA UNLESS OTHERWISE STATED)
(UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Hartford Life Insurance Company (the "Company") have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures which are normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made are adequate to make the
information presented not misleading. In the opinion of management, these
statements include all adjustments which were normal recurring adjustments
necessary to present fairly the financial position, results of operations and
cash flows for the periods presented.
For a description of accounting policies, see Note 2 of Notes to Consolidated
Financial Statements in the Company's 1997 Form 10-K Annual Report.
Certain reclassifications have been made to prior year financial information to
conform to the current year classification of transactions and accounts.
(b) CHANGES IN ACCOUNTING PRINCIPLES
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use". The SOP provides guidance on
accounting for the costs of internal use software and in determining whether the
software is for internal use. The SOP defines internal use software as software
that is acquired, internally developed, or modified solely to meet internal
needs and identifies stages of software development and accounting for the
related costs incurred during the stages. This statement is effective for
fiscal years beginning after December 15, 1998 and is not expected to have a
material impact on the Company's financial condition or results of operations.
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income", which establishes
standards for reporting and display of comprehensive income and its components
in a full set of general purpose financial statements. The objective of this
statement is to report a measure of all changes in equity of an enterprise that
result from transactions and other economic events of the period other than
transactions with owners. Comprehensive income is the total of net income and
all other nonowner changes in equity. Accordingly, the Company has reported
comprehensive income in the Condensed Consolidated Statement of Changes in
Stockholder's Equity.
NOTE 2. INITIAL PUBLIC OFFERING ("IPO")
On February 10, 1997, the Company's indirect parent, Hartford Life, Inc.
("Hartford Life"), filed a registration statement, as amended, with the
Securities and Exchange Commission, relating to the IPO of Hartford Life's
Class A Common Stock. Pursuant to the IPO on May 22, 1997, Hartford Life sold
to the public 26 million shares at $28.25 per share and received proceeds, net
of offering expenses, of $687. Of the proceeds, $527 was used to retire debt
related to Hartford Life's promissory notes outstanding and line of credit. The
remaining $160 was contributed by Hartford Life to Hartford Life and Accident
Insurance Company, the Company's direct parent, to support growth in its core
businesses.
The 26 million shares sold in the IPO represent approximately 18.6% of the
equity ownership in Hartford Life and approximately 4.4% of the combined voting
power of Hartford Life's Class A and Class B Common Stock. The Hartford owns
all of the 114 million outstanding shares of Class B Common Stock of Hartford
Life, representing approximately 81.4% of the equity ownership in Hartford Life
and approximately 95.6% of the combined voting power of Hartford Life's Class A
and Class B Common Stock. Holders of Class A Common Stock generally have
identical rights to the holders of Class B Common Stock except that the holders
of Class A Common Stock are entitled to one vote per share while holders of
Class B Common Stock are entitled to five votes per share on all matters
submitted to a vote of Hartford Life's stockholders.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary and punitive damages have
been asserted. Although there can be no assurances, management, at the present
time, does not anticipate that the ultimate liability arising from such pending
or threatened litigation will have a material effect on the financial condition
or operating results of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT FOR PER SHARE DATA UNLESS OTHERWISE STATED)
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") addresses the financial condition of the Company as of March
31, 1998, compared with December 31, 1997, and its results of operations for the
three months ended March 31, 1998 compared with the equivalent 1997 period.
This discussion should be read in conjunction with the MD&A in the Company's
1997 Form 10-K Annual Report.
Certain statements contained in this discussion, other than statements of
historical fact, are forward-looking statements. These statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and include estimates and assumptions related to economic,
competitive and legislative developments. These forward-looking statements are
subject to change and uncertainty which are, in many instances, beyond the
Company's control and have been made based upon management's expectations and
beliefs concerning future developments and their potential effect on Hartford
Life Insurance Company and subsidiaries (the "Company"). There can be no
assurance that future developments will be in accordance with management's
expectations or that the effect of future developments on the Company will be
those anticipated by management. Actual results could differ materially from
those expected by the Company, depending on the outcome of certain factors,
including those described in the forward-looking statements.
Certain reclassifications have been made to prior year financial information to
conform to the current year presentation.
INDEX
Consolidated Results of Operations: Employee Benefits 10
Operating Summary 8 Guaranteed Investment Contracts 11
Annuity 9 Accounting Standards 11
Individual Life Insurance 10
CONSOLIDATED RESULTS OF OPERATIONS: OPERATING SUMMARY
OPERATING SUMMARY FIRST QUARTER ENDED
MARCH 31,
----------------------------
1998 1997
----------------------------
REVENUES $ 915 $ 651
EXPENSES 832 588
------ ------
NET INCOME $ 83 $ 63
------ ------
------ ------
The Company's insurance business operates in three principal segments: Annuity,
Individual Life Insurance, and Employee Benefits as well as a Guaranteed
Investments Contracts segment, which is primarily comprised of business written
prior to 1995. The Company also maintains a Corporate operation through which
it reports items that are not directly allocable to any of its business
segments.
The Annuity segment focuses on the savings and retirement needs of the growing
number of individuals who are preparing for retirement or have already retired.
This segment consists of two areas of operation: Individual Annuity and Group
Annuity. The variety of products sold within this segment reflects the diverse
nature of the market. These include, in the Individual Annuity area, individual
variable annuities, fixed market value adjusted ("MVA") annuities, and mutual
funds; and in the Group Annuity area, deferred compensation and retirement plan
services for municipal governments and corporations, structured settlement
contracts and other special purpose annuity contracts, and investment management
contracts. The Individual Life Insurance segment, which focuses on the high end
6
<PAGE>
estate and business planning markets, sells a variety of life insurance
products, including variable life and universal life insurance. The Employee
Benefits segment consists of two areas of operation: Group Insurance and
Specialty Insurance. Through Group Insurance, the Company offers products such
as group life insurance, group short- and long-term disability and accidental
death and dismemberment. Substantially all of the Group Insurance business
directly written by the Company is ceded to its direct parent, Hartford Life and
Accident Insurance Company. Specialty Insurance primarily consists of the
Company's corporate owned life insurance ("COLI") business. The Guaranteed
Investment Contracts segment consists of guaranteed rate contract ("GRC")
business that is supported by assets held in either the Company's general
account or a guaranteed separate account and includes a closed block of
guaranteed rate contracts ("Closed Book GRC"). The Company decided in 1995,
after a thorough review of its GRC business, that it would significantly de-
emphasize general account GRC, choosing to focus its distribution efforts on
other products sold through other divisions. Management expects no material
income or loss from the Guaranteed Investment Contracts segment in the future.
Revenues increased $264, or 41%, to $915 for the first quarter of 1998 from
$651 for the comparable period in 1997. This was partially due to COLI revenues
which increased $161 due to renewal premium on leveraged COLI and increased fees
associated with variable COLI sales. Excluding COLI, revenues increased $103, or
22%, over the first quarter of 1997. This increase was driven by the Annuity
segment whose revenues increased $101, or 36%, for the first quarter of 1998 as
compared to the first quarter of 1997. This increase was due to higher fee
income earned on growing annuity account values where the average account value
grew $18.9 billion, or 37%, to $70.6 billion at March 31, 1998 from $51.7
billion at March 31, 1997 due to market appreciation and new sales. Also,
Individual Life Insurance revenues increased $17, or 15%, for the first quarter
of 1998 as compared to the first quarter of 1997 due to increased cost of
insurance charges and other fee income on the Company's growing block of
variable life business. Partially offsetting the increases discussed above was
a $20 decline in revenues related to Closed Book GRC.
Expenses increased $244, or 41%, to $832 for the first quarter of 1998 from $588
for the comparable period in 1997. The increase was partially driven by COLI,
whose expenses increased $160 as a result of increased operating expenses
associated with significant renewal premium and variable COLI sales for the
quarter ended March 31, 1998. Excluding COLI, expenses increased $84, or 20%,
over the first quarter of 1997. Annuity expenses grew $81 primarily due to
higher amortization of deferred policy acquisition costs and operating expenses.
Individual Life Insurance expenses increased $15 primarily due to higher
benefits, claims, and claim adjustment expenses, which is consistent with the
growth in this blocks of business. Partially offsetting the increases discussed
above was a $20 decline in expenses related to Closed Book GRC.
Net income increased $20, or 32%, to $83 for the first quarter of 1998 from $63
for the first quarter of 1997 primarily due to growth in the Annuity and the
Individual Life Insurance segments. Annuity earnings increased $20, or 47%, due
to increasing account values resulting from significant stock market
appreciation and new sales, particularly in Individual Annuity. Individual
Life Insurance earnings increased $2, or 18%, as a result of strong sales and
growing account values. Guaranteed Investment Contracts had no net income in
the first quarter of 1998 or 1997, consistent with management's expectations.
SEGMENT RESULTS
The Company's reporting segments, which reflect the management structure of the
Company, consist of Annuity, Individual Life Insurance, Employee Benefits,
Guaranteed Investment Contracts and a Corporate Operation.
Below is a summary of net income by segment.
FIRST QUARTER ENDED
MARCH 31,
-------------------------
1998 1997
-------------------------
ANNUITY $ 63 $ 43
INDIVIDUAL LIFE INSURANCE 13 11
EMPLOYEE BENEFITS 6 6
GUARANTEED INVESTMENT CONTRACTS -- --
CORPORATE OPERATION 1 3
---------- ----------
NET INCOME $ 83 $ 63
---------- ----------
---------- ----------
The sections that follow analyze each segment's results.
7
<PAGE>
ANNUITY
FIRST QUARTER ENDED
MARCH 31,
-------------------------
1998 1997
-------------------------
REVENUES $ 381 $ 280
EXPENSES 318 237
------- -------
NET INCOME $ 63 $ 43
------- -------
------- -------
Revenues increased $101, or 36%, to $381 as of March 31, 1998 from $280 as of
March 31, 1997. Individual Annuity revenues increased $90, or 50%, over the
first quarter of 1997 primarily due to higher fee income earned on growth in
individual variable annuity account values. Average individual variable annuity
account values grew $16.9 billion, or 51%, to $50.2 billion as of March 31, 1998
from $33.3 billion as of March 31, 1997. This growth was the result of
significant market appreciation as well as strong sales of $2.4 billion in the
first quarter of 1998. Also, Group Annuity revenues increased $11, or 11%, as
of March 31, 1998 as compared to March 31, 1997 due to higher net investment
income resulting from growth in assets under management. Group Annuity average
account values grew $2.0 billion, or 22%, to $11.1 billion as March 31, 1998
from $9.1 billion as of March 31, 1997 due to market appreciation and new
deposits.
Expenses increased $81, or 34%, to $318 as of March 31, 1998 from $237 as of
March 31, 1997. Benefits, claims and claim adjustment expenses increased $14
primarily due to increased interest credited on Individual Annuity general
account values, which increased $1.3 billion, or 43%, to $4.2 billion at March
31, 1998 from $2.9 billion at March 31, 1997. Amortization of DPAC increased
$20 as prior and current year sales remained strong. Also, other business
expenses increased $37 as a result of the growth in this segment. However,
operating expenses as a percentage of average account value declined from 1997
levels.
Annuity net income increased $20, or 47%, to $63 as of March 31, 1998 from $43
as of March 31, 1997 as a result of growing average account values discussed
above and operating expense efficiencies.
INDIVIDUAL LIFE INSURANCE
FIRST QUARTER ENDED
MARCH 31,
------------------------
1998 1997
------------------------
REVENUES $ 128 $ 111
EXPENSES 115 100
------- -------
NET INCOME $ 13 $ 11
------- -------
------- -------
Revenues increased $17, or 15%, to $128 as of March 31, 1998 from $111 as of
March 31, 1997. This increase was primarily due to higher cost of insurance
charges and other fee income earned on the Company's growing block of variable
life insurance. Variable life average account values increased $540, or 84%, to
$1.2 billion as of March 31, 1998 from $640 as of March 31, 1997 due to market
appreciation and strong sales. Variable life product sales constituted 75%, or
$24, of total Individual Life Insurance new sales in the first quarter of 1998,
an increased of $9, or 60%, compared to the same period in 1997.
Expenses increased $15, or 15%, to $115 as of March 31, 1998 from $100 as of
March 31, 1997. This increase was primarily the result of higher benefits,
claims, and claim adjustment expenses of $20 due to the growth in this segment
as well as increased mortality experience in the first quarter of 1998. Net
income increased $2, or 18%, to $13 as of March 31, 1998 from $11 as of March
31, 1997.
EMPLOYEE BENEFITS
FIRST QUARTER ENDED
MARCH 31,
------------------------
1998 1997
------------------------
REVENUES $ 348 $ 179
EXPENSES 342 173
------- -------
NET INCOME $ 6 $ 6
------- -------
------- -------
Revenues increased $169, or 94%, to $348 as of March 31, 1998 from $179 as of
March 31, 1997. This was primarily due to COLI whose revenues increased $161,
or 90%, for the first quarter of 1998 as compared to the first quarter of 1997.
This increase was due to $80 of renewal premium on leveraged COLI as well as
increase in fee income of $78 related to new sales of variable COLI.
8
<PAGE>
Expenses increased $169, or 98%, to $342 as of March 31, 1998 from $173 as of
March 31, 1997. COLI expenses increased $160 primarily due to higher expenses
associated with the first quarter 1998 increased variable COLI sales and
leveraged COLI renewal premium. Net income was consistent with the prior year
results.
GUARANTEED INVESTMENT CONTRACTS
FIRST QUARTER ENDED
MARCH 31,
------------------------
1998 1997
------------------------
REVENUES $ 52 $ 72
EXPENSES 52 72
------- -------
NET INCOME $ -- $ --
------- -------
------- -------
This segment reported no net income for the first quarter of 1998 and 1997
consistent with management's expectations that net income (loss) from Closed
Book GRC in the years subsequent to 1996 will be immaterial based on the
Company's current projections for the performance of the assets and liabilities
associated with Closed Book GRC. However, no assurance can be given that, under
certain unanticipated economic circumstances which result in the Company's
assumptions being proven inaccurate, further losses in respect of Closed Book
GRC will not occur in the future.
ACCOUNTING STANDARDS
For a discussion of accounting standards, see Note 1 of Notes to Condensed
Consolidated Financial Statements
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary and punitive damages have
been asserted. Although there can be no assurances, management, at the present
time, does not anticipate that the ultimate liability arising from such pending
or threatened litigation will have a material effect on the financial condition
or operating results of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Exhibits Index
(b) Reports on Form 8-K - None
9
<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 Flexible Premium Variable Annuity Contract.1
(5) Form of Application.(1)
(6) (a) Certificate of Incorporation of Hartford.
(6) (b) Bylaws of Hartford.(1)
(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
Registration
Statement 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 April 29, 1996.
<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
<PAGE>
Stephen T. Joyce Vice President
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 168,651 Contract Owners.
-3-
<PAGE>
Item 28. Indemnification
Under Section 33-772 of the Connecticut General Statutes, unless
limited by its certificate of incorporation, the Registrant must
indemnify a director who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party
because he is or was a director of the corporation against reasonable
expenses incurred by him in connection with the proceeding.
The Registrant may indemnify an individual made a party to a proceeding
because he is or was a director against liability incurred in the proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Registrant, and, with respect to any
criminal proceeding, had no reason to believe his conduct was unlawful.
Conn. Gen. Stat. 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
-4-
<PAGE>
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 29. Principal Underwriters
(a) HSD acts as principal underwriter for the following investment
companies:
<TABLE>
<S> <C>
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
</TABLE>
<TABLE>
<S> <C>
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
</TABLE>
(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
-5-
<PAGE>
Peter W. Cummins Senior Vice President
Lynda Godkin Senior Vice President, General Counsel
and Corporate Secretary
Donald E. Waggaman, Jr. Treasurer
George R. Jay Controller
Unless otherwise indicated, the principal business address of each
the above individuals is P. O. Box 2999, Hartford, 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 29th day of May, 1998.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT ONE
(Registrant)
*By: /s/ Peter W. Cummins *By:/s/ Marianne O'Doherty
------------------------------------ --------------------------
Peter W. Cummins Marianne O'Doherty
Senior Vice President 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/ Marianne O'Doherty
Director* --------------------
Thomas M. Marra, Executive Vice Marianne O'Doherty
President and Director, Individual Life and Attorney-in-Fact
Annuity Division, Director* Dated: May 29, 1998
Lowndes A. Smith, President and
Chief Executive Officer, Director*
David M. Znamierowski, Senior Vice President,
Director*
<PAGE>
EXHIBIT INDEX
(6)(a) Articles of Incorporation of Hartford.
(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
HARTFORD LIFE (LOGO)
May 29, 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
File No. 33-73568
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 flexible 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
May 29, 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 reports
(and to all references to our Firm) included in or made a part of this
Registration Statement File No. 33-73568 for Hartford Life and Annuity
Insurance Company Separate Account One on Form N-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
May 29, 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>
