<PAGE>
<TABLE>
<S> <C>
DIRECTOR IMMEDIATE VARIABLE ANNUITY
SEPARATE ACCOUNT ONE
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102-5085
TELEPHONE: 1-800-862-6668 (CONTRACT OWNERS)
1-800-862-7155 (REGISTERED REPRESENTATIVES) [LOGO]
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Prospectus describes information you should know before you purchase
Director Immediate Variable Annuity. Please read it carefully.
The Director Immediate Variable Annuity is a contract between you and Hartford
Life and Annuity Insurance Company where you agree to make one Premium Payment
to us and we agree to make a series of Annuity Payouts at a later date. This
Annuity is an immediate, tax-deferred, variable annuity offered to individuals.
It is:
x Immediate, because we start making Annuity Payouts within 60 days.
x Tax-deferred, which means you don't pay taxes until you take money out or
until we start to make Annuity Payouts.
x Variable, because the value of your Annuity will fluctuate with the
performance of the underlying funds.
- --------------------------------------------------------------------------------
At the time you purchase your Annuity, you allocate your Premium Payment to
"Sub-Accounts". These are subdivisions of our Separate Account, an account that
keeps your Annuity assets separate from our company assets. The Sub-Accounts
then purchase shares of mutual funds set up exclusively for variable annuity or
variable life insurance products. These are not the same mutual funds that you
buy through your stockbroker or through a retail mutual fund. They may have
similar investment strategies and the same portfolio managers as retail mutual
funds. This Annuity offers you Funds with investment strategies ranging from
conservative to aggressive and you may pick those Funds that meet your
investment goals and risk tolerance. The Sub-Accounts and the Funds are listed
below:
- - HARTFORD ADVISERS HLS FUND SUB-ACCOUNT which purchases shares of Class IA of
Hartford Advisers HLS Fund, Inc.
- - HARTFORD BOND HLS FUND SUB-ACCOUNT which purchases shares of Class IA of
Hartford Bond HLS Fund, Inc.
- - HARTFORD CAPITAL APPRECIATION HLS FUND SUB-ACCOUNT which purchases shares of
Class IA of Hartford Capital Appreciation HLS Fund, Inc.
- - HARTFORD DIVIDEND AND GROWTH HLS FUND SUB-ACCOUNT which purchases shares of
Class IA of Hartford Dividend and Growth HLS Fund, Inc.
- - HARTFORD GLOBAL HEALTH HLS FUND SUB-ACCOUNT which purchases shares of Class IA
of Hartford Global Health HLS Fund of Hartford Series Fund, Inc.
- - HARTFORD GLOBAL LEADERS HLS FUND SUB-ACCOUNT which purchases shares of Class
IA of Hartford Global Leaders HLS Fund of Hartford Series Fund, Inc.
- - HARTFORD GLOBAL TECHNOLOGY HLS FUND SUB-ACCOUNT which purchases shares of
Class IA of Hartford Global Technology HLS Fund of Hartford Series Fund, Inc.
- - HARTFORD GROWTH AND INCOME HLS FUND SUB-ACCOUNT which purchases shares of
Class IA of Hartford Growth and Income HLS Fund of Hartford Series Fund, Inc.
- - HARTFORD HIGH YIELD HLS FUND SUB-ACCOUNT which purchases shares of Class IA of
Hartford High Yield HLS Fund of Hartford Series Fund, Inc.
- - HARTFORD INDEX HLS FUND SUB-ACCOUNT which purchases shares of Class IA of
Hartford Index HLS Fund, Inc.
- - HARTFORD INTERNATIONAL ADVISERS HLS FUND SUB-ACCOUNT which purchases shares of
Class IA of Hartford International Advisers HLS Fund, Inc.
- - HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND SUB-ACCOUNT which purchases
shares of Class IA of Hartford International Opportunities HLS Fund, Inc.
- - HARTFORD MIDCAP HLS FUND SUB-ACCOUNT which purchases shares of Class IA of
Hartford MidCap HLS Fund, Inc.
- - HARTFORD MONEY MARKET HLS FUND SUB-ACCOUNT which purchases shares of Class IA
of Hartford Money Market HLS Fund, Inc.
- - HARTFORD MORTGAGE SECURITIES HLS FUND SUB-ACCOUNT which purchases shares of
Class IA of Hartford Mortgage Securities HLS Fund, Inc.
<PAGE>
- - HARTFORD SMALL COMPANY HLS FUND SUB-ACCOUNT which purchases shares of Class IA
of Hartford Small Company HLS Fund, Inc.
- - HARTFORD STOCK HLS FUND SUB-ACCOUNT which purchases of Class IA of Hartford
Stock HLS Fund, Inc.
If you decide to buy this Annuity, you should keep this prospectus for your
records. You can also call us at 1-800-862-6668 to get a Statement of Additional
Information, free of charge. The Statement of Additional Information contains
more information about this Annuity and, like this prospectus, is filed with the
Securities and Exchange Commission ("SEC"). We have included the Table of
Contents for the Statement of Additional Information at the end of this
prospectus.
Although we file the prospectus and the Statement of Additional information with
the SEC, the SEC doesn't approve or disapprove these securities or determine if
the information is truthful or complete. Anyone who represents that the SEC does
these things may be guilty of a criminal offense. This Prospectus and the
Statement of Additional Information can also be obtained from the SEC's website
(HTTP://WWW.SEC.GOV).
This Annuity IS NOT:
- A bank deposit or obligation
- Federally insured
- Endorsed by any bank or governmental agency
This Annuity may not be available for sale in all states.
- --------------------------------------------------------------------------------
PROSPECTUS DATED: MAY 1, 2000
STATEMENT OF ADDITIONAL INFORMATION DATED: MAY 1, 2000
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
- ----------------------------------------------------------------------
DEFINITIONS 4
- ----------------------------------------------------------------------
FEE TABLE 5
- ----------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES 6
- ----------------------------------------------------------------------
ACCUMULATION UNIT VALUES 8
- ----------------------------------------------------------------------
HIGHLIGHTS 10
- ----------------------------------------------------------------------
GENERAL CONTRACT INFORMATION 11
- ----------------------------------------------------------------------
Hartford Life and Annuity Insurance Company 11
- ----------------------------------------------------------------------
The Separate Account 11
- ----------------------------------------------------------------------
The Funds 11
- ----------------------------------------------------------------------
PERFORMANCE RELATED INFORMATION 13
- ----------------------------------------------------------------------
THE CONTRACT 14
- ----------------------------------------------------------------------
Purchases and Contract Value 14
- ----------------------------------------------------------------------
Charges and Fees 15
- ----------------------------------------------------------------------
Death Benefit 16
- ----------------------------------------------------------------------
Surrenders 17
- ----------------------------------------------------------------------
ANNUITY PAYOUTS 18
- ----------------------------------------------------------------------
OTHER INFORMATION 21
- ----------------------------------------------------------------------
Assignment 21
- ----------------------------------------------------------------------
Contract Modification 21
- ----------------------------------------------------------------------
How Contracts are Sold 21
- ----------------------------------------------------------------------
Legal Matters and Experts 21
- ----------------------------------------------------------------------
More Information 21
- ----------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS 22
- ----------------------------------------------------------------------
General 22
- ----------------------------------------------------------------------
Taxation of Hartford and the Separate Account 22
- ----------------------------------------------------------------------
Taxation of Purchasers of Non-Qualified Contracts 22
- ----------------------------------------------------------------------
Contract Owners that are Nonresident Aliens or Foreign
Corporations 24
- ----------------------------------------------------------------------
Other Tax Consequences 24
- ----------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION 25
- ----------------------------------------------------------------------
APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT
PLANS 26
- ----------------------------------------------------------------------
ILLUSTRATIONS OF ANNUITY PAYMENTS ASSUMING HYPOTHETICAL
RATES OF RETURN 29
- ----------------------------------------------------------------------
ILLUSTRATIONS OF ANNUITY PAYMENTS USING HISTORIC RATES OF
RETURN 31
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
DEFINITIONS
These terms are capitalized when used throughout this prospectus. Please refer
to these defined terms if you have any questions as you read your prospectus.
ACCOUNT: Any of the Sub-Accounts.
ACCUMULATION UNITS: If you allocate your Premium Payment to any of the
Sub-Accounts, we will convert those payments into Accumulation Units in the
selected Sub-Accounts. Accumulation Units are valued at the end of each
Valuation Day and are used to calculate the value of your Contract prior to the
Income Start Date.
ACCUMULATION UNIT VALUE: The daily price of Accumulation Units on any Valuation
Day.
ADMINISTRATIVE OFFICE OF THE COMPANY: Our location and overnight mailing address
is: 200 Hopmeadow Street, Simsbury, Connecticut 06089. Our standard mailing
address is: Investment Product Services, P.O. Box 5085, Hartford, Connecticut
06102-5085.
ANNIVERSARY VALUE: An amount equal to the present value of any remaining
guaranteed Annuity Payouts determined as of a Contract Anniversary.
ANNUITANT: The person on whose life the Contract is based. The Annuitant may not
be changed after your Contract is issued.
ANNUITY CALCULATION DATE: The date we calculate the first Annuity Payout.
ANNUITY PAYOUTS: The money we pay after the Income Start Date for the duration
and frequency selected.
ANNUITY UNIT: The unit of measure we use to calculate the value of your Annuity
Payouts under a variable dollar amount Annuity Payout Option.
ANNUITY UNIT VALUE: The daily price of Annuity Units on any Valuation Day.
BENEFICIARY: The person entitled to receive a Death Benefit upon the death of
the Contract Owner or Annuitant.
CODE: The Internal Revenue Code of 1986, as amended.
COMMUTED VALUE: The present value of any remaining guaranteed Annuity Payouts.
This amount is calculated using the Assumed Investment Return for variable
dollar amount Annuity Payouts or the underlying rate of return for fixed dollar
amount Annuity Payouts.
CONTINGENT DEFERRED SALES CHARGE: The deferred sales charge that will apply when
you Surrender.
CONTRACT ANNIVERSARY: The anniversary of the date we issued your Contract. If
the Contract Anniversary falls on a Non-Valuation Day, then the Contract
Anniversary will be the next Valuation Day.
CONTRACT VALUE: The total value of the Accounts on any Valuation Day.
CONTRACT YEAR: Any 12 month period between Contract Anniversaries, beginning
with the date the Contract was issued.
DEATH BENEFIT: The amount payable after the Contract Owner or the Annuitant
dies.
DOLLAR COST AVERAGING: A program that allows you to systematically make
transfers between Accounts available in your Contract.
GENERAL ACCOUNT: The General Account includes our company assets.
HARTFORD, WE OR OUR: Hartford Life and Annuity Insurance Company. Only Hartford
is a capitalized term in the prospectus.
INCOME PAYOUT DATE: The date we use to compute the Annuity Payouts.
INCOME START DATE: The time when regularly scheduled Annuity Payouts begin.
JOINT ANNUITANT: The person on whose life Annuity Payouts are based if the
Annuitant dies after Annuitization. You may name a Joint Annuitant only if your
Annuity Payout Option provides for a survivor. The Joint Annuitant may not be
changed.
MAXIMUM ANNIVERSARY VALUE: As of the date we receive a certified death
certificate or other legal document acceptable to us, we will calculate an
Anniversary Value for each Contract Anniversary. The highest Anniversary Value
is the Maximum Anniversary Value.
NET INVESTMENT FACTOR: This is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next, and is also used to calculate
your Annuity Payout amount.
NON-VALUATION DAY: Any day the New York Stock Exchange is not open for trading.
PAYEE: The person or party you designate to receive Annuity Payouts.
PAYOUT FACTOR: A number used to calculate the first Annuity Payout.
PREMIUM PAYMENT: Money sent to us to be invested in your Annuity.
PREMIUM TAX: A tax charged by a state or municipality on Premium Payments.
SUB-ACCOUNT VALUE: The value on or before the Annuity Calculation Date, which is
determined on any day by multiplying the number of Accumulation Units by the
Accumulation Unit Value for that Sub-Account.
SURRENDER: A complete or partial withdrawal from your Contract.
SURRENDER VALUE: The Contract Value minus any applicable Premium Tax if
requested before the Annuity Calculation Date or the Commuted Value minus any
applicable Contingent Deferred Sales Charge if requested on or after the Annuity
Calculation Date.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. Values
of the Separate Account are determined as of the close of the New York Stock
Exchange, generally 4:00 p.m. Eastern Time.
VALUATION PERIOD: The time span between the close of trading on the New York
Stock Exchange from one Valuation Day to the next.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
- --------------------------------------------------------------------------------
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
SALES CHARGE IMPOSED ON PREMIUM PAYMENT (as a percentage of
Premium Payment) None
- ---------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE (as a percentage of
Commuted Value)*
First Year 6%
- ---------------------------------------------------------------------
Second Year 6%
- ---------------------------------------------------------------------
Third Year 5%
- ---------------------------------------------------------------------
Fourth Year 5%
- ---------------------------------------------------------------------
Fifth Year 4%
- ---------------------------------------------------------------------
Sixth Year 3%
- ---------------------------------------------------------------------
Seventh Year 2%
- ---------------------------------------------------------------------
Eighth Year 0%
- ---------------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average
daily Sub-Account Value)
Mortality and Expense Risk Charge 1.25%
- ---------------------------------------------------------------------
Total Separate Account Annual Expenses 1.25%
- ---------------------------------------------------------------------
</TABLE>
* Only applies to the following Annuity Payout Options after the Income Start
Date: Life Annuity with Payments Guaranteed for a Specified Number of Years,
Joint and Last Survivor Annuity with Payments Guaranteed for a Specified
Number of Years, and Payments Guaranteed for a Specified Number of Years.
The purpose of the Fee Table and Example is to assist you in understanding
various costs and expenses that you will pay directly or indirectly. The Fee
Table and Example reflect expenses of the Separate Account and underlying Funds.
We will deduct any Premium Taxes that apply.
The Example should not be considered a representation of past or future expenses
and actual expenses may be greater or less than those shown. The Annual
Maintenance Fee has been reflected in the Example by a method intended to show
the "average" impact of the Annual Maintenance Fee on an investment in the
Separate Account. We do this by approximating an "average" 0.06% annual charge.
<PAGE>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
as of the Fund's Year End
(as a percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
OTHER EXPENSES
MANAGEMENT FEES EXPENSES (INCLUDING ANY
(INCLUDING ANY (INCLUDING ANY WAIVERS AND ANY
WAIVERS) REIMBURSEMENTS) REIMBURSEMENTS)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Hartford Advisers HLS Fund 0.63% 0.02% 0.65%
- -----------------------------------------------------------------------------------------------------------------
Hartford Bond HLS Fund 0.49% 0.03% 0.52%
- -----------------------------------------------------------------------------------------------------------------
Hartford Capital Appreciation HLS Fund 0.64% 0.02% 0.66%
- -----------------------------------------------------------------------------------------------------------------
Hartford Dividend and Growth HLS Fund 0.65% 0.03% 0.68%
- -----------------------------------------------------------------------------------------------------------------
Hartford Global Health HLS Fund (1) 0.85% 0.25% 1.10%
- -----------------------------------------------------------------------------------------------------------------
Hartford Global Leaders HLS Fund 0.74% 0.12% 0.86%
- -----------------------------------------------------------------------------------------------------------------
Hartford Global Technology HLS Fund (1) 0.85% 0.25% 1.10%
- -----------------------------------------------------------------------------------------------------------------
Hartford Growth and Income HLS Fund 0.78% 0.04% 0.82%
- -----------------------------------------------------------------------------------------------------------------
Hartford High Yield HLS Fund 0.66% 0.06% 0.72%
- -----------------------------------------------------------------------------------------------------------------
Hartford Index HLS Fund 0.40% 0.03% 0.43%
- -----------------------------------------------------------------------------------------------------------------
Hartford International Advisers HLS Fund 0.76% 0.09% 0.85%
- -----------------------------------------------------------------------------------------------------------------
Hartford International Opportunities HLS Fund 0.69% 0.09% 0.78%
- -----------------------------------------------------------------------------------------------------------------
Hartford MidCap HLS Fund 0.76% 0.03% 0.79%
- -----------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS Fund 0.45% 0.02% 0.47%
- -----------------------------------------------------------------------------------------------------------------
Hartford Mortgage Securities HLS Fund 0.45% 0.03% 0.48%
- -----------------------------------------------------------------------------------------------------------------
Hartford Small Company HLS Fund 0.75% 0.03% 0.78%
- -----------------------------------------------------------------------------------------------------------------
Hartford Stock HLS Fund 0.46% 0.02% 0.48%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Hartford Global Health HLS Fund and Hartford Global Technology HLS Fund are
new Funds. "Total Fund Operating Expenses" are Based on annualized estimates
of such expenses to be incurred during the current fiscal year.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
- --------------------------------------------------------------------------------
EXAMPLE
<TABLE>
<CAPTION>
If you surrender your Contract at the If you annuitize your Contract at the
end of the applicable time period you end of the applicable time period you
would pay the following expenses on would pay the following expenses on
a $1,000 investment, assuming a 5% a $1,000 investment, assuming a 5%
annual return on assets: annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Hartford Advisers HLS Fund $76 $110 $144 $224 $19 $60 $104 $224
- --------------------------------------------------------------------------------------------------------------------
Hartford Bond HLS Fund $75 $106 $137 $210 $18 $56 $ 97 $210
- --------------------------------------------------------------------------------------------------------------------
Hartford Capital Appreciation
HLS Fund $77 $111 $144 $225 $20 $61 $104 $225
- --------------------------------------------------------------------------------------------------------------------
Hartford Dividend and Growth
HLS Fund $77 $111 $145 $227 $20 $61 $105 $227
- --------------------------------------------------------------------------------------------------------------------
Hartford Global Health HLS
Fund $81 $124 N/A N/A $24 $74 N/A N/A
- --------------------------------------------------------------------------------------------------------------------
Hartford Global Leaders HLS
Fund $79 $117 $154 $246 $22 $67 $114 $246
- --------------------------------------------------------------------------------------------------------------------
Hartford Global Technology
HLS Fund $81 $124 N/A N/A $24 $74 N/A N/A
- --------------------------------------------------------------------------------------------------------------------
Hartford Growth and Income
HLS Fund $78 $116 $152 $242 $21 $66 $112 $242
- --------------------------------------------------------------------------------------------------------------------
Hartford High Yield HLS Fund $77 $112 $147 $231 $20 $62 $107 $231
- --------------------------------------------------------------------------------------------------------------------
Hartford Index HLS Fund $74 $103 $132 $200 $17 $53 $ 92 $200
- --------------------------------------------------------------------------------------------------------------------
Hartford International
Advisers HLS Fund $79 $116 $154 $245 $22 $66 $114 $245
- --------------------------------------------------------------------------------------------------------------------
Hartford International
Opportunities HLS Fund $78 $114 $150 $238 $21 $64 $110 $238
- --------------------------------------------------------------------------------------------------------------------
Hartford MidCap HLS Fund $78 $115 $151 $239 $21 $65 $111 $239
- --------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS
Fund $75 $105 $134 $204 $18 $55 $ 94 $204
- --------------------------------------------------------------------------------------------------------------------
Hartford Mortgage Securities
HLS Fund $75 $105 $135 $205 $18 $55 $ 95 $205
- --------------------------------------------------------------------------------------------------------------------
Hartford Small Company HLS
Fund $78 $114 $150 $238 $21 $64 $110 $238
- --------------------------------------------------------------------------------------------------------------------
Hartford Stock HLS Fund $75 $105 $135 $205 $18 $55 $ 95 $205
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
If you do not surrender your
Contract, you would pay the
following expenses on a $1,000
investment, assuming a 5% annual
return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------
Hartford Advisers HLS Fund $19 $60 $104 $224
- -----------------------------
Hartford Bond HLS Fund $18 $56 $ 97 $210
- -----------------------------
Hartford Capital Appreciation
HLS Fund $20 $61 $104 $225
- -----------------------------
Hartford Dividend and Growth
HLS Fund $20 $61 $105 $227
- -----------------------------
Hartford Global Health HLS
Fund $24 $74 N/A N/A
- -----------------------------
Hartford Global Leaders HLS
Fund $22 $67 $114 $246
- -----------------------------
Hartford Global Technology
HLS Fund $24 $74 N/A N/A
- -----------------------------
Hartford Growth and Income
HLS Fund $21 $66 $112 $242
- -----------------------------
Hartford High Yield HLS Fund $20 $62 $107 $231
- -----------------------------
Hartford Index HLS Fund $17 $53 $ 92 $200
- -----------------------------
Hartford International
Advisers HLS Fund $22 $66 $114 $245
- -----------------------------
Hartford International
Opportunities HLS Fund $21 $64 $110 $238
- -----------------------------
Hartford MidCap HLS Fund $21 $65 $111 $239
- -----------------------------
Hartford Money Market HLS
Fund $18 $55 $ 94 $204
- -----------------------------
Hartford Mortgage Securities
HLS Fund $18 $55 $ 95 $205
- -----------------------------
Hartford Small Company HLS
Fund $21 $64 $110 $238
- -----------------------------
Hartford Stock HLS Fund $18 $55 $ 95 $205
- -----------------------------
</TABLE>
<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES
(For an Accumulation Unit outstanding throughout the period)
The following information has been derived from the audited financial statements
of the Separate Account, which have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and should be read in conjunction with those statements, which are
included in the Statement of Additional Information, which is incorporated by
reference in this Prospectus. No information is shown for Hartford Global Health
HLS Fund and Hartford Global Technology HLS Fund Sub-Accounts because, as of
December 31, 1999 the Sub-Accounts had not yet commenced operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
HARTFORD BOND HLS FUND SUB-ACCOUNT (Inception date
August 1, 1986)
Accumulation Unit Value at beginning of period $2.258 $2.114 $ --
- ----------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $2.185 $2.258 $2.114
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period
(in thousands) 197,575 180,120 107,759
- ----------------------------------------------------------------------------------------------
HARTFORD STOCK HLS FUND SUB-ACCOUNT (Inception date
August 1, 1986)
Accumulation Unit Value at beginning of period $6.066 $4.602 $ --
- ----------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $7.176 $6.066 $4.602
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period
(in thousands) 638,407 553,087 440,557
- ----------------------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS FUND SUB-ACCOUNT (Inception date
August 1, 1986)
Accumulation Unit Value at beginning of period $1.716 $1.650 $ --
- ----------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $1.777 $1.716 $1.650
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period
(in thousands) 270,072 195,489 120,947
- ----------------------------------------------------------------------------------------------
HARTFORD ADVISERS HLS FUND SUB-ACCOUNT (Inception date
August 1, 1986)
Accumulation Unit Value at beginning of period $4.398 $3.572 $ --
- ----------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $4.803 $4.398 $3.572
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period
(in thousands) 1,425,393 1,258,365 999,829
- ----------------------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION HLS FUND SUB-ACCOUNT
(Inception date August 1, 1986)
Accumulation Unit Value at beginning of period $5.526 $4.845 $ --
- ----------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $7.501 $5.526 $4.845
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period
(in thousands) 537,835 517,384 461,578
- ----------------------------------------------------------------------------------------------
HARTFORD MORTGAGE SECURITIES HLS FUND SUB-ACCOUNT (Inception
date August 1, 1986)
Accumulation Unit Value at beginning of period $2.211 $2.098 $ --
- ----------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $2.217 $2.211 $2.098
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 52,197 48,850 38,292
- ----------------------------------------------------------------------------------------------
HARTFORD INDEX HLS FUND SUB-ACCOUNT (Inception date
May 1, 1987)
Accumulation Unit Value at beginning of period $4.712 $3.726 $ --
- ----------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $5.608 $4.712 $3.726
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 191,225 160,586 117,372
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND SUB-ACCOUNT
(Inception date July 2, 1990)
Accumulation Unit Value at beginning of period $1.641 $1.469 $ --
- ----------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $2.267 $1.641 $1.469
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period
(in thousands) 391,871 400,336 396,430
- ----------------------------------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH HLS FUND SUB-ACCOUNT (Inception
date March 8, 1994)
Accumulation Unit Value at beginning of period $2.471 $2.149 $ --
- ----------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $2.570 $2.471 $2.149
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 760,046 735,537 541,076
- ----------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL ADVISERS HLS FUND SUB-ACCOUNT
(Inception date March 1, 1995)
Accumulation Unit Value at beginning of period $1.476 $1.319 $ --
- ----------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $1.796 $1.476 $1.319
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 149,495 135,919 109,735
- ----------------------------------------------------------------------------------------------
HARTFORD MIDCAP HLS FUND SUB-ACCOUNT (Inception date
July 30, 1997)
Accumulation Unit Value at beginning of period $1.371 $1.097 $ --
- -----------------------------------------------------------------------
Accumulation Unit Value at end of period $2.056 $1.371 $1.097
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 181,142 65,617 13,437
- ----------------------------------------------------------------------------------------------
HARTFORD SMALL COMPANY HLS FUND SUB-ACCOUNT (Inception date
August 9, 1996)
Accumulation Unit Value at beginning of period $1.374 $1.247 $ --
- ----------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $2.251 $1.374 $1.247
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 198,856 156,179 108,104
- ----------------------------------------------------------------------------------------------
HARTFORD GLOBAL LEADERS HLS FUND SUB-ACCOUNT (Inception date
September 30, 1998)
Accumulation Unit Value at beginning of period $1.315 $ -- $ --
- ----------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $1.952 $1.315 $ --
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 54,890 898 --
- ----------------------------------------------------------------------------------------------
HARTFORD GROWTH AND INCOME HLS FUND SUB-ACCOUNT (Inception
date June 1, 1998)
Accumulation Unit Value at beginning of period $1.182 $ -- $ --
- ----------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $1.422 $1.182 $ --
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 78,909 11,822 --
- ----------------------------------------------------------------------------------------------
HARTFORD HIGH YIELD HLS FUND SUB-ACCOUNT (Inception date
September 30, 1998)
Accumulation Unit Value at beginning of period $1.035 $ -- $ --
- ----------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $1.070 $1.035 $ --
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 20,235 2,255 --
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
HIGHLIGHTS
HOW DO I PURCHASE THIS ANNUITY?
You must complete our application or order request and submit it to us for
approval with your Premium Payment. You may also transfer from another
investment. Your Premium Payment must be at least $25,000. You may not make
additional Premium Payments.
- For a limited time, usually within ten days after you receive your Contract,
you may cancel your Annuity without paying a Contingent Deferred Sales
Charge. You may bear the investment risk for your Premium Payment prior to
our receipt of your request for cancellation.
WHAT TYPE OF SALES CHARGE WILL I PAY?
You don't pay a sales charge when you purchase your Annuity. If you selected the
Life Annuity with Payments Guaranteed for a Specified Number of Years, Joint and
Last Survivor Annuity with Payments Guaranteed for a Specified Number of Years
or the Payments Guaranteed for a Specified Number of Years Annuity Payout
Options, we will charge you a Contingent Deferred Sales Charge when you fully or
partially Surrender your Annuity.
The Contingent Deferred Sales Charge is a percentage of the Commuted Value and
is equal to:
<TABLE>
<CAPTION>
CONTRACT YEAR
SURRENDER CHARGE
AS A PERCENTAGE OF CONTINGENT DEFERRED
COMMUTED VALUE SALES CHARGE
<S> <C>
- ---------------------------------------
1 8%
- ---------------------------------------
2 8%
- ---------------------------------------
3 8%
- ---------------------------------------
4 8%
- ---------------------------------------
5 7%
- ---------------------------------------
6 6%
- ---------------------------------------
7 5%
- ---------------------------------------
8 or more 0%
- ---------------------------------------
</TABLE>
If you select the Life Annuity with Payments Guaranteed for a Specified Number
of Years, Joint and Last Survivor Annuity with Payments Guaranteed for a
Specified Number of Years or the Payments Guaranteed for a Specified Number of
Years Annuity Payout Options, Hartford agrees to make Annuity Payouts for at
least the Specified Number of Years you select. Commuted Value is the present
value of any remaining Annuity Payouts to be made during the Specified Number of
Years. We calculate the Commuted Value for variable dollar amount Annuity
Payouts using the Assumed Investment Return you selected.
WHAT CHARGES WILL I PAY ON AN ANNUAL BASIS?
You pay two different types of charges each year. The first type of charge is
the fee you pay for insurance. This charge is:
A Mortality and Expense Risk Charge that is subtracted daily and is equal to an
annual charge of 1.25% of your Contract Value invested in the Funds.
The second type of charge is the fee you pay for the Funds. See the Annual Fund
Operating Expenses table for more complete information and the Funds'
prospectuses accompanying this prospectus.
CAN I TAKE OUT ANY OF MY MONEY?
If you selected the Life Annuity with Payments Guaranteed for a Specified Number
of Years, Joint and Last Survivor Annuity with Payments Guaranteed for a
Specified Number of Years or the Payments Guaranteed for a Specified Number of
Years Annuity Payout Options, you may Surrender some or all of the amount you
invested after Annuity Payouts begin.
- You may have to pay income tax on the money you take out and, if you
Surrender before you are age 59 1/2, you may have to pay an income tax
penalty.
- You may have to pay a Contingent Deferred Sales Charge on the money you
Surrender.
- Partial Surrenders may have adverse tax consequences, so please consult your
tax adviser.
WILL HARTFORD PAY A DEATH BENEFIT?
There is a Death Benefit if the Contract Owner or the Annuitant die. The Death
Benefit will be calculated as of the date we receive a certified death
certificate or other legal document acceptable to us.
If the Contract Owner dies before the Income Start Date, the Death Benefit will
be equal to the Contract Value on the date the certified death certificate or
other legal document acceptable to us is received. The Death Benefit may be
taken in one lump sum or under any of the Annuity Payout Options then being
offered.
If the Annuitant dies on or after the Income Start Date, the Death Benefit will
be paid according to the Annuity Payout Option selected. Under some Annuity
Payout Options, there is no Death Benefit.
Under the Payments Guaranteed for a Specified Number of Years Annuity Payout
Option on or after the Income Start Date, the Death Benefit is the greater of:
x Commuted Value;
x 100% of the Premium Payment minus all Annuity Payouts made since the Income
Start Date; or
x the Maximum Anniversary Value minus all Annuity Payouts made since that
anniversary.
As of the date we receive a certified death certificate or other legal document
acceptable to us, we will calculate an Anniversary Value for each Contract
Anniversary. The highest Anniversary Value is the Maximum Anniversary Value.
Until complete instructions are received from the Beneficiary, the Death Benefit
will be transferred to the Money Market Sub-Account.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
WHAT ANNUITY PAYOUT OPTIONS ARE AVAILABLE?
You may choose one of the following Annuity Payout Options: Life Annuity, Life
Annuity with Cash Refund, Life Annuity with Payments Guaranteed for a Specified
Number of Years, Joint and Last Survivor Life Annuity, Joint and Last Survivor
Annuity with Payments Guaranteed for a Specified Number of Years and Payments
Guaranteed for a Specified Number of Years. We may make other Annuity Payout
Options available at any time.
GENERAL CONTRACT INFORMATION
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut. Our offices are
located in Simsbury, Connecticut; however, our mailing address is P.O. Box 2999,
Hartford, CT 06104-2999. We are ultimately controlled by The Hartford Financial
Services Group, Inc., one of the largest financial service providers in the
United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
EFFECTIVE DATE
RATING AGENCY OF RATING RATING BASIS OF RATING
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
A.M. Best and
Company, Inc. 1/1/99 A+ Financial performance
- --------------------------------------------------------------------------------
Standard & Poor's 8/1/99 AA Insurer financial strength
- --------------------------------------------------------------------------------
Duff & Phelps 7/1/99 AA+ Claims paying ability
- --------------------------------------------------------------------------------
</TABLE>
THE SEPARATE ACCOUNT
The Separate Account is where we set aside and invest the assets of some of our
annuity contracts, including this Contract. The Separate Account was established
on May 20, 1991 and is registered as a unit investment trust under the
Investment Company Act of 1940. This registration does not involve supervision
by the SEC of the management or the investment practices of the Separate Account
or Hartford. The Separate Account meets the definition of "Separate Account"
under federal securities law. This Separate Account holds only assets for
variable annuity contracts. The Separate Account:
- - Holds assets for your benefit and the benefit of other Contract Owners, and
the persons entitled to the payouts described in the Contract.
- - Is not subject to the liabilities arising out of any other business Hartford
may conduct.
- - Is not affected by the rate of return of our General Account or by the
investment performance of any of our other Separate Accounts.
- - May be subject to liabilities from a Sub-Account of the Separate Account that
holds assets of other variable annuity contracts offered by the Separate
Account, which are not described in this Prospectus.
- - Is credited with income and gains, and takes losses, whether or not realized,
from the assets it holds.
We do not guarantee the investment results of the Separate Account. There is no
assurance that the value of your Annuity will equal the Premium Payment you make
to us.
THE FUNDS
Hartford HLS Funds are sponsored and administered by Hartford Life and Annuity
Insurance Company. HL Investment Advisors, LLC ("HL Advisors") serves as the
investment adviser to each of the Hartford HLS Funds. Wellington Management
Company, LLP ("Wellington Management") and Hartford Investment Management
Company ("HIMCO") serve as sub-investment advisors and provide day to day
investment services.
Each Hartford HLS Fund, except for Hartford Global Health HLS Fund, Hartford
Global Leaders HLS Fund, Hartford Global Technology HLS Fund, Hartford Growth
and Income HLS Fund and Hartford High Yield HLS Fund, is a separate Maryland
corporation registered with the Securities and Exchange Commission as an
open-end management investment company. Hartford Global Leaders HLS Fund,
Hartford Growth and Income HLS Fund and Hartford High Yield HLS Fund are
diversified series of Hartford Series Fund, Inc., a Maryland corporation, also
registered with the Securities and Exchange Commission as an open-end management
investment company. Hartford Global Health HLS Fund and Hartford Global
Technology HLS Fund are non-diversified series of Hartford Series Fund, Inc. The
shares of each Fund have been divided into Class IA and Class IB. Only Class IA
shares are available in this Annuity.
We do not guarantee the investment results of any of the underlying Funds. Since
each underlying Fund has different investment objectives, each is subject to
different risks. These risks and the Funds' expenses are more fully described in
the accompanying Funds' prospectus and Statement of Additional Information,
which may be ordered from us. The Funds' prospectus should be read in
conjunction with this Prospectus before investing.
The Funds may not be available in all states.
The investment goals of each of the Funds are as follows:
HARTFORD ADVISERS HLS FUND -- Seeks maximum long-term total rate of return by
investing in common stocks and other
<PAGE>
12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
equity securities, bonds and other debt securities, and money market
instruments. Sub-advised by Wellington Management.
HARTFORD BOND HLS FUND -- Seeks maximum current income consistent with
preservation of capital by investing primarily in investment grade fixed-income
securities. Up to 20% of the total assets of this Fund may be invested in debt
securities rated in the highest category below investment grade ("Ba" by Moody's
Investor Services, Inc. or "BB" by Standard & Poor's) or, if unrated, are
determined to be of comparable quality by the Fund's investment adviser.
Securities rated below investment grade are commonly referred to as "high
yield-high risk securities" or "junk bonds." For more information concerning the
risks associated with investing in such securities, please refer to the section
in the accompanying prospectus for the Funds entitled "Hartford Bond HLS Fund,
Inc." Sub-advised by HIMCO.
HARTFORD CAPITAL APPRECIATION HLS FUND -- Seeks growth of capital by investing
in equity securities selected solely on the basis of potential for capital
appreciation. Sub-advised by Wellington Management.
HARTFORD DIVIDEND AND GROWTH HLS FUND -- Seeks a high level of current income
consistent with growth of capital by investing primarily in dividend paying
equity securities. Sub-advised by Wellington Management.
HARTFORD GLOBAL HEALTH HLS FUND -- Seeks long-term capital appreciation by
investing in equity securities of health care companies worldwide. Sub-advised
by Wellington Management.
HARTFORD GLOBAL LEADERS HLS FUND -- Seeks growth of capital by investing
primarily in equity securities issued by high quality growth companies worldwide
that, in the opinion of Wellington Management, are leaders within their
respective industries as indicated by an established market presence and strong
competitive position on a global, regional or country basis. Sub-advised by
Wellington Management.
HARTFORD GLOBAL TECHNOLOGY HLS FUND -- Seeks long-term capital appreciation by
investing in equity securities technology companies worldwide. Sub-advised by
Wellington Management.
HARTFORD GROWTH AND INCOME HLS FUND -- Seeks growth of capital and current
income by investing primarily in equity securities with earnings growth
potential and steady or rising dividends. Sub-advised by Wellington Management.
HARTFORD HIGH YIELD HLS FUND -- Seeks high current income by investing in
non-investment grade fixed-income securities. Growth of capital is a secondary
objective. Securities rated below investment grade are commonly referred to as
"high yield-high risk securities" or "junk bonds." For more information
concerning the risks associated with investing in such securities, please refer
to the section in the accompanying prospectus for the Funds entitled "Hartford
High Yield HLS Fund." Sub-advised by HIMCO.
HARTFORD INDEX HLS FUND -- Seeks to provide investment results that approximate
the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock Price
Index.* Sub-advised by HIMCO.
HARTFORD INTERNATIONAL ADVISERS HLS FUND -- Seeks maximum long-term total return
by investing in a portfolio of equity, debt and money market securities.
Securities in which the Fund invests primarily will be denominated in non-U.S.
currencies and will be traded in non-U.S. markets. Sub-advised by Wellington
Management.
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND -- Seeks growth of capital by
investing primarily in equity securities issued by non-U.S. companies.
Sub-advised by Wellington Management.
HARTFORD MIDCAP HLS FUND -- Seeks to achieve long-term capital growth through
capital appreciation by investing primarily in equity securities of companies
with market capitalizations within the range represented by the Standard &
Poor's MidCap 400 Index. Sub-advised by Wellington Management.
HARTFORD MONEY MARKET HLS FUND -- Seeks maximum current income consistent with
liquidity and preservation of capital. Sub-advised by HIMCO.
HARTFORD MORTGAGE SECURITIES HLS FUND -- Seeks maximum current income consistent
with safety of principal and maintenance of liquidity by investing primarily in
mortgage-related securities. Sub-advised by HIMCO.
HARTFORD SMALL COMPANY HLS FUND -- Seeks growth of capital by investing
primarily in equity securities within the range represented by the Russell 2000
Index selected on the basis of potential for capital appreciation. Sub-advised
by Wellington Management.
HARTFORD STOCK HLS FUND -- Seeks long-term growth by investing primarily in
equity securities. Sub-advised by Wellington Management.
MIXED AND SHARED FUNDING -- Shares of the Funds may be sold to our other
separate accounts and our insurance company affiliates or other unaffiliated
insurance companies to serve as the underlying investment for both variable
annuity contracts and variable life insurance policies, a practice known as
"mixed and shared funding." As a result, there is a possibility that a material
conflict may arise between the interests of Contract Owners, and of owners of
other contracts whose contract values are allocated to one or more of these
other separate accounts investing in any one of the Funds. In the event of any
such material conflicts, we will consider what action may be appropriate,
including removing the Fund from the Separate Account or replacing the Fund with
another underlying fund. There are certain risks associated with mixed and
shared funding, as disclosed in the Funds' prospectus.
* "Standard & Poor's," "S&P-Registered Trademark-," "S&P
500-Registered Trademark-," "Standard & Poor's 500," and "500" are trademarks
of The McGraw-Hill Companies, Inc. and have been licensed for use by Hartford.
The Index Fund is not sponsored, endorsed, sold or promoted by Standard &
Poor's and Standard & Poor's makes no representation regarding the
advisability of investing in the Index Fund.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
VOTING RIGHTS -- We are the legal owners of all Fund shares held in the Separate
Account and we have the right to vote at the Fund's shareholder meetings. To the
extent required by federal securities laws or regulations, we will:
- - Notify you of any Fund shareholders' meeting if the shares held for your
Contract may be voted.
- - Send proxy materials and a form of instructions that you can use to tell us
how to vote the Fund shares held for your Contract.
- - Arrange for the handling and tallying of proxies received from Contract
Owners.
- - Vote all Fund shares attributable to your Contract according to instructions
received from you, and
- - Vote all Fund shares for which no voting instructions are received in the same
proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present interpretation,
change to permit us to vote Fund shares on our own, we may decide to do so. You
may attend any Shareholder Meeting at which shares held for your Contract may be
voted. After we begin to make Annuity Payouts to you, the number of votes you
have will decrease.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF FUNDS -- We reserve the right, subject
to any applicable law, to make certain changes to the Funds offered under your
Contract. We may, in our sole discretion, establish new Funds. New Funds will be
made available to existing Contract Owners as we determine appropriate. We may
also close one or more Funds to additional Payments or transfers from existing
Sub-Accounts.
We reserve the right to eliminate the shares of any of the Funds for any reason
and to substitute shares of another registered investment company for the shares
of any Fund already purchased or to be purchased in the future by the Separate
Account. To the extent required by the Investment Company Act of 1940 (the "1940
Act"), substitutions of shares attributable to your interest in a Fund will not
be made until we have the approval of the Commission and we have notified you of
the change.
In the event of any substitution or change, we may, by appropriate endorsement,
make any changes in the Contract necessary or appropriate to reflect the
substitution or change. If we decide that it is in the best interest of the
Contracts Owners, the Separate Account may be operated as a management company
under the 1940 Act or any other form permitted by law, may be de-registered
under the 1940 Act in the event such registration is no longer required, or may
be combined with one or more other Separate Accounts.
ADMINISTRATIVE SERVICES -- Hartford has entered into agreements with the
investment advisers or distributors of many of the Funds. Under the terms of
these agreements, Hartford provides administrative services and the Funds pay a
fee to Hartford that is usually based on an annual percentage of the average
daily net assets of the Funds. These agreements may be different for each Fund
or each Fund family.
PERFORMANCE RELATED INFORMATION
- --------------------------------------------------------------------------------
The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
When a Sub-Account advertises its standardized total return, it will usually be
calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period.
The Separate Account may also advertise NON-STANDARD TOTAL RETURNS THAT PRE-DATE
THE INCEPTION DATE OF THE SEPARATE ACCOUNT. These non-standardized total returns
are calculated by assuming that the Sub-Accounts have been in existence for the
same periods as the underlying Funds and by taking deductions for charges equal
to those currently assessed against the Sub-Accounts. These non-standardized
returns must be accompanied by standardized total returns.
If applicable, the Sub-Accounts may advertise YIELD IN ADDITION TO TOTAL RETURN.
The yield will be computed in the following manner: The net investment income
per unit earned during a recent one month period is divided by the unit value on
the last day of the period. This figure includes the recurring charges at the
Separate Account level.
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 include the recurring charges at the Separate Account level.
We may provide information on various topics to Contract Owners and prospective
Contract Owners in advertising, sales literature or other materials. These
topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as systematic investing, Dollar Cost Averaging
and asset allocation), the advantages and disadvantages of investing in
tax-deferred and taxable instruments, customer profiles and hypothetical
purchase scenarios,
<PAGE>
14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
financial management and tax and retirement planning, and other investment
alternatives, including comparisons between the Contract and the characteristics
of and market for such alternatives.
THE CONTRACT
- --------------------------------------------------------------------------------
PURCHASES AND CONTRACT VALUE
WHAT TYPES OF CONTRACTS ARE AVAILABLE?
The Contract is an individual tax-deferred variable annuity contract. It is
designed for retirement planning purposes and may be purchased by any individual
or trust, including:
- - Any trustee or custodian for a retirement plan qualified under Sections
401(a) or 403(a) 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 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.
The examples above represent Qualified Contracts, as defined by the Code. In
addition, individuals and trusts can also purchase Contracts that are not part
of a tax qualified retirement plan. These are known as Non-Qualified Contracts.
If you are purchasing the Contract for use in an IRA or other qualified
retirement plan, you should consider other features of the Contract besides tax
deferral, since any investment vehicle used within an IRA or other qualified
plan receives tax deferred treatment under the Code.
HOW DO I PURCHASE A CONTRACT?
You may purchase a Contract by completing and submitting an application or an
order request along with a Premium Payment. You may also transfer assets from an
existing investment. The minimum Premium Payment is $25,000. No additional
Premium Payments may be made. Prior approval is required for Premium Payments of
$1,000,000 or more.
You and your Annuitant must not be older than age 90 on the date that your
Contract is issued. You must be of legal age in the state where the Contract is
being purchased or a guardian must act on your behalf.
HOW ARE PREMIUM PAYMENTS APPLIED TO MY CONTRACT?
Your initial Premium Payment will be invested within two Valuation Days of our
receipt of a properly completed application or an order request and the Premium
Payment. If we receive your subsequent Premium Payment on a Non-Valuation Day,
the amount will be invested on the next Valuation Day. We will send you a
confirmation when we invest your Premium Payment.
If the request or other information accompanying the Premium Payment is
incomplete when received, we will hold the money in a non-interest bearing
account for up to five Valuation Days while we try to obtain complete
information. If we cannot obtain the information within five Valuation Days, we
will either return the Premium Payment and explain why the Premium Payment could
not be processed or keep the Premium Payment if you authorize us to keep it
until you provide the necessary information.
CAN I CANCEL MY CONTRACT AFTER I PURCHASE IT?
We want you to be satisfied with the Contract you have purchased. We urge you to
closely examine its provisions. If for any reason you are not satisfied with
your Contract, simply return it within ten days after you receive it with a
written request for cancellation that indicates your tax-withholding
instructions. In some states, you may be allowed more time to cancel your
Contract. We will not deduct any Contingent Deferred Sales Charges during this
time. We may require additional information, including a signature guarantee,
before we can cancel your Contract.
You bear the investment risk from the time the Contract is issued until we
receive your complete cancellation request.
The amount we pay you upon cancellation depends on the requirements of the state
where you purchased your Contract, the method of purchase, the type of Contract
you purchased and your age.
HOW IS THE VALUE OF MY CONTRACT CALCULATED BEFORE THE INCOME START DATE?
The Contract Value is the sum of all Accounts. There are two things that affect
your Sub-Account value: (1) the number of Accumulation Units and (2) the
Accumulation Unit Value. The Sub-Account value is determined by multiplying the
number of Accumulation Units by the Accumulation Unit Value. Therefore, on any
Valuation Day your Contract Value reflects the investment performance of the
Sub-Accounts and will fluctuate with the performance of the underlying Funds.
When your Premium Payment is credited to your Sub-Accounts, it is converted into
Accumulation Units by dividing the amount of your Premium Payment, minus any
Premium Taxes, by the Accumulation Unit Value for that day. The larger the
Premium Payment you put into your Contract, the more Accumulation Units you will
own. You decrease the number of Accumulation Units you have by requesting
Surrenders, transferring money out of an Account, settling a Death Benefit claim
or by annuitizing your Contract.
To determine the current Accumulation Unit Value, we take the prior Valuation
Day's Accumulation Unit Value and multiply it by the Net Investment Factor for
the current Valuation Day.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
The Net Investment Factor is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next. The Net Investment Factor for
each Sub-Account equals:
- - The net asset value per share of each Fund held in the Sub-Account at the end
of the current Valuation Day divided by
- - The net asset value per share of each Fund held in the Sub-Account at the end
of the prior Valuation Day; minus
- - The daily mortality and expense risk charge adjusted for the number of days in
the period, and any other applicable charge.
CAN I TRANSFER FROM ONE SUB-ACCOUNT TO ANOTHER?
TRANSFERS BETWEEN SUB-ACCOUNTS -- You may transfer from one Sub-Account to
another before and after the Income Start Date at no extra charge. Your transfer
request will be processed on the day that it is received as long as it is
received on a Valuation Day before the close of the New York Stock Exchange.
Otherwise, your request will be processed on the following Valuation Day. We
will send you a confirmation when we process your transfer. You are responsible
for verifying transfer confirmations and promptly advising us of any errors
within 30 days of receiving the confirmation.
SUB-ACCOUNT TRANSFER RESTRICTIONS -- We reserve the right to limit the number of
transfers to 12 per Contract Year, with no transfers occurring on consecutive
Valuation Days. We also have the right to restrict transfers if we believe that
the transfers could have an adverse effect on other Contract Owners. In all
states except New York, Florida, Maryland and Oregon, we may:
- - Require a minimum time period between each transfer,
- - Limit the dollar amount that may be transferred on any one Valuation Day, and
- - Not accept transfer requests from an agent acting under a power of attorney
for more than one Contract Owner.
We also have a restriction in place that involves individuals who act under a
power of attorney for multiple Contract Owners. If the value of the Contract
Owners' Accounts add up to more than $2 million, we will not accept transfer
instructions from the power of attorney unless the power of attorney has entered
into a Third Party Transfer Services Agreement with us.
Some states may have different restrictions.
POWER OF ATTORNEY -- You may authorize another person to make transfers on your
behalf by submitting a completed Power of Attorney form. Once we have the
completed form on file, we will accept transfer instructions, subject to our
transfer limitations, from your designated third party until we receive new
instructions in writing from you. You will not be able to make transfers or
other changes to your Contract if you have authorized someone else to act under
a power of attorney.
CHARGES AND FEES
There are 3 charges and fees associated with the Contract:
1. THE CONTINGENT DEFERRED SALES CHARGE
The Contingent Deferred Sales Charge is deducted only under the Life Annuity
with Payments Guaranteed for a Specified Number of Years, Joint and Last
Survivor Annuity with Payments Guaranteed for a Specified Number of Years or the
Payments Guaranteed for a Specified Number of Years Annuity Payout Options. It
covers some of the expenses relating to the sale and distribution of the
Contract, including commissions paid to registered representatives and the cost
of preparing sales literature and other promotional activities.
We assess a Contingent Deferred Sales Charge when you request a full or partial
Surrender. The Contingent Deferred Sales Charge will not exceed the total amount
of the Premium Payments made. The longer you leave your Premium Payment in the
Contract, the lower the Contingent Deferred Sales Charge will be when you
Surrender.
The Contingent Deferred Sales Charge is a percentage of the Commuted Value and
is equal to:
<TABLE>
<CAPTION>
CONTRACT YEAR
SURRENDER CHARGE
AS A PERCENTAGE OF CONTINGENT DEFERRED
COMMUTED VALUE SALES CHARGE
<S> <C>
- ---------------------------------------
1 6%
- ---------------------------------------
2 6%
- ---------------------------------------
3 5%
- ---------------------------------------
4 5%
- ---------------------------------------
5 4%
- ---------------------------------------
6 3%
- ---------------------------------------
7 2%
- ---------------------------------------
8 or more 0%
- ---------------------------------------
</TABLE>
THE FOLLOWING SITUATIONS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE:
- - Upon death of the Annuitant or Contract Owner
- - Upon cancellation during the Right to Cancel Period
2. MORTALITY AND EXPENSE RISK CHARGE
For assuming mortality and expense risks under the Contract, we deduct a daily
charge at the rate of 1.25% per year of Sub-Account Value (estimated at .90% for
mortality and .35% for expenses). The mortality and expense risk charge is
broken into charges for mortality risks and for an expense risk:
- - MORTALITY RISK -- The primary mortality risk that we assume is made once
Annuity Payouts have begun. Once Annuity Payouts have begun, we may be
required to make Annuity Payouts as long as the Annuitant is living,
regardless of how long the Annuitant lives. We would be required to make these
payments if the Payout Option chosen is the Life Annuity, Life Annuity With
Payments for a Period Certain or Joint and Last
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Survivor Life Annuity Payout Option. The risk that we bear during this period
is that the actual mortality rates, in aggregate, may be lower than the
expected mortality rates.
For the Payments Guaranteed for a Specified Number of Years Annuity Payout
Option, we must cover any difference between the Death Benefit paid and the
Surrender Value. These differences may occur in periods of declining value or
periods when the Contingent Deferred Sales Charges would have been deducted.
The risk that we bear during this period is that actual mortality rates, in
aggregate, may be higher than expected.
- - EXPENSE RISK -- We also bear an expense risk that the Contingent Deferred
Sales Charges collected before the Income Start Date may not be enough to
cover the actual cost of selling, distributing and administering the Contract.
Although variable Annuity Payouts will fluctuate with the performance of the
underlying Fund selected, your Annuity Payouts will NOT be affected by (a) the
actual mortality experience of our Annuitants, or (b) our actual expenses if
they are greater than the deductions stated in the Contract. Because we cannot
be certain how long our Annuitants will live, we charge this percentage fee
based on the mortality tables currently in use. The mortality and expense risk
charge enables us to keep our commitments and to pay you as planned.
3. PREMIUM TAX
We deduct Premium Taxes, if required, by a state or other government agency.
Some states collect the taxes when Premium Payments are made; others collect at
Annuitization. Since we pay Premium Taxes when they are required by applicable
law, we may deduct them from your Contract when we pay the taxes, upon
Surrender, or on the Annuity Calculation Date. The Premium Tax rate varies by
state or municipality. Currently, the maximum rate charged by any state is 3.5%
and 4% in Puerto Rico.
CHARGES AGAINST THE FUNDS -- The Separate Account purchases shares of the Funds
at net asset value. The net asset value of the Fund shares reflects investment
advisory fees and administrative expenses already deducted from the assets of
the Funds. These charges are described in the Funds' prospectuses accompanying
this Prospectus.
WE MAY OFFER, IN OUR DISCRETION, REDUCED FEES AND CHARGES INCLUDING, BUT NOT
LIMITED TO CONTINGENT DEFERRED SALES CHARGES AND THE MORTALITY AND EXPENSE RISK
CHARGE FOR CERTAIN CONTRACTS (INCLUDING EMPLOYER SPONSORED SAVINGS PLANS) WHICH
MAY RESULT IN DECREASED COSTS AND EXPENSES. REDUCTIONS IN THESE FEES AND CHARGES
WILL NOT BE UNFAIRLY DISCRIMINATORY AGAINST ANY CONTRACT OWNER.
DEATH BENEFIT
WHAT IS THE DEATH BENEFIT AND HOW IS IT CALCULATED?
The Death Benefit is the amount we will pay upon the death of the Contract Owner
or the Annuitant. The Death Benefit is calculated when we receive a certified
death certificate or other legal document acceptable to us.
BEFORE THE INCOME START DATE -- If the Contract Owner dies before the Income
Start Date, the Death Benefit will be equal to the Contract Value on the date
the certified death certificate or other legal document acceptable to us is
received. The Death Benefit may be taken in one lump sum or under any of the
Annuity Payout Options then being offered.
ON OR AFTER THE INCOME START DATE -- If the Annuitant dies on or after the
Income Start Date, the Death Benefit will be paid according to the Annuity
Payout Option selected. Under some Annuity Payout Options, there is no Death
Benefit.
Under the Payments Guaranteed for a Specified Number of Years Annuity Payout
Option on or after the Income Start Date, the Death Benefit is the greater of:
x Commuted Value;
x 100% of the Premium Payment minus all Annuity Payouts made since the Income
Start Date; or
x the Maximum Anniversary Value minus all Annuity Payouts made since that
anniversary.
As of the date we receive a certified death certificate or other legal document
acceptable to us, we will calculate an Anniversary Value for each Contract
Anniversary. The highest Anniversary Value is the Maximum Anniversary Value. The
Maximum Anniversary Value is only calculated until the earlier of the Contract
Owner or Annuitant's 81st birthday or death.
HOW IS THE DEATH BENEFIT PAID?
The Death Benefit may be taken in one lump sum or under any of the Annuity
Payout Options then being offered by us. When there is more than one
Beneficiary, we will calculate the Death Benefit amount for each Beneficiary's
portion of the proceeds and then pay it out or apply it to a selected Annuity
Payout Option according to each Beneficiary's instructions. If we receive the
complete instructions on a Non-Valuation Day, computations will take place on
the next Valuation Day. Until complete instructions are received from the
Beneficiary, the Death Benefit will be transferred to the Money Market
Sub-Account.
The Beneficiary may elect under the Annuity Payout Option "Death Benefit
Remaining with the Company" to leave proceeds from the Death Benefit with us for
up to five years from the date of the Contract Owner's death if the Contract
Owner died before the Income Start Date. Once we receive a certified death
certificate or other legal documents acceptable to us, the Beneficiary can:
(a) make Sub-Account transfers and (b) take a full Surrender without paying
Contingent Deferred Sales Charges.
REQUIRED DISTRIBUTIONS -- If the Annuitant dies before the Income Start Date,
the Death Benefit must be distributed within five years after death. The
Beneficiary can choose any Annuity Payout Option that results in complete
Annuity Payout within five years.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
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If the Contract Owner dies on or after the Income Start Date under an Annuity
Payout Option with a Death Benefit, any remaining value must be distributed at
least as rapidly as under the payment method being used as of the Contract
Owner's death.
If the Contract Owner is not an individual (e.g. a trust), then the original
Annuitant will be treated as the Contract Owner in the situations described
above and any change in the original Annuitant will be treated as the death of
the Contract Owner.
WHO WILL RECEIVE THE DEATH BENEFIT?
The distribution of the Death Benefit is based on whether death is before, on or
after the Income Start Date.
WHAT SHOULD THE BENEFICIARY CONSIDER?
ALTERNATIVES TO THE REQUIRED DISTRIBUTIONS -- The selection of an Annuity Payout
Option and the timing of the selection will have an impact on the tax treatment
of the Death Benefit. To receive favorable tax treatment, the Annuity Payout
Option selected: (a) cannot extend beyond the Beneficiary's life or life
expectancy, and (b) must begin within one year of the date of death.
If these conditions are NOT met, the Death Benefit will be treated as a lump sum
payment for tax purposes. This sum will be taxable in the year in which it is
considered received.
SPOUSAL CONTRACT CONTINUATION -- If the Beneficiary is the Contract Owner's
spouse, the Beneficiary may elect to continue the Contract as the contract
owner, receive the death benefit in one lump sum payment or elect an Annuity
Payout Option. Spousal continuation is available only once for each Contract.
IF DEATH OCCURS BEFORE THE INCOME START DATE:
<TABLE>
<CAPTION>
IF THE DECEASED IS THE . . . AND . . . AND . . . THEN THE . . .
<S> <C> <C> <C>
Contract Owner There is a surviving joint The Annuitant is living or Joint Contract Owner
Contract Owner deceased receives the Death
Benefit.
Contract Owner There is no surviving The Annuitant is living or Designated Beneficiary
joint Contract Owner deceased receives the Death
Benefit.
Contract Owner There is no surviving The Annuitant is living or Contract Owner's estate
joint Contract Owner and deceased receives the Death
the Beneficiary Benefit.
predeceases the Contract
Owner
Annuitant The Contract Owner is Death Benefit is paid to
living the Contract Owner and not
the designated
Beneficiary.
</TABLE>
IF DEATH OCCURS ON OR AFTER THE INCOME START DATE:
<TABLE>
<CAPTION>
IF THE DECEASED IS THE . . . AND . . . THEN THE . . .
<S> <C> <C>
Contract Owner Designated Beneficiary becomes the
Contract Owner.
Annuitant The Contract Owner is living Contract Owner receives the Death
Benefit.
Annuitant The Annuitant is also the Contract Owner Designated Beneficiary receives the
Death Benefit.
</TABLE>
THESE ARE THE MOST COMMON DEATH BENEFIT SCENARIOS, HOWEVER, THERE ARE OTHERS.
SOME OF THE ANNUITY PAYOUT OPTIONS MAY NOT RESULT IN A DEATH BENEFIT PAYOUT. IF
YOU HAVE QUESTIONS ABOUT THESE AND ANY OTHER SCENARIOS, PLEASE CONTACT YOUR
REGISTERED REPRESENTATIVE OR US.
SURRENDERS
WHAT KINDS OF SURRENDERS ARE AVAILABLE?
FULL SURRENDERS BEFORE THE INCOME START DATE -- When you Surrender your Contract
before the Income Start Date, the Surrender Value of the Contract will be made
in a lump sum payment. The Surrender Value is the Contract Value minus any
applicable Premium Taxes, or Contingent Deferred Sales Charges. The Surrender
Value may be more or less than the amount of the Premium Payments made to a
Contract.
SURRENDERS AFTER THE INCOME START DATE -- Partial Surrenders are permitted after
the Income Start Date if you select the Life Annuity with Payments Guaranteed
for a Specified Number of Years, Joint and Last Survivor Annuity with Payments
Guaranteed for a Specified Number of Years or the Payments Guaranteed for a
Specified Number of Years Annuity Payout Option.
<PAGE>
18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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You may take partial Surrenders of amounts equal to the Commuted Value of the
payments that we would have made during the "Specified Number of Years" you
select under the Annuity Payout Option.
To qualify for partial Surrenders under these Annuity Payout Options you must
elect a variable dollar amount Annuity Payout and you must make the Surrender
request during the Specified Number of Years.
Hartford will deduct any applicable Contingent Deferred Sales Charges.
If you elect to take the entire Commuted Value of the Annuity Payouts we would
have made during the Specified Number of Years, Hartford will not make any
Annuity Payouts during the remaining Specified Number of Years. If you elect to
take only some of the Commuted Value of the Annuity Payouts we would have made
during the Specified Number of Years, Hartford will reduce the remaining Annuity
Payouts during the remaining Specified Number of Years. The remaining Annuity
Payouts are reduced by the same percentage as the percentage of Commuted Value
Surrendered. If the partial Surrender represented 25% of the Commuted Value, the
total of the remaining Annuity Payouts would be reduced by 25%.
Annuity Payouts that are to be made after the Specified Number of Years is over
will not change.
Please check with your qualified tax adviser because there could be adverse tax
consequences for partial Surrenders after the Income Start Date.
HOW DO I REQUEST A SURRENDER?
Requests for Surrenders must be in writing. We will send your money within seven
days of receiving complete instructions. However, we may postpone payment of
Surrenders whenever: (a) the New York Stock Exchange is closed, (b) trading on
the New York Stock Exchange is restricted by the SEC, (c) the SEC permits and
orders postponement or (d) the SEC determines that an emergency exists to
restrict valuation.
WRITTEN REQUESTS -- To request a Surrender, complete a Surrender Form or send us
a letter, signed by you, stating:
- - the dollar amount that you want to receive, either before or after we withhold
taxes and deduct for any applicable charges,
- - your tax withholding amount or percentage, if any, and
- - your mailing address.
If there are joint Contract Owners, both must authorize all Surrenders. The
partial Surrender will be taken in proportion to the value in each Account.
WHAT SHOULD BE CONSIDERED ABOUT TAXES?
There are certain tax consequences associated with Surrenders:
PRIOR TO AGE 59 1/2 -- If you make a Surrender prior to age 59 1/2, there may be
adverse tax consequences including a10% federal income tax penalty on the
taxable portion of the Surrender payment. Surrendering before age 59 1/2 may
also affect the continuing tax-qualified status of some Contracts.
WE DO NOT MONITOR SURRENDER REQUESTS. TO DETERMINE WHETHER A SURRENDER IS
PERMISSIBLE, WITH OR WITHOUT FEDERAL INCOME TAX PENALTY, PLEASE CONSULT YOUR
PERSONAL TAX ADVISER.
MORE THAN ONE CONTRACT ISSUED IN THE SAME CALENDAR YEAR -- If you own more than
one contract issued by us or our affiliates in the same calendar year, then
these contracts may be treated as one contract for the purpose of determining
the taxation of distributions prior to the Income Start Date. Please consult
your tax adviser for additional information.
INTERNAL REVENUE CODE SECTION 403(B) ANNUITIES -- As of December 31, 1988, all
section 403(b) annuities have limits on full Surrenders. Contributions to your
Contract made after December 31, 1988 and any increases in cash value after
December 31, 1988 may not be distributed unless you are: (a) age 59 1/2, (b) no
longer employed, (c) deceased, (d) disabled, or (e) experiencing a financial
hardship (cash value increases may not be distributed for hardships prior to age
59 1/2). Distributions prior to age 59 1/2 due to financial hardship;
unemployment or retirement may still be subject to a penalty tax of 10%.
WE ENCOURAGE YOU TO CONSULT WITH YOUR TAX ADVISER BEFORE MAKING ANY SURRENDERS.
PLEASE SEE THE "FEDERAL TAX CONSIDERATIONS" SECTION FOR MORE INFORMATION.
ANNUITY PAYOUTS
- --------------------------------------------------------------------------------
THIS SECTION DESCRIBES WHAT HAPPENS WHEN WE BEGIN TO MAKE REGULAR ANNUITY
PAYOUTS FROM YOUR CONTRACT. YOU, AS THE CONTRACT OWNER, SHOULD ANSWER FIVE
QUESTIONS:
- - When do you want Annuity Payouts to begin?
- - Which Annuity Payout Option do you want to use?
- - How often do you want to receive Annuity Payouts?
- - Do you want to receive level monthly Annuity Payouts?
- - What is the Assumed Investment Return?
- - How are the variable dollar amount Annuity Payouts determined?
Please check with your financial advisor to select the Annuity Payout Option
that best meets your income needs.
1. WHEN DO YOU WANT ANNUITY PAYOUTS TO BEGIN?
You select an Income Start Date and an Annuity Payout Option when you purchase
your Contract. The Income Start Date is any date after the right to cancel
period is over and no later than 60 days after your Contract is issued. Once
selected, neither the
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
- --------------------------------------------------------------------------------
Income Start Date nor your Annuity Payout Option can be changed.
The Annuity Calculation Date is when the amount of your Annuity Payout is
determined. This occurs within five Valuation Days before your selected Income
Start Date.
All Annuity Payouts, regardless of frequency, will occur on the same day of the
month as the Income Start Date. After the initial payout, if an Annuity Payout
date falls on a Non-Valuation Day, the Annuity Payout is computed on the prior
Valuation Day. If the Annuity Payout date does not occur in a given month due to
a leap year or months with only 28 days (i.e. the 31st), the Annuity Payout will
be computed on the last Valuation Day of the month.
2. WHICH ANNUITY PAYOUT OPTION DO YOU WANT TO USE?
Your Contract contains the Annuity Payout Options described below. The Annuity
Proceeds Settlement Option is an option that can be elected by the Beneficiary
after the death of the Contract Owner and is described in the "Death Benefit"
section. We may at times offer other Annuity Payout Options. Once we begin to
make Annuity Payouts, the Annuity Payout Option cannot be changed.
LIFE ANNUITY -- We make Annuity Payouts as long as the Annuitant is living. When
the Annuitant dies, we stop making Annuity Payouts. A Payee would receive only
one Annuity Payout if the Annuitant dies after the first payout, two Annuity
Payouts if the Annuitant dies after the second payout, and so forth.
LIFE ANNUITY WITH CASH REFUND -- We will make Annuity Payouts as long as the
Annuitant is living. When the Annuitant dies, we pay the Beneficiary the
Contract Value as of the Annuity Calculation Date, minus applicable Premium
Taxes, and minus any Annuity Payouts already made. This Annuity Payout Option is
only available if you select the 5% Assumed Investment Return.
LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS -- We make
monthly Annuity Payouts during the lifetime of the Annuitant but Annuity Payouts
are at least guaranteed for a time period you select which is between 5 years
and 100 years minus the age of Annuitant. If, at the death of the Annuitant,
Annuity Payouts have been made for less than the time period selected, then the
Beneficiary may elect to either continue the Annuity Payouts for the remainder
of the period, receive the Commuted Value in one lump sum or take the Death
Benefit.
For Qualified Contracts, the Annuity Payout period remaining must be less than
the life expectancy of the Annuitant when the Contact is issued.
JOINT AND LAST SURVIVOR LIFE ANNUITY -- We will make Annuity Payouts as long as
the Annuitant and Joint Annuitant are living. When one Annuitant dies, we
continue to make Annuity Payouts to the other Annuitant until that second
Annuitant dies. When choosing this option, you must decide what will happen to
the Annuity Payouts; either fixed or variable, after the first Annuitant dies.
You must select Annuity Payouts that:
- - Remain the same at 100%, or
- - Decrease to 66.67%, or
- - Decrease to 50%.
For variable Annuity Payouts, these percentages represent Annuity Units; for
fixed Annuity Payouts, they represent actual dollar amounts. The percentage will
also impact the Annuity Payout amount we pay while both Annuitants are living.
If you pick a lower percentage, your original Annuity Payouts will be higher
while both Annuitants are alive.
JOINT AND LAST SURVIVOR ANNUITY WITH PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER
OF YEARS -- We will make Annuity Payouts as long as the Annuitant and Joint
Annuitant are living, but Annuity Payouts are at least guaranteed for a time
period you select which is between 5 years and 100 years minus the age of
younger Annuitant. When one Annuitant dies, we continue to make Annuity Payouts
to the other Annuitant until that second Annuitant dies. If the Annuitant and
the Joint Annuitant both die before Annuity Payouts have been made for less than
the time period selected, then the Beneficiary may elect to either continue the
Annuity Payouts for the remainder of the period or receive the Commuted Value in
one lump sum.
When choosing this option, you must decide what will happen to the Annuity
Payouts; either fixed or variable, after the first Annuitant dies. You must
select Annuity Payouts that:
- - Remain the same at 100%, or
- - Decrease to 66.67%, or
- - Decrease to 50%.
For variable Annuity Payouts, these percentages represent Annuity Units. The
percentage will also impact the Annuity Payout amount we pay while both
Annuitants are living. If you pick a lower percentage, your Annuity Payouts will
be higher while both Annuitants are alive.
PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS -- We will make Annuity
Payouts for the number of years that you select. You can select between 5 years
and 100 years minus the age of the Annuitant. If the Annuitant dies before the
specified number of years have passed, the Beneficiary may elect either to
continue Annuity Payouts for the rest of the specified number of years, or
receive the Commuted Value in one sum.
IMPORTANT INFORMATION:
- - YOU CANNOT SURRENDER YOUR CONTRACT ONCE ANNUITY PAYOUTS BEGIN, UNLESS YOU HAVE
SELECTED THE PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS ANNUITY
PAYOUT OPTION. A CONTINGENT DEFERRED SALES CHARGE MAY BE DEDUCTED.
3. HOW OFTEN DO YOU WANT THE PAYEE TO RECEIVE ANNUITY PAYOUTS?
In addition to selecting an Income Start Date and an Annuity Payout Option, you
must also decide how often you want the
<PAGE>
20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Payee to receive Annuity Payouts. You may choose to receive Annuity Payouts:
- - monthly,
- - quarterly,
- - semi-annually, or
- - annually.
Once you select a frequency, it cannot be changed. If you do not make a
selection, the Payee will receive monthly Annuity Payouts. You must select a
frequency that results in an Annuity Payout of at least $50. If the amount falls
below $50, we have the right to change the frequency to bring the Annuity Payout
up to at least $50. For Contracts issued in New York, the minimum monthly
Annuity Payout is $20.
4. DO YOU WANT TO RECEIVE LEVEL MONTHLY ANNUITY PAYOUTS?
You may elect to receive Annuity Payouts that vary in amount each Contract Year,
but are level each month throughout the Contract Year. We offer these level
payouts on a monthly frequency only. You can begin receiving these level monthly
Annuity Payouts on your Income Start Date or as of any anniversary of your
Income Start Date. You can cancel these level Annuity Payouts by notifying us
within 30 days of the anniversary of the Income Start Date.
The level payouts are available only under the following Annuity Payout Options:
- - Life Annuity with Cash Refund
- - Life Annuity with Payments Guaranteed for a Specified Number of Years
- - Joint and Survivor Life Annuity with Payments Guaranteed for a Specified
Number of Years
- - Payments Guaranteed for a Specified Number of Years
We will transfer the annual variable Annuity Payout amount to the General
Account to provide your level monthly Annuity Payouts. The assets of the General
Account are subject to the claims of our creditors. The level monthly Annuity
Payouts will be calculated using a fixed interest rate which will be determined
annually on each anniversary of your Income Start Date. The minimum interest
rate will be 3%, compounded annually.
In situations where we make Annuity Payouts based on the life of the Annuitant,
we will calcuate the level monthly Annuity Payout using the mortality table
listed in the Contract.
5. WHAT IS THE ASSUMED INVESTMENT RETURN?
The Assumed Investment Return ("AIR") is the investment return you select before
we start to make Annuity Payouts. It is a critical assumption for calculating
variable dollar amount Annuity Payouts. The first Annuity Payout will be based
upon the AIR. The remaining Annuity Payouts will fluctuate based on the
performance of the underlying Funds.
Subject to the approval of your State, you can select one of three AIRs: 3%, 5%
or 6%. The greater the AIR, the greater the initial Annuity Payout. A higher AIR
may result in smaller potential growth in the Annuity Payouts. On the other
hand, a lower AIR results in a lower initial Annuity Payout, but future Annuity
Payouts have the potential to be greater.
For example, if the second monthly Annuity Payout is the same as the first, the
sub-accounts earned exactly the same return as the AIR. If the second monthly
Annuity Payout is more than the first, the sub-accounts earned more than the
AIR. If the second Annuity Payout is less than the first, the sub-account earned
less than the AIR.
Level variable dollar amount Annuity Payouts would be produced if the investment
returns remained constant and equal to the AIR. In fact, Annuity Payouts will
vary up or down as the investment rate varies up or down from the AIR.
6. HOW ARE VARIABLE-DOLLAR AMOUNT ANNUITY PAYOUTS DETERMINED?
A variable-dollar amount Annuity Payout is based on the investment performance
of the Sub-Accounts. The variable-dollar amount Annuity Payouts may fluctuate
with the performance of the underlying Funds. To begin making variable-dollar
amount Annuity Payouts, we convert the first Annuity Payout amount to a set
number of Annuity Units and then price those units to determine the Annuity
Payout amount. The number of Annuity Units that determines the Annuity Payout
amount remains fixed unless you transfer units between Sub-Accounts.
The dollar amount of the first variable Annuity Payout depends on:
- - the Annuity Payout Option chosen,
- - the Annuitant's attained age and gender (if applicable), and,
- - the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table
- - the Assumed Investment Return
The total amount of the first variable-dollar amount Annuity Payout is
determined by dividing the Contract Value minus any applicable Premium Taxes, by
$1,000 and multiplying the result by the payment factor defined in the Contract
for the selected Annuity Payout Option.
The dollar amount of each subsequent variable-dollar amount Annuity Payout is
equal to the total of:
Annuity Units for each Sub-Account multiplied by Annuity Unit Value of each
Sub-Account.
The Annuity Unit Value of each Sub-Account for any Valuation Period is equal to
the Accumulation Unit Value Net Investment Factor for the current Valuation
Period multiplied by the Annuity Unit factor found in your Contract, multiplied
by the Annuity Unit Value for the preceding Valuation Period.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
- --------------------------------------------------------------------------------
TRANSFER OF ANNUITY UNITS -- After the Income Start Date, you may transfer
dollar amounts of Annuity Units from one Sub-Account to another. On the day you
make a transfer, the dollar amounts are equal for both Sub-Accounts and the
number of Annuity Units will be different. We will transfer the dollar amount of
your Annuity Units the day we receive your written request if received before
the close of the New York Stock Exchange. Otherwise, the transfer will be made
on the next Valuation Day.
OTHER INFORMATION
- --------------------------------------------------------------------------------
ASSIGNMENT
Ownership of this Contract is generally assignable. However, if the Contract is
issued to a tax qualified retirement plan, it is possible that the ownership of
the Contract may not be transferred or assigned. An assignment of a
Non-Qualified Contract may subject the Contract Values or Surrender Value to
income taxes and certain penalty taxes.
CONTRACT MODIFICATION
The Annuitant may not be changed. We may modify the Contract, but no
modification will effect the amount or term of any Contract unless a
modification is required to conform the Contract to applicable Federal or State
law. No modification will effect the method by which Contract Values are
determined.
HOW CONTRACTS ARE SOLD
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is an affiliate of Hartford. Both HSD and Hartford are ultimately controlled by
The Hartford Financial Services Group, Inc. The principal business address of
HSD is the same as that of Hartford.
The securities will be sold by salesperson of HSD who represent Hartford as
insurance and variable annuity agents and who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of 1934
as a Broker-Dealer and is a member of the National Association of Securities
Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 7% of premium
payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on premium payments made by
policyholders or contract owners. This compensation is usually paid from the
sales charges described in this prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or Surrender variable insurance products.
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 financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
MORE INFORMATION
You may call your Representative if you have any questions or write or call us
at the address below:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085.
Telephone: (800) 862-6668 (Contract Owners)
(800) 862-7155 (Registered Representatives)
<PAGE>
22 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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FEDERAL TAX CONSIDERATIONS
GENERAL
Since federal tax law is complex, the tax consequences of purchasing this
contract will vary depending on your situation. You may need tax or legal advice
to help you determine whether purchasing this contract is right for you.
Our general discussion of the tax treatment of this contract is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed description of all federal income tax consequences regarding the
purchase of this contract cannot be made in the prospectus. We also do not
discuss state, municipal or other tax laws that may apply to this contract. For
detailed information, you should consult with a qualified tax adviser familiar
with your situation.
TAXATION OF HARTFORD AND THE
SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company under Subchapter L of Chapter 1 of the Code. Accordingly, the
Separate Account is not separately taxed as a "regulated investment company"
under subchapter M. Investment income and any realized capital gains on the
assets of the Separate Account are reinvested and are taken into account in
determining the value of the Accumulation and Annuity Units. As a result, such
investment income and realized capital gains are automatically applied to
increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
TAXATION OF PURCHASERS OF NON-QUALIFIED CONTRACTS
CORPORATIONS, TRUSTS AND OTHER NON-NATURAL PERSONS -- Code Section 72 contains
provisions for contract owners which are not natural persons. Non-natural
persons include corporations, trusts, limited liability companies, partnerships
and other types of legal entities. The tax rules for contracts owned by non-
natural persons are different from the rules for contracts owned by individuals.
For example, the annual net increase in the value of the contract is currently
includible in the gross income of a non-natural person, unless the non-natural
person holds the contract as an agent for a natural person. There are additional
exceptions from current inclusion for:
- - certain annuities held by structured settlement companies,
- - certain annuities held by an employer with respect to a terminated qualified
retirement plan and
- - certain immediate annuities.
A non-natural person which is a tax-exempt entity for federal tax purposes will
not be subject to income tax as a result of this provision.
If the contract owner is a non-natural person, the primary annuitant is treated
as the contract owner in applying mandatory distribution rules. These
rules require that certain distributions be made upon the death of the contract
owner. A change in the primary annuitant is also treated as the death of the
contract owner.
NATURAL PERSONS -- Section 72 generally provides that a Contract Owner is not
taxed on increases in the value of the Contract until an amount distributed from
the Contract is received (or deemed received) by the Contract Owner, either in
the form of Annuity Payments, as contemplated by the Contract, or in some other
form (i.e., surrender or Death Benefit). However, this tax deferral generally
applies only if: (1) the investments in the Separate Account are "adequately
diversified" in accordance with Treasury Department regulations, (2) Hartford,
rather than the Contract Owner, is considered the owner of such assets for
federal income tax purposes, and (3) certain distribution requirements are met
in the event that the Contract Owner dies. These requirements are discussed
further under the caption "Tax Status of the Contract" below.
DISTRIBUTIONS PRIOR TO THE INCOME START DATE -- The Contract does not permit
partial withdrawals or partial surrenders or loans. If, however, a Contract is
surrendered prior to the Income Start Date, amounts received by the Contract
Owner are includable in his or her income to the extent that such amounts exceed
the "investment in the contract." For this purpose, the investment in the
contract at any time equals the Premium Payment (to the extent that such Payment
was neither deductible when made nor excludable from income as, for example, in
the case of certain contributions to Qualified Contracts), less any amounts
previously received from the Contract which were not includable in income. Also,
the Surrender Value may be subject to a penalty tax, described below. In
general, an assignment of the Contract (or other change of ownership) without
full and adequate consideration will be treated as a distribution from the
Contract and taxed in the same manner as a surrender (except where the Contract
is transferred between spouses or incident to a divorce).
The Contract provides that upon the death of Contract Owner, Annuitant or Joint
Annuitant, the Beneficiary will receive the Contract Value. This distribution is
includable in the Beneficiary's income as follows: (1) if distributed in a lump
sum, it is taxed in the same manner as a surrender, (2) if it is distributed in
the form of Annuity Payments, it is taxed in the same manner as Annuity Payments
(see below).
DISTRIBUTIONS AFTER THE INCOME START DATE -- The portion of each Annuity Payment
taxable as ordinary income is equal to the excess of the Annuity Payment over
the "exclusion amount." The "exclusion amount" is the investment in the Contract
(described above), adjusted for any guaranteed period, divided by the number of
Annuity Payments expected to be made (determined by Treasury Department
regulations that take into account the Annuitant's life expectancy and the
Annuity Payment Option elected). After the dollar amount of the investment in
the Contract, adjusted for any guaranteed period, is deemed to be recovered, the
entire amount of each Annuity Payment is fully includable in income.
Nonetheless, should the Annuity Payments cease before the adjusted investment in
the Contract is fully
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
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recovered, a deduction is allowed for the unrecovered amount of the adjusted
investment in the Contract. Where a guaranteed period of Annuity Payments is
selected and the Annuitant does not live to the end of that period, the Annuity
Payments for the remainder of the period are includable in income as follows:
(1) if distributed in a lump sum, they are included in income to the extent that
they exceed the unrecovered investment in the Contract at that time, or (2) if
received as Annuity Payments, they are fully excluded from income until the
remaining investment in the Contract is deemed to be recovered. All Annuity
Payments thereafter are fully includable in income.
PENALTY TAX ON CERTAIN DISTRIBUTIONS -- Distributions received (or deemed
received) from a Contract (before or after the Income Start Date) may be subject
to a penalty tax equal to 10% of the amount treated as taxable income. In
general, however, there is no penalty tax on distributions:
- - made on or after a taxpayer reaches age 59 1/2;
- - made on or after the death of the Contract Owner;
- - attributable to a taxpayer's becoming disabled;
- - that are part of a series of substantially equal periodic payments (not less
frequently than annually) for the life (or the life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the taxpayer and
his or her designated beneficiary;
- - made under certain annuities issued in connection with structured settlement
agreements; and
- - made under an annuity contract that is purchased with a single premium payment
when the annuity date is no later than a year from purchase and substantially
equal periodic payments are made, not less frequently than annually, during
the annuity payment period.
AGGREGATION OF TWO OR MORE CONTRACTS -- All non-qualified deferred annuity
contracts that are issued by Hartford (or its affiliates) to the same owner
during any calendar year are treated as one annuity contract for purposes of
determining the amount includable in gross income under Section 72(e) of the
Code. The effects of this rule are not yet clear; however, it could affect the
time when income is taxable and the amount that might be subject to the 10%
penalty tax described above. In addition, the Treasury Department has specific
authority to issue regulations that prevent the avoidance of Section 72(e) of
the Code through the serial purchase of annuity contracts or otherwise. There
may also be other situations in which the Treasury Department may conclude that
it would be appropriate to aggregate two or more deferred or immediate annuity
contracts purchased by the same owner. Accordingly, a Contract Owner should
consult a competent tax adviser before purchasing more than one annuity contract
in a calendar year.
POSSIBLE CHANGES IN TAXATION -- In past years, legislation has been proposed
that would have adversely modified the federal taxation of certain annuity
contracts. For example, one such proposal would have changed the tax treatment
of non-qualified annuities that did not have "substantial life contingencies" by
taxing income as it is credited to the annuity contract. Although as of the date
of this Prospectus Congress is not considering any legislation regarding
taxation of annuity contracts, there is always the possibility that the tax
treatment of annuities could change by legislation or other means (such as IRS
regulations, revenue rulings, judicial decisions, etc.). Moreover, it is also
possible that any change could be retroactive (that is, effective prior to the
date of the change).
CONTRACTS OBTAINED THROUGH A TAX-FREE EXCHANGE OF OTHER ANNUITY OR LIFE
INSURANCE CONTRACTS -- Section 1035 of the Code generally provides that no gain
or loss shall be recognized on the exchange of one annuity contract for another.
If the surrendered contract was issued prior to August 14, 1982, the tax
rules formerly provided that the surrender was taxable only to the extent the
amount received exceeds the owner's investment in the contract will and continue
to apply to amounts allocable to investments in that contract prior to
August 14, 1982. In contrast, contracts issued after January 19, 1985 in a Code
Section 1035 exchange are treated as new contracts for purposes of the penalty
and distribution-at-death rules. Special rules and procedures apply to Section
1035 transactions. Prospective Contract Owners wishing to take advantage of
Section 1035 should consult their tax adviser.
TAX STATUS OF THE CONTRACTS -- The foregoing discussion assumes that the
Contracts qualify as "annuity contracts" for federal income tax purposes under
the Code.
DIVERSIFICATION REQUIREMENTS -- The Code requires that investments supporting
your contract be adequately diversified. Code Section 817 provides that a
variable annuity contract will not be treated as an annuity contract for any
period during which the investments made by the separate account or underlying
fund are not adequately diversified. If a contract is not treated as an annuity
contract, the contract owner will be subject to income tax on annual increases
in cash value.
The Treasury Department's diversification regulations require, among other
things, that:
- - no more than 55% of the value of the total assets of the segregated asset
account underlying a variable contract is represented by any one investment,
- - no more than 70% is represented by any two investments,
- - no more than 80% is represented by any three investments and
- - no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all securities of
the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In the
case of government securities, each government agency or instrumentality is
treated as a separate issuer.
A separate account must be in compliance with the diversification standards on
the last day of each calendar quarter or within 30 days after the quarter ends.
If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the taxation of contract income on an ongoing basis. However, either the company
or the contract owner must agree to pay the
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24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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tax due for the period during which the diversification requirements were not
met.
We monitor the diversification of investments in the separate accounts and test
for diversification as required by the Code. We intend to administer all
contracts subject to the diversification requirements in a manner that will
maintain adequate diversification.
OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT -- In order for a variable
annuity contract to qualify for tax deferral, assets in the separate accounts
supporting the contract must be considered to be owned by the insurance company
and not by the contract owner. It is unclear under what circumstances an
investor is considered to have enough control over the assets in the separate
account to be considered the owner of the assets for tax purposes.
The IRS has issued several rulings discussing investor control. These rulings
say that certain incidents of ownership by the contract owner, such as the
ability to select and control investments in a separate account, will cause the
contract owner to be treated as the owner of the assets for tax purposes.
In its explanation of the diversification regulations, the Treasury Department
recognized that the temporary regulations "do not provide guidance concerning
the circumstances in which investor control of the investments of a segregated
asset account may cause the investor, rather than the insurance company, to be
treated as the owner of the assets in the account." The explanation further
indicates that "the temporary regulations provide that in appropriate cases a
segregated asset account may include multiple sub-accounts, but do not specify
the extent to which policyholders may direct their investments to particular
sub-accounts without being treated as the owners of the underlying assets.
Guidance on this and other issues will be provided in regulations or revenue
rulings under Section 817(d), relating to the definition of variable contract."
The final regulations issued under Section 817 did not provide guidance
regarding investor control, and as of the date of this prospectus, guidance has
yet to be issued. We do not know if additional guidance will be issued. If
guidance is issued, we do not know if it will have a retroactive effect.
Due to the lack of specific guidance on investor control, there is some
uncertainty about when a contract owner is considered the owner of the assets
for tax purposes. We reserve the right to modify the contract, as necessary, to
prevent you from being considered the owner of assets in the separate account.
REQUIRED DISTRIBUTIONS -- In order to be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires any
Non-Qualified Contract to provide that: (a) if any Contract Owner dies on or
after the Income Start Date but prior to the time the entire interest in the
Contract has been distributed, the remaining portion of such interest will be
distributed at least as rapidly as under the method of distribution being used
as of the date of that Contract Owner's death; and (b) if any Contract Owner
dies prior to the Income Start Date, the entire interest in the Contract will be
distributed within five years after the date of the Contract Owner's death.
These requirements will be considered satisfied as to any portion of the
Contract Owner's interest that is payable to or for the benefit of a "designated
beneficiary," and that is distributed over the life of such Beneficiary or over
a period not extending beyond the life expectancy of that Beneficiary, provided
that such distributions begin within one year of that Contract Owner's death.
The Contract Owner's "designated beneficiary" is the person designated by such
Contract Owner as a Beneficiary and must be a natural person. However, if the
Contract Owner's sole designated beneficiary is the surviving spouse of the
Contract Owner, the Contract may be continued with the surviving spouse as the
new Contract Owner. This spousal continuation shall apply only once for this
contract. The requirements further provide that if the Contract Owner is not an
individual, the primary Annuitant shall be treated as the Contract Owner for
purposes of making distributions that are required to be made upon the death of
the Contract Owner. If there is a change in the primary Annuitant, such change
shall be treated as the death of the Contract Owner. The Contract does not
permit a change of the Annuitants, however.
Non-Qualified Contracts contain provisions that are intended to comply with the
requirements of Section 72(s) of the Code, although no regulations interpreting
these requirements have yet been issued. Hartford will review such provisions
and modify them if necessary to assure that they comply with the requirements of
Code Section 72(s) when clarified by regulation or otherwise.
CONTRACT OWNERS THAT ARE NONRESIDENT
ALIENS OR FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to Contract Owners that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal income tax and withholding on annuity distributions at a 30% rate,
unless a lower treaty rate applies and any required tax forms are submitted to
Hartford. In addition, purchasers may be subject to state premium tax, other
state and/or municipal taxes, and taxes that may be imposed by the purchaser's
country of citizenship or residence. Prospective purchasers are advised to
consult with a qualified tax adviser regarding U.S., state, and foreign taxation
with respect to the purchase of a Contract.
OTHER TAX CONSEQUENCES
As noted above, the foregoing comments about the federal tax consequences under
these Contracts are not exhaustive, and special rules may apply to other tax
situations not discussed in this Prospectus. Further, the federal income tax
consequences discussed herein reflect Hartford's understanding of current law
and the law may change. Federal estate and state and local estate, inheritance
and other tax consequences of ownership or receipt of distributions under a
Contract depend on the individual circumstances of each Contract Owner or
recipient of the distribution. In particular, gift and/or estate tax
consequences may result in situations where the Contract Owner is not also the
Annuitant, Payee, and Beneficiary. A competent tax adviser should be consulted
for further information.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
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TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
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DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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SAFEKEEPING OF ASSETS
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INDEPENDENT PUBLIC ACCOUNTANTS
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DISTRIBUTION OF CONTRACTS
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CALCULATION OF YIELD AND RETURN
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PERFORMANCE COMPARISONS
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VARIABLE ANNUITY PAYMENTS
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OTHER INFORMATION
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FINANCIAL STATEMENTS
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</TABLE>
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26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS
This summary does not attempt to provide more than general information about the
federal income tax rules associated with use of a Contract by a tax-qualified
retirement plan. Because of the complexity of the federal tax rules, owners,
participants and beneficiaries are encouraged to consult their own tax advisors
as to specific tax consequences.
The federal tax rules applicable to owners of Contracts under tax-qualified
retirement plans vary according to the type of plan as well as the terms and
conditions of the plan itself. Contract owners, plan participants and
beneficiaries are cautioned that the rights and benefits of any person may be
controlled by the terms and conditions of the tax-qualified retirement plan
itself, regardless of the terms and conditions of a Contract. We are not bound
by the terms and conditions of such plans to the extent such terms conflict with
a Contract, unless we specifically consent to be bound.
Some tax-qualified retirement plans are subject to distribution and other
requirements that are not incorporated into our administrative procedures.
Contract owners, participants and beneficiaries are responsible for determining
that contributions, distributions and other transactions comply with applicable
law. Tax penalties may apply to transactions with respect to tax-qualified
retirement plans if applicable federal income tax rules and restrictions are not
carefully observed.
We do not currently offer the Contracts in connection with all of the types of
tax-qualified retirement plans discussed below and may not offer the Contracts
for all types of tax-qualified retirement plans in the future.
1. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS -- Eligible employers can
establish certain tax-qualified pension and profit-sharing plans under section
401 of the Code. Rules under section 401(k) of the Code govern certain "cash or
deferred arrangements" under such plans. Rules under section 408(k) govern
"simplified employee pensions." Tax-qualified pension and profit-sharing plans
are subject to limitations on the amount that may be contributed, the persons
who may be eligible to participate and the time when distributions must
commence. Employers intending to use the Contracts in connection with
tax-qualified pension or profit-sharing plans should seek competent tax and
other legal advice.
2. TAX SHELTERED ANNUITIES UNDER SECTION 403(B) -- Public schools and certain
types of charitable, educational and scientific organizations, as specified in
section 501(c)(3) of the Code, can purchase tax-sheltered annuity contracts for
their employees. Tax-deferred contributions can be made to tax-sheltered annuity
contracts under section 403(b) of the Code, subject to certain limitations.
Generally, such contributions may not exceed the lesser of $10,500 (indexed) or
20% of the employee's "includable compensation" for such employee's most recent
full year of employment, subject to other adjustments. Special provisions under
the Code may allow some employees to elect a different overall limitation.
Tax-sheltered annuity programs under section 403(b) are subject to a PROHIBITION
AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO CONTRIBUTIONS MADE
PURSUANT TO A SALARY REDUCTION AGREEMENT, unless such distribution is made:
- - after the participating employee attains age 59 1/2;
- - upon separation from service;
- - upon death or disability; or
- - in the case of hardship (and in the case of hardship, any income attributable
to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions attributable to
cash values or other amounts held under a section 403(b) contract as of
December 31, 1988.
3. DEFERRED COMPENSATION PLANS UNDER SECTION 457 -- A governmental employer or a
tax-exempt employer other than a governmental unit can establish a Deferred
Compensation Plan under section 457 of the Code. For these purposes, a
"governmental employer" is a State, a political subdivision of a State, or an
agency or an instrumentality of a State or political subdivision of a State.
Employees and independent contractors performing services for a governmental or
tax-exempt employer can elect to have contributions made to a Deferred
Compensation Plan of their employer in accordance with the employer's plan and
section 457 of the Code.
Deferred Compensation Plans that meet the requirements of section 457(b) of the
Code are called "eligible" Deferred Compensation Plans. Section 457(b) limits
the amount of contributions that can be made to an eligible Deferred
Compensation Plan on behalf of a participant. Generally, the limitation on
contributions is 33 1/3% of a participant's includable compensation (typically
25% of gross compensation) or, for 2000, $8,000 (indexed), whichever is less.
The plan may provide for additional "catch-up" contributions during the three
taxable years ending before the year in which the participant attains normal
retirement age.
All of the assets and income of an eligible Deferred Compensation Plan of a
governmental employer must be held in trust for the exclusive benefit of
participants and their beneficiaries. For this purpose, custodial accounts and
certain annuity contracts are treated as trusts. The requirement of a trust does
not apply to amounts under a Deferred Compensation Plan of a tax-exempt
(non-governmental) employer. In addition, the requirement of a trust does not
apply to amounts under a Deferred Compensation Plan of a governmental employer
if the Deferred Compensation Plan is not an eligible plan within the meaning of
section 457(b) of the Code. In the absence of such a trust,
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
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amounts under the plan will be subject to the claims of the employer's general
creditors.
In general, distributions from an eligible Deferred Compensation Plan are
prohibited under section 457 of the Code unless made after the participating
employee:
- - attains age 70 1/2,
- - separates from service,
- - dies, or
- - suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Deferred Compensation
Plan under section 457 of the Code cannot be transferred or rolled over on a
tax-deferred basis except for certain transfers to other Deferred Compensation
Plans under section 457 in limited cases.
4. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS") UNDER
SECTION 408
TRADITIONAL IRAS -- Eligible individuals can establish individual retirement
programs under section 408 of the Code through the purchase of an IRA. Section
408 imposes limits with respect to IRAs, including limits on the amount that may
be contributed to an IRA, the amount of such contributions that may be deducted
from taxable income, the persons who may be eligible to contribute to an IRA,
and the time when distributions commence from an IRA. Distributions from certain
tax-qualified retirement plans may be "rolled-over" to an IRA on a tax-deferred
basis.
SIMPLE IRAS -- Eligible employees may establish SIMPLE IRAs in connection with a
SIMPLE IRA plan of an employer under section 408(p) of the Code. Special
rollover rules apply to SIMPLE IRAs. Amounts can be rolled over from one SIMPLE
IRA to another SIMPLE IRA. However, amounts can be rolled over from a SIMPLE IRA
to a Traditional IRA only after two years have expired since the employee first
commenced participation in the employer's SIMPLE IRA plan. Amounts cannot be
rolled over to a SIMPLE IRA from a qualified plan or a Traditional IRA. Hartford
is a non-designated financial institution for purposes of the SIMPLE IRA rules.
ROTH IRAS -- Eligible individuals may establish Roth IRAs under section 408A of
the Code. Contributions to a Roth IRA are not deductible. Subject to special
limitations, a Traditional IRA may be converted into a Roth IRA or a
distribution from a Traditional IRA may be rolled over to a Roth IRA. However, a
conversion or a rollover from a Traditional IRA to a Roth IRA is not excludable
from gross income. If certain conditions are met, qualified distributions from a
Roth IRA are tax-free.
5. FEDERAL TAX PENALTIES AND WITHHOLDING -- Distributions from tax-qualified
retirement plans are generally taxed as ordinary income under section 72 of the
Code. Under these rules, a portion of each distribution may be excludable from
income. The excludable amount is the portion of the distribution that bears the
same ratio as the after-tax contributions bear to the expected return.
(a) PENALTY TAX ON EARLY DISTRIBUTIONS Section 72(t) of the Code imposes an
additional penalty tax equal to 10% of the taxable portion of a distribution
from certain tax-qualified retirement plans. However, the 10% penalty tax
does not apply to a distributions that is:
- - Made on or after the date on which the employee reaches age 59 1/2;
- - Made to a beneficiary (or to the estate of the employee) on or after the death
of the employee;
- - Attributable to the employee's becoming disabled (as defined in the Code);
- - Part of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the employee or the
joint lives (or joint life expectancies) of the employee and his or her
designated beneficiary;
- - Except in the case of an IRA, made to an employee after separation from
service after reaching age 55; or
- - Not greater than the amount allowable as a deduction to the employee for
eligible medical expenses during the taxable year.
IN ADDITION, THE 10% PENALTY TAX DOES NOT APPLY TO A DISTRIBUTION FROM AN IRA
THAT IS:
- - Made after separation from employment to an unemployed IRA owner for health
insurance premiums, if certain conditions are met;
- - Not in excess of the amount of certain qualifying higher education expenses,
as defined by section 72(t)(7) of the Code; or
- - A qualified first-time homebuyer distribution meeting the requirements
specified at section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that the 10%
penalty tax is increased to 25% with respect to non-exempt early distributions
made from your SIMPLE IRA during the first two years following the date you
first commenced participation in any SIMPLE IRA plan of your employer.
(b) MINIMUM DISTRIBUTION PENALTY TAX If the amount distributed is less than the
minimum required distribution for the year, the Participant is subject to a
50% penalty tax on the amount that was not properly distributed.
An individual's interest in a tax-qualified retirement plan generally must be
distributed, or begin to be distributed, not later than the Required Beginning
Date. Generally, the Required Beginning Date is April 1 of the calendar year
following the later of:
- - the calendar year in which the individual attains age 70 1/2; or
- - the calendar year in which the individual retires from service with the
employer sponsoring the plan.
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28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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The Required Beginning Date for an individual who is a five (5) percent owner
(as defined in the Code), or who is the owner of an IRA, is April 1 of the
calendar year following the calendar year in which the individual attains age
70 1/2.
The entire interest of the Participant must be distributed beginning no later
than the Required Beginning Date over:
- - the life of the Participant or the lives of the Participant and the
Participant's designated beneficiary, or
- - over a period not extending beyond the life expectancy of the Participant or
the joint life expectancy of the Participant and the Participant's designated
beneficiary.
Each annual distribution must equal or exceed a "minimum distribution amount"
which is determined by dividing the account balance by the applicable life
expectancy. This account balance is generally based upon the account value as of
the close of business on the last day of the previous calendar year. In
addition, minimum distribution incidental benefit rules may require a larger
annual distribution.
If an individual dies before reaching his or her Required Beginning Date, the
individual's entire interest must generally be distributed within five years of
the individual's death. However, this rule will be deemed satisfied, if
distributions begin before the close of the calendar year following the
individual's death to a designated beneficiary and distribution is over the life
of such designated beneficiary (or over a period not extending beyond the life
expectancy of the beneficiary). If the beneficiary is the individual's surviving
spouse, distributions may be delayed until the individual would have attained
age 70 1/2.
If an individual dies after reaching his or her Required Beginning Date or after
distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect at
the time of the individual's death.
(C) WITHHOLDING In general, regular wage withholding rules apply to
distributions from IRAs and plans described in section 457 of the Code.
Periodic distributions from other tax-qualified retirement plans that are
made for a specified period of 10 or more years or for the life or life
expectancy of the participant (or the joint lives or life expectancies of
the participant and beneficiary) are generally subject to federal income tax
withholding as if the recipient were married claiming three exemptions. The
recipient of periodic distributions may generally elect not to have
withholding apply or to have income taxes withheld at a different rate by
providing a completed election form.
Mandatory federal income tax withholding at a flat rate of 20% will generally
apply to other distributions from such other tax-qualified retirement plans
unless such distributions are:
- - the non-taxable portion of the distribution;
- - required minimum distributions; or
- - direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
Certain states require withholding of state taxes when federal income tax is
withheld.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
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ILLUSTRATIONS OF ANNUITY PAYMENTS ASSUMING HYPOTHETICAL RATES OF RETURN
The following graph has been prepared to show how investment performance could
affect Variable Annuity Payments over time. The graph illustrates the Variable
Annuity Payments of a Non-Qualified Contact under three rate of return
scenarios. Of course, the illustrations merely represent what Variable Annuity
Payments might be paid under a hypothetical Non-Qualified Contract.
WHAT THE GRAPHS ILLUSTRATE -- Each curve plotted on the graph illustrates the
payments under a hypothetical Non-Qualified Contract (described in more detail
below) assuming a different hypothetical rate of return for a single Sub-Account
supporting the Contract by plotting one point for each contract year. Each such
annual point on the graph represents the average of twelve monthly Variable
Annuity Payments made in that contract year under the hypothetical Contract
(hereinafter, an "Average Monthly Payment"). Each curve on the graph assumes
that the initial Variable Annuity Payment under the hypothetical Contract is
$1,000 (discussed in more detail below).
HYPOTHETICAL RATES OF RETURN -- The Variable Annuity Payments reflect three
different assumptions for a constant investment return before fees and expenses:
0%, 6% and 12%. Net of all expenses, these constant returns are: -1.85%, 4.04%
and 9.93%. Average Monthly Payments reflect the assumed investment return net of
all expenses of the illustrated Sub-Account (and the Funds) over the periods
shown in each graph. Fund management fees and operating expenses are assumed to
be at an annual rate of 0.62% of their average daily net assets. This is the
weighted average of Fund expenses shown in the fee table on page 6. The
mortality and expense risk charge is assumed to be at an annual rate of 1.25% of
the illustrated Sub-Account's average daily net assets.
Nevertheless, THE AVERAGE MONTHLY PAYMENTS DEPICTED IN THE GRAPH ARE BASED ON
HYPOTHETICAL CONTRACTS AND HYPOTHETICAL INVESTMENT RESULTS AND ARE NOT
PROJECTIONS OR INDICATIONS OF FUTURE RESULTS. HARTFORD DOES NOT GUARANTEE OR
EVER SUGGEST THAT ANY SUB-ACCOUNT OR CONTRACT ISSUED BY IT WOULD GENERATE THESE
OR SIMILAR AVERAGE MONTHLY PAYMENTS FOR ANY PERIOD OF TIME. THE GRAPHS ARE FOR
ILLUSTRATION PURPOSES ONLY AND DO NOT REPRESENT FUTURE VARIABLE ANNUITY PAYMENTS
OR FUTURE INVESTMENT RETURNS. Variable Annuity Payments under a real Contract
may be more or less than those forming the basis for the Average Monthly
Payments shown in these illustrations if the actual returns of the Sub-Accounts
selected by a Contract Owner are different from the hypothetical returns.
Because it is very likely that a Sub-Account's investment return will fluctuate
over time, one can expect Variable Annuity Payments under a real Contract to
fluctuate. Moreover, under a real Contract, the total amount of Variable Annuity
Payments ultimately received by a Payee depends upon which Annuity Payment
Option the Contract Owner selects and, for life contingent annuity payment
options, how long the Annuitant lives. See "Annuity Payouts."
ASSUMPTIONS ON WHICH THE HYPOTHETICAL CONTRACT IS BASED -- In order to
illustrate a hypothetical Contract, Hartford had to make several assumptions
about the Contract. These assumptions are that: (1) the hypothetical Contract is
a Non-Qualified Contract, (2) the entire Contract Value of the hypothetical
Contract is allocated (on the Annuity Calculation Date) to a Sub-Account having
a constant investment return before fees and expenses of 0%, 6%, or 12%,
(3) the Contract Owner selected an Assumed Investment Return of 5%, (4) the
Contract Owner elects to receive monthly Variable Annuity Payments, and (5) the
Contract Value (less any applicable Premium Tax) applied to the purchase of
Annuity Units on the Annuity Calculation Date under the Annuity Payment Option
selected results in an initial Variable Annuity Payment of $1,000.
For a discussion of how a Contract Owner may elect to receive monthly,
quarterly, semi-annual or annual Variable Annuity Payments, see "Annuity
Payouts."
ASSUMED INVESTMENT RETURN -- Among the most important factors that determine
that amount of Variable Annuity Payments is the Assumed Investment Return
selected by the Contract Owner. The hypothetical Contract has an Assumed
Investment Return of 5%. Subject to state approval, a Contract Owner may,
however, select a 3%, 5% or 6% Assumed Investment Return under a real Contract.
Generally, Variable Annuity Payments will increase in size from one Income
Payment Date to the next if the annualized net rate of return during that time
is greater than the Assumed Investment Return, and will decrease if the
annualized net rate of return over this period is less than the Assumed
Investment Return. (The Assumed Investment Return is an important component of
the Payment Factor.) For a detailed discussion of Assumed Investment Returns,
see "Annuity Payouts."
THE $1,000 INITIAL ANNUITY PAYMENT -- The hypothetical Contract has an initial
Variable Annuity Payment of $1,000. The dollar amount of the first Variable
Annuity Payment under a real Contract generally depends upon the Annuity Payment
Option selected by the Contract Owner, the amount of Contract Value applied to
purchase the Variable Annuity Payments, the annuity purchase rates in the
Contract at the time it is purchased (i.e., the Payment Factor), the age of the
Annuitant, and, in most cases (e.g., Non-Qualified Contracts), the sex of the
Annuitant. For each of the illustrations, the entire Contract Value under the
hypothetical Contract is allocated to a Sub-Account having a constant investment
return before fees and expenses of 0%, 6%, or 12%. However, for a real Contract,
Contract Value is often allocated among several Sub-Accounts prior to the
Annuity Calculation Date. The dollar amount of the first Variable Annuity
Payment attributable to each Sub-Account is determined under a real Contract by
dividing the dollar amount of Contract Value (less applicable Premium Tax)
applied to that Sub-Account on the Annuity Calculation Date by $1,000, and
multiplying the result by the annuity Payment Factor in the Contract for the
selected Annuity Payment Option. The dollar value of the first Variable Annuity
Payment is the sum of the first Variable Annuity Payments attributable to each
Sub-Account. For a detailed discussion of how the first Variable Annuity Payment
is determined, see "Annuity Payouts."
<PAGE>
30 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
HYPOTHETICAL ILLUSTRATIONS
<TABLE>
<CAPTION>
HYPOTHETICAL 0% GROSS RATE HYPOTHETICAL 6% GROSS RATE
AVERAGE MONTHLY PAYMENT AVERAGE MONTHLY PAYMENT
FOR EACH YEAR SHOWN FOR EACH YEAR SHOWN
$1,000 INITIAL PAYMENT; 5% AIR $1,000 INITIAL PAYMENT; 5% AIR
- -------------------------------- -------------------------------
AVERAGE AVERAGE
CONTRACT MONTHLY CONTRACT MONTHLY
YEAR PAYMENT YEAR PAYMENT
- --------------------- -------- -------------- --------------
<S> <C> <C> <C>
1 970 1 996
2 906 2 988
3 847 3 980
4 791 4 972
5 740 5 964
6 691 6 956
7 646 7 948
8 604 8 940
9 564 9 932
10 527 10 924
11 493 11 917
12 461 12 909
13 430 13 902
14 402 14 894
15 376 15 887
16 351 16 879
17 328 17 872
18 307 18 865
19 287 19 858
20 268 20 851
<CAPTION>
HYPOTHETICAL 0% GR HYPOTHETICAL 12% GROSS RATE
AVERAGE MONTHLY P AVERAGE MONTHLY PAYMENT
FOR EACH YEAR S FOR EACH YEAR SHOWN
$1,000 INITIAL PAYME $1,000 INITIAL PAYMENT; 5% AIR
- --------------------- -------------------------------
AVERAGE
CONTRACT CONTRACT MONTHLY
YEAR YEAR PAYMENT
- --------------------- -------------- --------------
<S> <C> <C>
1 1 1,022
2 2 1,072
3 3 1,125
4 4 1,179
5 5 1,237
6 6 1,298
7 7 1,361
8 8 1,427
9 9 1,497
10 10 1,570
11 11 1,647
12 12 1,727
13 13 1,812
14 14 1,900
15 15 1,993
16 16 2,091
17 17 2,193
18 18 2,300
19 19 2,412
20 20 2,530
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C> <C> <C>
Contract 0% 6% 12%
Year Gross Rate Gross Rate Gross Rate
1 970 996 1,022
2 906 988 1,072
3 847 980 1,125
4 791 972 1,179
5 740 964 1,237
6 691 956 1,298
7 646 948 1,361
8 604 940 1,427
9 564 932 1,497
10 527 924 1,570
11 493 917 1,647
12 461 909 1,727
13 430 902 1,812
14 402 894 1,900
15 376 887 1,993
16 351 879 2,091
17 328 872 2,193
18 307 865 2,300
19 287 858 2,412
20 268 851 2,530
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 31
- --------------------------------------------------------------------------------
ILLUSTRATIONS OF ANNUITY PAYMENTS USING HISTORIC
RATES OF RETURN
The following graphs have been prepared to show how investment performance
affects Variable Annuity Payments over time. These graphs illustrate the
"performance" of a Non-Qualified Contract under which Variable Annuity Payments
begin at the end of the month that the Contract was issued which is the same
month that each Sub-Account illustrated began operations. Of course, Hartford
did not sell Contracts prior to the date of this Prospectus (i.e., during any of
the time periods shown) and therefore the illustrations merely represent what
Variable Annuity Payments might have been under a hypothetical Non-Qualified
Contract had one existed during the years shown.
WHAT THE GRAPHS ILLUSTRATE -- Each graph illustrates the "performance" of a
particular Sub-Account based on hypothetical Non-Qualified Contract (described
in more detail below) by plotting one point for each calendar year since the
Sub-Account began operations. Each such annual point on the graph represents the
average of twelve monthly Variable Annuity Payments made in that year under the
hypothetical Contract. Each graph assumes that the initial Variable Annuity
Payment under the hypothetical Contract is $1,000 (discussed in more detail
below). All of the graphs end on December 31, 1998. Where a Sub-Account began
operations in mid-year, the point for the first year represents the average of
monthly Variable Annuity Payments made (which is fewer than 12) under the
hypothetical Contract during that year. The points therefore represent, in each
case, the average monthly Variable Annuity Payment (hereinafter, an "Average
Monthly Payment").
Average Monthly Payments reflect the actual past investment return after all
expenses of the Sub-Accounts over the periods shown in each graph. Nevertheless,
THE AVERAGE MONTHLY PAYMENTS DEPICTED IN THE GRAPHS ARE BASED ON HYPOTHETICAL
CONTRACTS AND PAST INVESTMENT RESULTS AND ARE NOT PROJECTIONS OR INDICATIONS OF
FUTURE RESULTS. HARTFORD DOES NOT GUARANTEE OR EVEN SUGGEST THAT ANY CONTRACT
ISSUED BY IT WOULD GENERATE THESE OR SIMILAR VARIABLE ANNUITY PAYMENTS FOR ANY
PERIOD OF TIME. THE GRAPHS ARE FOR ILLUSTRATION PURPOSES ONLY AND DO NOT
REPRESENT FUTURE VARIABLE ANNUITY PAYMENTS OR FUTURE INVESTMENT RETURNS.
Variable Annuity Payments under a real Contract may be more or less than those
forming the basis for the Average Monthly Payments shown in these illustrations
if the actual returns of the Sub-Accounts selected by a Contract Owner are
different from the past returns of the Sub-Accounts. Because it is very likely
that a Sub-Account's investment return will fluctuate over time, one can expect
Variable Annuity Payments under a real Contract to fluctuate. Moreover, under a
real Contract, the total amount of Variable Annuity Payments ultimately received
by a Payee depends upon which Annuity Payment Option the Contract Owner selects
and, for life contingent annuity options, how long the Annuitant lives. (See
"Annuity Payouts.")
ASSUMPTIONS ON WHICH THE HYPOTHETICAL CONTRACT IS BASED -- In order to
illustrate a hypothetical Contract, Hartford had to make several assumptions
about the Contract. These assumptions are that: (1) the hypothetical Contract is
a Non-Qualified Contract, (2) the entire Contract Value of the hypothetical
Contract is allocated (on the Annuity Calculation Date) to the Sub-Account being
illustrated, (3) the Contract Owner selected an Assumed Investment Return of 5%,
(4) the Contract Owner elects to receive monthly Variable Annuity Payments and
elects an Income Start Date that is the last day of the month in which the
Contract was issued, (5) the Contract Value (less any applicable premium tax)
applied to the purchase of Annuity Units on the Annuity Calculation Date under
the Annuity Payment Option selected results in an initial Variable Annuity
Payment of $1,000, and (6) the Income Start Date is the last day of the month
that the Sub-Account illustrated began operations. TO THE EXTENT THAT A REAL
CONTRACT IS ISSUED BY HARTFORD ON A BASIS DIFFERENT FROM THE FOREGOING
ASSUMPTIONS, THAT REAL CONTRACT WOULD HAVE HAD AVERAGE MONTHLY PAYMENTS
DIFFERENT FROM THOSE ILLUSTRATED EVEN DURING THE PERIODS ILLUSTRATED.
For a discussion of how a Contract Owner may elect to receive monthly,
quarterly, semi-annual or annual Variable Annuity Payments, see "Annuity
Payouts."
ASSUMED INVESTMENT RETURN -- Among the most important factors that determine
that amount of Variable Annuity Payments is the Assumed Investment Return
selected by the Contract Owner. The hypothetical Contract has an Assumed
Investment Return of 5%. Subject to state approval, a Contract Owner may,
however, select a 3%, 5% or 6% Assumed Investment Return under a real Contract.
Generally, Variable Annuity Payments will increase in size from one Income
Payment Date to the next if the annualized net rate of return during that time
is greater than the Assumed Investment Return, and will decrease if the
annualized net rate of return over this period is less than the Assumed
Investment Return. (The Assumed Investment Return is an important component of
the Payment Factor.) For a detailed discussion of Assumed Investment Returns,
see "Variable Annuity Payments." Standardized and non-standardized average
annual total returns as well as the Sub-Account Annual Percentage Change column
reflect the performance of the Sub-Account being illustrated without adjustment
for an Assumed Investment Return.
THE $1,000 INITIAL ANNUITY PAYMENT -- The hypothetical Contract has an initial
Variable Annuity Payment of $1,000. The dollar amount of the first Variable
Annuity Payment under a real Contract generally depends upon the Annuity Payment
Option selected by the Contract Owner, the amount of Contract Value applied to
purchase the Variable Annuity Payments, the annuity purchase rates in the
Contract at the time it is purchased (i.e., the Payment Factor), the age of the
Annuitant, and, in most cases (e.g., Non-Qualified Contracts), the sex of the
Annuitant. For each of the illustrations, the entire Contract Value under the
hypothetical Contract is allocated to the Sub-Account shown in
<PAGE>
32 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
the illustrations. However, for a real Contract, Contract Value is often
allocated among several Sub-Accounts prior to the Annuity Calculation Date. The
dollar amount of the first Variable Annuity Payment attributable to each
Sub-Account is determined under a real Contract by dividing the dollar amount of
Contract Value (less applicable Premium Tax) applied to that Sub-Account on the
Annuity Calculation Date by $1,000, and multiplying the result by the annuity
Payment Factor in the Contract for the selected Annuity Payment Option. The
dollar value of the first Variable Annuity Payment is the sum of the first
Variable Annuity Payments attributable to each Sub-Account. For a detailed
discussion of how the first Variable Annuity Payment is determined, see "Annuity
Payouts."
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 33
- --------------------------------------------------------------------------------
ADVISERS FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- -----------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
- ------------------------ ----------- ------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983* 990 1.26%
1984 948 6.05%
1985 1,078 25.26%
1986 1,253 11.27%
1987 1,337 4.66%
1988 1,322 12.71%
1989 1,479 20.24%
1990 1,459 0.01%
1991 1,584 18.88%
1992 1,630 6.96%
1993 1,731 10.86%
1994 1,688 -3.94%
1995 1,821 26.74%
1996 2,042 15.14%
1997 2,384 22.96%
1998 2,745 23.11%
1999 2,991 9.21%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 9.21%
5 Year 19.26%
10 Year 12.57%
Since Inception 12.25%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 3.21%
5 Year 18.86%
10 Year 12.57%
Since Inception 12.25%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE
<S> <C>
Calendar Monthly
Year Payment
1977
1978
1979
1980
1981
1982
1983* 990
1984 948
1985 1,078
1986 1,253
1987 1,337
1988 1,322
1989 1,479
1990 1,459
1991 1,584
1992 1,630
1993 1,731
1994 1,688
1995 1,821
1996 2,042
1997 2,384
1998 2,745
1999 2,991
</TABLE>
* Fund inception was 4/83. Therefore, the Average Monthly Payment represents
the average monthly payment from April 1983 to December 1983. The Annual Sub-
Account Return is based on the period from April 1983 to December 1983.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
contingent deferred sales charge where the latter do not.
<PAGE>
34 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- -----------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
- ------------------------ ----------- ------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984* 1,038 9.16%
1985 1,237 34.37%
1986 1,485 7.65%
1987 1,496 -5.55%
1988 1,451 24.67%
1989 1,694 22.60%
1990 1,550 -12.02%
1991 1,852 52.16%
1992 2,100 15.55%
1993 2,492 19.30%
1994 2,562 1.26%
1995 2,897 28.63%
1996 3,328 19.20%
1997 3,881 20.83%
1998 4,150 14.04%
1999 4,864 35.75%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 35.75%
5 Year 23.46%
10 Year 18.28%
Since Inception 17.26%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 29.75%
5 Year 23.11%
10 Year 18.28%
Since Inception 17.26%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE
<S> <C>
Calendar Monthly
Year Payment
1977
1978
1979
1980
1981
1982
1983
1984* 1,038
1985 1,237
1986 1,485
1987 1,496
1988 1,451
1989 1,694
1990 1,550
1991 1,852
1992 2,100
1993 2,492
1994 2,562
1995 2,897
1996 3,328
1997 3,881
1998 4,150
1999 4,864
</TABLE>
* Fund inception was 4/84. Therefore, the Average Monthly Payment represents
the average monthly payment from April 1984 to December 1984. The Annual Sub-
Account Return is based on the period from April 1984 to December 1984.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
contingent deferred sales charge where the latter do not.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
DIVIDEND AND GROWTH FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- -----------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
- ------------------------- ------------ ----------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994* 1,024 4.07%
1995 1,146 34.68%
1996 1,383 21.39%
1997 1,695 30.25%
1998 1,932 14.97%
1999 2,006 4.01%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 4.01%
5 Year 20.55%
10 Year --
Since Inception 17.61%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- -----------------------------------------------------
<S> <C>
1 Year -1.99%
5 Year 20.17%
10 Year --
Since Inception 17.61%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE
<S> <C>
Calendar Monthly
Year Payment
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994* 1,024
1995 1,146
1996 1,383
1997 1,695
1998 1,932
1999 2,006
</TABLE>
* Fund inception was 3/94. Therefore, the Average Monthly Payment represents
the average monthly payment from March 1994 to December 1994. The Annual Sub-
Account Return is based on the period from March 1994 to December 1994.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
contingent deferred sales charge where the latter do not.
<PAGE>
36 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
GLOBAL LEADERS FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- -----------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
- ------------------------- ------------ ----------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998* 1,159 31.47%
1999 1,450 48.51%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 48.51%
5 Year --
10 Year --
Since Inception 70.84%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/99**
- ---------------------------------------------
<S> <C>
1 Year 42.51%
5 Year --
10 Year --
Since Inception 70.84%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE
<S> <C>
Calendar Monthly
Year Payment
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998* 1,159
1999 1,450
</TABLE>
* Fund inception was 9/98. Therefore, the Average Monthly Payment represents
the average monthly payment from September 1998 to December 1998. The Annual
Sub-Account Return is based on this period.
** These returns are not annualized.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 37
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- -----------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
- ------------------------- ------------ ----------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998* 1,018 18.18%
1999 1,219 20.32%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/99**
- ---------------------------------------------
<S> <C>
1 Year 20.32%
5 Year --
10 Year --
Since Inception 24.75%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 14.32%
5 Year --
10 Year --
Since Inception 24.75%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE
<S> <C>
Calendar Monthly
Year Payment
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998* 1,018
1999 1,219
</TABLE>
* Fund inception was 6/1/98. Therefore, the Average Monthly Payment represents
the average monthly payment from June 1998 to December 1998. The Annual Sub-
Account Return is based on this period.
** These returns are not annualized.
<PAGE>
38 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
HIGH YIELD FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- -----------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
- ------------------------- ------------ ----------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998* 1,011 3.49%
1999 1,019 3.40%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/99**
- ---------------------------------------------
<S> <C>
1 Year 3.40%
5 Year --
10 Year --
Since Inception 5.57%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- -----------------------------------------------------
<S> <C>
1 Year -2.60%
5 Year --
10 Year --
Since Inception 5.57%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE
<S> <C>
Calendar Monthly
Year Payment
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998* 1,011
1999 1,019
</TABLE>
* Fund inception was 9/98. Therefore, the Average Monthly Payment represents
the average monthly payment from September 1998 to December 1998. The Annual
Sub-Account Return is based on this period.
** These returns are not annualized.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 39
- --------------------------------------------------------------------------------
INDEX FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- -----------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
- ------------------------ ----------- ------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987* 978 -14.02%
1988 890 14.75%
1989 1,049 28.73%
1990 1,035 -5.24%
1991 1,145 27.93%
1992 1,205 5.49%
1993 1,256 7.76%
1994 1,228 -0.31%
1995 1,401 34.85%
1996 1,653 20.58%
1997 2,044 30.96%
1998 2,408 26.47%
1999 2,829 19.00%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 19.00%
5 Year 26.23%
10 Year 15.98%
Since Inception 14.57%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 13.00%
5 Year 25.91%
10 Year 15.98%
Since Inception 14.57%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE
<S> <C>
Calendar Monthly
Year Payment
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987* 978
1988 890
1989 1,049
1990 1,035
1991 1,145
1992 1,205
1993 1,256
1994 1,228
1995 1,401
1996 1,653
1997 2,044
1998 2,408
1999 2,829
</TABLE>
* Fund inception was 5/87. Therefore, the Average Monthly Payment represents
the average monthly payment from May 1987 to December 1987. The Annual Sub-
Account Return is based on the period from May 1987 to December 1987.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
contingent deferred sales charge where the latter do not.
<PAGE>
40 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- -----------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
- ------------------------ ----------- ------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995* 1,037 11.45%
1996 1,099 10.41%
1997 1,143 4.20%
1998 1,180 11.94%
1999 1,251 21.63%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 21.63%
5 Year --
10 Year --
Since Inception 12.86%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 15.63%
5 Year --
10 Year --
Since Inception 12.86%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE
<S> <C>
Calendar Monthly
Year Payment
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995* 1,037
1996 1,099
1997 1,143
1998 1,180
1999 1,251
</TABLE>
* Fund inception was 3/95. Therefore, the Average Monthly Payment represents
the average monthly payment from March 1995 to December 1995. The Annual Sub-
Account Return is based on the period from March 1995 to December 1995.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
contingent deferred sales charge where the latter do not.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 41
- --------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- -----------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
- ------------------------ ----------- ------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990* 900 -12.18%
1991 890 11.60%
1992 869 -5.62%
1993 911 32.07%
1994 999 -3.15%
1995 967 12.51%
1996 1,056 11.53%
1997 1,090 -0.91%
1998 1,086 11.72%
1999 1,195 38.12%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 38.12%
5 Year 13.92%
10 Year --
Since Inception 8.99%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 32.12%
5 Year 13.44%
10 Year --
Since Inception 8.99%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE
<S> <C>
Calendar Monthly
Year Payment
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990* 900
1991 890
1992 869
1993 911
1994 999
1995 967
1996 1,056
1997 1,090
1998 1,086
1999 1,195
</TABLE>
* Fund inception was 7/90. Therefore, the Average Monthly Payment represents
the average monthly payment from July 1990 to December 1990. The Annual Sub-
Account Return is based on the period from July 1990 to December 1990.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
contingent deferred sales charge where the latter do not.
<PAGE>
42 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MID-CAP FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- -----------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
- ------------------------- ------------ ----------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997* 1,026 9.68%
1998 1,143 25.00%
1999 1,464 49.92%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 49.92%
5 Year --
10 Year --
Since Inception 34.65%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 43.92%
5 Year --
10 Year --
Since Inception 34.65%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE
<S> <C>
Calendar Monthly
Year Payment
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997* 1,026
1998 1,143
1999 1,464
</TABLE>
* Fund inception was 7/97. Therefore, the Average Monthly Payment represents
the average monthly payment from July 1997 to December 1997. The Annual Sub-
Account Return is based on the period from July 1997 to December 1997.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
contingent deferred sales charge where the latter do not.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 43
- --------------------------------------------------------------------------------
MONEY MARKET FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- -----------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
- ------------------------ ----------- ------------------
<S> <C> <C>
1977
1978
1979
1980* 1,009 5.09%
1981 1,074 14.29%
1982 1,162 12.39%
1983 1,212 8.01%
1984 1,254 9.35%
1985 1,296 7.19%
1986 1,313 5.45%
1987 1,311 5.17%
1988 1,319 6.06%
1989 1,347 7.77%
1990 1,375 6.76%
1991 1,386 4.72%
1992 1,364 2.35%
1993 1,324 1.66%
1994 1,286 2.67%
1995 1,272 4.45%
1996 1,261 3.86%
1997 1,248 4.02%
1998 1,237 3.96%
1999 1,221 3.59%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 3.59%
5 Year 3.98%
10 Year 3.80%
Since Inception 6.05%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- -----------------------------------------------------
<S> <C>
1 Year -2.41%
5 Year 3.28%
10 Year 3,80%
Since Inception 6.05%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE
<S> <C>
Calendar Monthly
Year Payment
1977
1978
1979
1980* 1,009
1981 1,074
1982 1,162
1983 1,212
1984 1,254
1985 1,296
1986 1,313
1987 1,311
1988 1,319
1989 1,347
1990 1,375
1991 1,386
1992 1,364
1993 1,324
1994 1,286
1995 1,272
1996 1,261
1997 1,248
1998 1,237
1999 1,221
</TABLE>
* Fund inception was 6/80. Therefore, the Average Monthly Payment represents
the average monthly payment from June 1980 to December 1980. The Annual Sub-
Account Return is based on the period from June 1980 to December 1980.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
contingent deferred sales charge where the latter do not.
<PAGE>
44 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MORTGAGE SECURITIES FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- -----------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
- ------------------------ ----------- ------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984* 1,000
1985 1,064 19.13%
1986 1,162 9.75%
1987 1,151 1.36%
1988 1,170 7.03%
1989 1,205 11.74%
1990 1,239 8.35%
1991 1,324 13.31%
1992 1,365 3.35%
1993 1,372 4.99%
1994 1,297 -2.83%
1995 1,336 14.73%
1996 1,348 3.77%
1997 1,372 7.66%
1998 1,400 5.39%
1999 1,365 0.26%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ----------------------------------------------
<S> <C>
1 Year 0.26%
5 Year 6.25%
10 Year 5.77%
Since Inception 7.05%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- -----------------------------------------------------
<S> <C>
1 Year -5.74%
5 Year 5.62%
10 Year 5.77%
Since Inception 7.05%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE
<S> <C>
Calendar Monthly
Year Payment
1977
1978
1979
1980
1981
1982
1983
1984* 1,000
1985 1,064
1986 1,162
1987 1,151
1988 1,170
1989 1,205
1990 1,239
1991 1,324
1992 1,365
1993 1,372
1994 1,297
1995 1,336
1996 1,348
1997 1,372
1998 1,400
1999 1,365
</TABLE>
* Fund inception was 12/84. Therefore, the Average Monthly Payment represents
the monthly payment for December 1984.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
contingent deferred sales charge where the latter do not.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 45
- --------------------------------------------------------------------------------
SMALL COMPANY FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- -------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
- ------------------------- ------------ ------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996* 1,025 4.26%
1997 1,092 16.91%
1998 1,129 10.23%
1999 1,390 63.78%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 63.78%
5 Year --
10 Year --
Since Inception 26.99%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 57.78%
5 Year --
10 Year --
Since Inception 26.99%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE
<S> <C>
Calendar Monthly
Year Payment
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996* 1,025
1997 1,092
1998 1,129
1999 1,390
</TABLE>
* Fund inception was 8/96. Therefore, the Average Monthly Payment represents
the average monthly payment from August 1996 to December 1996. The Annual
Sub-Account Return is based on the period from August 1996 to December 1996.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
contingent deferred sales charge where the latter do not.
<PAGE>
46 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
STOCK FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- -------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
- ------------------------- ------------ ------------------
<S> <C> <C>
1977* 999 1.72%
1978 992 3.55%
1979 1,044 21.10%
1980 1,228 29.61%
1981 1,349 -0.64%
1982 1,311 19.81%
1983 1,652 12.50%
1984 1,500 -0.70%
1985 1,718 29.85%
1986 2,052 10.93%
1987 2,305 4.09%
1988 2,172 17.51%
1989 2,536 24.49%
1990 2,450 -5.07%
1991 2,701 23.07%
1992 2,758 8.68%
1993 2,982 12.92%
1994 2,980 -3.11%
1995 3,306 32.43%
1996 3,937 22.83%
1997 4,893 29.75%
1998 5,892 31.82%
1999 6,930 18.30%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 18.30%
5 Year 26.90%
10 Year 16.42%
Since Inception 14.84%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- ---------------------------------------------
<S> <C>
1 Year 12.30%
5 Year 26.59%
10 Year 16.42%
Since Inception 14.84%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE
<S> <C>
Calendar Monthly
Year Payment
1977* 999
1978 992
1979 1,044
1980 1,228
1981 1,349
1982 1,311
1983 1,652
1984 1,500
1985 1,718
1986 2,052
1987 2,305
1988 2,172
1989 2,536
1990 2,450
1991 2,701
1992 2,758
1993 2,982
1994 2,980
1995 3,306
1996 3,937
1997 4,893
1998 5,892
1999 6,930
</TABLE>
* Fund inception was 8/77. Therefore, the Average Monthly Payment represents
the average monthly payment from August 1977 to December 1977. The Annual
Sub-Account Return is based on the period from August 1977 to December 1977.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
contingent deferred sales charge where the latter do not.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 47
- --------------------------------------------------------------------------------
BOND FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- -----------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
- ------------------------ ----------- ------------------
<S> <C> <C>
1977* 998 1.00%
1978 979 1.34%
1979 959 1.63%
1980 929 4.91%
1981 932 9.12%
1982 1,045 26.16%
1983 1,132 1.48%
1984 1,121 11.78%
1985 1,262 19.11%
1986 1,396 10.78%
1987 1,360 -1.26%
1988 1,364 6.25%
1989 1,397 10.73%
1990 1,416 7.06%
1991 1,506 15.02%
1992 1,579 4.23%
1993 1,645 8.86%
1994 1,541 -5.14%
1995 1,585 17.01%
1996 1,596 2.24%
1997 1,637 9.97%
1998 1,708 6.80%
1999 1,634 -3.23%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- -----------------------------------------------------
<S> <C>
1 Year -3.23%
5 Year 6.34%
10 Year 6.07%
Since Inception 7.18%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1999**
- -----------------------------------------------------
<S> <C>
1 Year -9.23%
5 Year 5.70%
10 Year 6.07%
Since Inception 7.18%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE
<S> <C>
Calendar Monthly
Year Payment
1977* 998
1978 979
1979 959
1980 929
1981 932
1982 1,045
1983 1,132
1984 1,121
1985 1,262
1986 1,396
1987 1,360
1988 1,364
1989 1,397
1990 1,416
1991 1,506
1992 1,579
1993 1,645
1994 1,541
1995 1,585
1996 1,596
1997 1,637
1998 1,708
1999 1,634
</TABLE>
* Fund inception was 8/77. Therefore, the Average Monthly Payment represents
the average monthly payment from August 1977 to December 1977. The Annual
Sub-Account Return is based on the period from August 1977 to December 1977.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
contingent deferred sales charge where the latter do not.
<PAGE>
To obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life and Annuity Insurance Company
Attn: Investment Products Annuity Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Please send a Statement of Additional Information for the Director Immediate
Variable Annuity to me at the following address:
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City/State Zip Code
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SEPARATE ACCOUNT ONE
DIRECTOR IMMEDIATE VARIABLE ANNUITY
This Statement of Additional Information is not a prospectus. The information
contained herein should be read in conjunction with the prospectus.
To obtain a prospectus, send a written request to Hartford Life Insurance
Company, Attn: Investment Product Services, P.O. Box 5085, Hartford,
Connecticut 06102-5085.
Date of Prospectus: May 1, 2000
Date of Statement of Additional Information: May 1, 2000
333-19607
Director Immediate Variable Annuity (IHLA)
<PAGE>
TABLE OF CONTENTS
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY............... 2
SAFEKEEPING OF ASSETS.................................................... 2
INDEPENDENT PUBLIC ACCOUNTANTS........................................... 2
DISTRIBUTION OF CONTRACTS................................................ 3
CALCULATION OF YIELD AND RETURN.......................................... 3
PERFORMANCE COMPARISONS.................................................. 8
VARIABLE ANNUITY PAYMENTS................................................ 9
OTHER INFORMATION........................................................ 11
FINANCIAL STATEMENTS..................................................... SA-1
<PAGE>
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut. Our offices are
located in Simsbury, Connecticut; however, our mailing address is P.O. Box 2999,
Hartford, CT 06104-2999. We are ultimately controlled by The Hartford Financial
Services Group, Inc., one of the largest financial service providers in the
United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 1/1/99 A+ Financial performance
- ----------------------------------------------------------------------------------
Standard & Poor's 8/1/99 AA Insurer financial strength
- ----------------------------------------------------------------------------------
Duff & Phelps 7/1/99 AA+ Claims paying ability
- ----------------------------------------------------------------------------------
</TABLE>
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. The assets are
kept physically segregated and are held separate and apart from Hartford's
general corporate assets. Records are maintained of all purchases and
redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally
2
<PAGE>
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.
HSD is an affiliate of Hartford. Both HSD and Hartford are ultimately controlled
by The Hartford Financial Services Group, Inc. The principal business address of
HSD is the same as that of Hartford.
The securities will be sold by salesperson of HSD who represent Hartford as
insurance and variable annuity agents and who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as a Broker-Dealer and is a member of the
National Association of Securities Dealers, Inc.("NASD")
Hartford currently pays HSD underwriting commissions for its role as principle
underwriter of all variable annuities associated with this Separate Account. For
the past three years, the aggregate dollar amount of underwriting commissions
paid to HSD in its role as principal underwriter has been: 1999:
$226,178,603.20; 1998: $107,925,386; and 1997: $134,304,585. HSD has retained
none of these commissions.
CALCULATION OF YIELD AND RETURN
YIELD OF A MONEY MARKET SUB-ACCOUNT. As summarized in the Prospectus under the
heading "Performance Related Information," the yield of a Money Market
Sub-Account for a seven-day period (the "base period") will be computed by
determining the "net change in value" (calculated as set forth below) of a
hypothetical account having a balance of one accumulation unit of the
Sub-Account at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from Contract Owner accounts, and dividing the difference
by the value of the account at the beginning of the base period to obtain the
base period return, and then multiplying the base period return by 365/7 with
the resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include net investment income of
the account (accrued daily dividends as declared by the underlying funds, less
daily expense charges of the account) for the period, but will not include
realized gains or losses or unrealized appreciation or depreciation on the
underlying fund shares.
3
<PAGE>
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from the
result, according to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) 0] - 1
A MONEY MARKET SUB-ACCOUNT'S YIELD AND EFFECTIVE YIELD WILL VARY IN RESPONSE TO
FLUCTUATIONS IN INTEREST RATES AND IN THE EXPENSES OF THE SUB-ACCOUNT. THE
CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES ON THE SEPARATE
ACCOUNT LEVEL.
YIELD AND EFFECTIVE YIELD FOR THE SEVEN-DAY PERIOD ENDING DECEMBER 31, 1999
- -------------------------------------------------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
- -------------------------------------------------------------------------------
Hartford Money Market HLS Fund 4.09% 4.18%
- -------------------------------------------------------------------------------
YIELD OF SUB-ACCOUNTS. As summarized in the Prospectus under the heading
"Performance Related Information," yields of Sub-Accounts will be computed by
annualizing a recent month's net investment income, divided by a Fund share's
net asset value on the last trading day of that month. 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
Sub-Accounts.
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL.
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges assessed
against a Contract Owner's account over the base period. Yield quotations based
on a 30-day period were computed by dividing the dividends and interest earned
during the period by the maximum offering price per unit on the last day of the
period, according to the following formula:
Example:
6
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1) - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the
period that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the period.
4
<PAGE>
YIELD QUOTATION BASED ON A 30-DAY PERIOD ENDED DECEMBER 31, 1999
- -------------------------------------------------------------------------------
SUB-ACCOUNT YIELD
- -------------------------------------------------------------------------------
Hartford Bond HLS Fund 5.69%
- -------------------------------------------------------------------------------
Hartford High Yield HLS Fund 8.30%
- -------------------------------------------------------------------------------
Hartford Mortgage Securities HLS Fund 5.51%
- -------------------------------------------------------------------------------
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the heading
"Performance Related Information," total return is a measure of the change in
value of an investment in a Sub-Account over the period covered. The formula for
total return used herein includes three steps: (1) calculating the value of the
hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of units owned at the end of the period by the unit
value per unit on the last trading day of the period; (2) assuming redemption at
the end of the period and deducting any applicable contingent deferred sales
charge (the contingent deferred sales charge deducted under the "Since
Inception" column below depends on the fund inception date; 6% is deducted for 1
Year, 4% for 5 Year, and 0% for 10 Year periods) and (3) dividing this account
value for the hypothetical investor by the initial $1,000 investment and
annualizing the result for periods of less than one year. Standardized total
return will be calculated since the inception of the Separate Account for one
year, five years and ten years or some other relevant periods if a Sub-Account
has not been in existence for at least ten years.
The following are the standardized average annual total return quotations for
the Sub-Accounts. No information is shown for Hartford Global Health HLS Fund
and Hartford Global Technology HLS Fund Sub-Accounts because, as of December 31,
1999 the Sub-Accounts had not yet commenced operations.
5
<PAGE>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SEPARATE SINCE INCEPTION OF
SUB-ACCOUNT ACCOUNT 1 YEAR 5 YEAR 10 YEAR SEPARATE ACCOUNT
INCEPTION DATE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Hartford Advisers HLS Fund 5/20/91 2.21% 18.86% N/A 13.43%
- -------------------------------------------------------------------------------------------------------------------
Hartford Bond HLS Fund 5/20/91 -10.23% 5.70% N/A 5.83%
- -------------------------------------------------------------------------------------------------------------------
Hartford Capital Appreciation 5/20/91 28.75% 23.11% N/A 20.16%
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford Dividend and Growth 3/9/94 -2.99% 20.17% N/A 17.37%
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford Global Leaders HLS Fund 10/1/98 41.51% N/A N/A 66.63%
- -------------------------------------------------------------------------------------------------------------------
Hartford Growth and Income HLS 5/29/98 13.32% N/A N/A 21.41%
Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford High Yield HLS Fund 10/1/98 -3.60% N/A N/A 0.81%
- -------------------------------------------------------------------------------------------------------------------
Hartford Index HLS Fund 5/20/91 12.00% 25.91% N/A 17.65%
- -------------------------------------------------------------------------------------------------------------------
Hartford International Advisers 3/1/95 14.63% N/A N/A 12.34%
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford International 5/20/91 31.12% 13.44% N/A 10.89%
Opportunities HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford MidCap HLS Fund 7/30/97 42.92% N/A N/A 33.01%
- -------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS Fund 5/20/91 -3.41% 3.28% N/A 3.37%
- -------------------------------------------------------------------------------------------------------------------
Hartford Mortgage Securities 5/20/91 -6.74% 5.62% N/A 5.32%
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford Small Company HLS Fund 8/9/96 56.78% N/A N/A 26.16%
- -------------------------------------------------------------------------------------------------------------------
Hartford Stock HLS Fund 5/20/91 11.30% 26.59% N/A 17.97%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated since the
inception of the underlying fund for one year, five years, and ten years or
other periods. Non-standardized total return is measured in the same manner as
the standardized total return described above, except that the contingent
deferred sales charge is not
6
<PAGE>
deducted. Therefore, non-standardized total return for a Sub-Account is higher
than standardized total return for a Sub-Account.
The following are the non-standardized annualized total return quotations for
the Sub-Accounts. No information is shown for Hartford Global Health HLS Fund
and Hartford Global Technology HLS Fund Sub-Accounts because, as of
December 31, 1999 the Sub-Accounts had not yet commenced operations.
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE
INCEPTION DATE OF THE SEPARATE ACCOUNT FOR YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FUND SINCE INCEPTION OF
SUB-ACCOUNT INCEPTION DATE 1 YEAR 5 YEAR 10 YEAR FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Hartford Advisers HLS Fund 3/31/83 9.21% 19.26% 12.57% N/A
- -------------------------------------------------------------------------------------------------------------------
Hartford Bond HLS Fund 8/31/77 -3.23% 6.34% 6.07% N/A
- -------------------------------------------------------------------------------------------------------------------
Hartford Capital Appreciation 4/2/84 35.75% 23.46% 18.28% N/A
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford Dividend and Growth 3/8/94 4.01% 20.55% N/A 17.61%
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford Global Leaders HLS Fund 10/1/98 48.51% N/A N/A 70.84%
- -------------------------------------------------------------------------------------------------------------------
Hartford Growth and Income HLS 5/29/98 20.32% N/A N/A 24.75%
Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford High Yield HLS Fund 10/1/98 3.40% N/A N/A 5.57%
- -------------------------------------------------------------------------------------------------------------------
Hartford Index HLS Fund 5/1/87 19.00% 26.23% 15.98% N/A
- -------------------------------------------------------------------------------------------------------------------
Hartford International Advisers 3/1/95 21.63% N/A N/A 12.86%
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford International 7/2/90 38.12% 13.92% N/A 8.99%
Opportunities HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford MidCap HLS Fund 7/30/97 49.92% N/A N/A 34.65%
- -------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS Fund 6/30/80 3.59% 3.98% 3.80% N/A
- -------------------------------------------------------------------------------------------------------------------
Hartford Mortgage Securities 1/1/85 0.26% 6.25% 5.77% N/A
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford Small Company HLS Fund 8/9/96 63.78% N/A N/A 26.99%
- -------------------------------------------------------------------------------------------------------------------
Hartford Stock HLS Fund 8/31/77 18.30% 26.90% 16.42% N/A
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
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
8
<PAGE>
weighted by market capitalization, and therefore, it has a heavy representation
in countries with large stock markets, such as Japan.
The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency.
The Composite Index for Hartford Advisers Fund is comprised of the S&P 500
(55%), the Lehman Government/Corporate Bond Index (35%), both mentioned above,
and 90 Day U.S. Treasury Bills (10%).
VARIABLE ANNUITY PAYMENTS
ANNUITY UNIT VALUE
The value of an Annuity Unit is calculated at the same time that the value of an
Accumulation Unit is calculated and is based on the same values for Fund shares
and other assets and liabilities. (See "Annuity Payouts" in the Prospectus.) The
Annuity Unit Value for each Sub-Account's first Valuation Period was set at $10.
The Annuity Unit Value of each Sub-Account for any subsequent Valuation Period
is equal to (a) multiplied by (b) divided by (c) where:
(a) is the Net Investment Factor for the Valuation Period for which the
Annuity Unit Value is being calculated;
(b) is the Annuity Unit Value for the preceding Valuation Period; and
(c) is a daily Assumed Investment Return factor (for the 3%, 5% or 6%
Assumed Investment Return) adjusted for the number of days in the
Valuation Period.
The Assumed Investment Return factor is equal to one plus the applicable
percentage. Therefore, for 3%, it is 1.03, for 4% it is 1.04 and for 6% it is
1.06. The annual factors
9
<PAGE>
can be translated into daily factor of 1.000080986, 1.00010746, and 1.000159654,
respectively.
If a Contract Owner selects a 5% Assumed Investment Return rate and if the net
investment return of the Sub-Account for an Annuity Payment period is equal to
the pro-rated portion of the 5% Assumed Investment Return, the Variable Annuity
Payment attributable to that Sub-Account for that period will equal the Payment
for the prior period. To the extent that such net investment return exceeds an
annualized rate of return of 5% for a Payment period, the Payment for that
period will be greater than the Payment for the prior period and to the extent
that such return for a period falls short of an annualized rate of 5%, the
Payment for that period will be less than the Payment for the prior period.
The following illustrations show, by use of hypothetical examples, the method of
determining the Annuity Unit Value and the amount of several Variable Annuity
Payments based on one Sub-Account.
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
1. Annuity Unit Value for immediately preceding
Valuation Period 10.00000000
2. Net Investment Factor 1.00036164
3. Daily factor to compensate for Assumed Investment Return of 5% 1.00013368
4. Adjusted Net Investment Factor (2)/(3) 1.00028063
5. Annuity Unit Value for current Valuation Period (4)x(1) 10.00280630
ILLUSTRATION OF VARIABLE ANNUITY PAYMENTS
(ASSUMING NO PREMIUM TAX IS APPLICABLE)
1. Number of Accumulation Units at Annuity Date 1,000.00
2. Accumulation Unit Value 12.55548000
3. Adjusted Contract Value (1)x(2) $12,555.48
4. First monthly Annuity Payment per $1,000 of adjusted Contract Value $ 9.63
5. First monthly Annuity Payment (3)x(4)/1,000 $ 120.91
6. Annuity Unit Value 10.00280630
7. Number of Annuity Units (5)/(6) 12.08760785
8. Assume Annuity Unit value for second month equal to 10.04000000
9. Second Monthly Annuity Payment (7)X(8) $ 121.36
10. Assume Annuity Unit value for third month equal to 10.05000000
11. Third Monthly Annuity Payment (7)X(10) $ 121.48
10
<PAGE>
OTHER INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended, with respect to
the Contracts discussed in this Statement of Additional Information. Not all the
information set forth in the registration statement, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Contracts and other legal instruments are summaries. For a
complete statement of the terms of these documents, reference should be made to
the instruments filed with the SEC.
11
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT ONE AND TO THE OWNERS OF UNITS OF INTEREST THEREIN:
We have audited the accompanying statements of assets and liabilities of
Hartford Life and Annuity Insurance Company Separate Account One (Bond Fund,
Stock Fund, Money Market Fund, Advisers Fund, Capital Appreciation Fund,
Mortgage Securities Fund, Index Fund, International Opportunities Fund, Dividend
and Growth Fund, International Advisers Fund, Small Company Fund, MidCap Fund,
Global Leaders Fund, High Yield Fund, Growth and Income Fund, Mentor VIP Capital
Growth Fund, Mentor VIP Perpetual International Fund, Mentor VIP Growth Fund,
Mercury VI US Large Cap Fund and Merrill Lynch Global Growth Focus Fund)
(collectively, the Account) as of December 31, 1999, and the related statements
of operations and the statements of changes in net assets for the periods
presented. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1999, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 17, 2000 ARTHUR ANDERSEN LLP
_____________________________________ SA-1 _____________________________________
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund, Inc. -
Class IA
Shares 449,867,813
Cost $471,536,987
Market Value...................... $447,106,524 --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 659,095,163
Cost $3,107,192,905
Market Value...................... -- $4,710,808,860
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 548,422,425
Cost $548,422,425
Market Value...................... -- --
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 2,366,315,491
Cost $5,444,912,732
Market Value...................... -- --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 672,032,314
Cost $2,550,014,270
Market Value...................... -- --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 117,880,676
Cost $127,698,156
Market Value...................... -- --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 266,744,217
Cost $736,583,539
Market Value...................... -- --
Hartford International Opportunities
HLS Fund, Inc. - Class IA
Shares 480,127,442
Cost $614,510,013
Market Value...................... -- --
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 923,635,920
Cost $1,584,821,109
Market Value...................... -- --
Hartford International Advisers HLS
Fund, Inc. - Class IA
Shares 196,357,266
Cost $227,828,642
Market Value...................... -- --
Due from Hartford Life and Annuity
Insurance Company.................... -- 1,569,635
Receivable from fund shares sold...... 821,248 --
------------ --------------
Total Assets.......................... 447,927,772 4,712,378,495
------------ --------------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... 821,442 --
Payable for fund shares purchased..... -- 1,564,212
------------ --------------
Total Liabilities..................... 821,442 1,564,212
------------ --------------
Net Assets (variable annuity contract
liabilities)......................... $447,106,330 $4,710,814,283
============ ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-2
-------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ----------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund, Inc. -
Class IA
Shares 449,867,813
Cost $471,536,987
Market Value...................... -- -- -- -- --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 659,095,163
Cost $3,107,192,905
Market Value...................... -- -- -- -- --
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 548,422,425
Cost $548,422,425
Market Value...................... $548,422,425 -- -- -- --
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 2,366,315,491
Cost $5,444,912,732
Market Value...................... -- $7,015,590,643 -- -- --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 672,032,314
Cost $2,550,014,270
Market Value...................... -- -- $4,096,297,700 -- --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 117,880,676
Cost $127,698,156
Market Value...................... -- -- -- $122,536,020 --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 266,744,217
Cost $736,583,539
Market Value...................... -- -- -- -- $1,117,332,843
Hartford International Opportunities
HLS Fund, Inc. - Class IA
Shares 480,127,442
Cost $614,510,013
Market Value...................... -- -- -- -- --
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 923,635,920
Cost $1,584,821,109
Market Value...................... -- -- -- -- --
Hartford International Advisers HLS
Fund, Inc. - Class IA
Shares 196,357,266
Cost $227,828,642
Market Value...................... -- -- -- -- --
Due from Hartford Life and Annuity
Insurance Company.................... 4,024,594 -- -- -- --
Receivable from fund shares sold...... -- 954,565 2,647,605 70,893 110,670
------------ -------------- -------------- ------------ --------------
Total Assets.......................... 552,447,019 7,016,545,208 4,098,945,305 122,606,913 1,117,443,513
------------ -------------- -------------- ------------ --------------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... -- 950,615 2,404,382 72,076 105,519
Payable for fund shares purchased..... 4,001,041 -- -- -- --
------------ -------------- -------------- ------------ --------------
Total Liabilities..................... 4,001,041 950,615 2,404,382 72,076 105,519
------------ -------------- -------------- ------------ --------------
Net Assets (variable annuity contract
liabilities)......................... $548,445,978 $7,015,594,593 $4,096,540,923 $122,534,837 $1,117,337,994
============ ============== ============== ============ ==============
<CAPTION>
INTERNATIONAL DIVIDEND AND INTERNATIONAL
OPPORTUNITIES FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ -------------- -------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund, Inc. -
Class IA
Shares 449,867,813
Cost $471,536,987
Market Value...................... -- -- --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 659,095,163
Cost $3,107,192,905
Market Value...................... -- -- --
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 548,422,425
Cost $548,422,425
Market Value...................... -- -- --
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 2,366,315,491
Cost $5,444,912,732
Market Value...................... -- -- --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 672,032,314
Cost $2,550,014,270
Market Value...................... -- -- --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 117,880,676
Cost $127,698,156
Market Value...................... -- -- --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 266,744,217
Cost $736,583,539
Market Value...................... -- -- --
Hartford International Opportunities
HLS Fund, Inc. - Class IA
Shares 480,127,442
Cost $614,510,013
Market Value...................... $900,687,872 -- --
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 923,635,920
Cost $1,584,821,109
Market Value...................... -- $1,984,734,728 --
Hartford International Advisers HLS
Fund, Inc. - Class IA
Shares 196,357,266
Cost $227,828,642
Market Value...................... -- -- $274,250,426
Due from Hartford Life and Annuity
Insurance Company.................... 1,056,559 -- 1,454
Receivable from fund shares sold...... -- 765,866 --
------------ -------------- ------------
Total Assets.......................... 901,744,431 1,985,500,594 274,251,880
------------ -------------- ------------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... -- 763,409 --
Payable for fund shares purchased..... 1,313,277 -- 2,289
------------ -------------- ------------
Total Liabilities..................... 1,313,277 763,409 2,289
------------ -------------- ------------
Net Assets (variable annuity contract
liabilities)......................... $900,431,154 $1,984,737,185 $274,249,591
============ ============== ============
</TABLE>
------------------------------------------------- SA-3
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL MIDCAP
COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Small Company HLS
Fund, Inc. - Class IA
Shares 212,076,990
Cost $280,439,845
Market Value...................... $463,977,162 --
Hartford MidCap HLS Fund, Inc. -
Class IA
Shares 191,961,289
Cost $297,691,376
Market Value...................... -- $394,192,314
Hartford Global Leaders HLS Fund -
Class IA
Shares 61,681,952
Cost $94,610,676
Market Value...................... -- --
Hartford High Yield HLS Fund -
Class IA
Shares 24,345,792
Cost $25,309,628
Market Value...................... -- --
Hartford Growth and Income HLS Fund
- Class IA
Shares 90,572,348
Cost $114,627,320
Market Value...................... -- --
Mentor VIP Capital Growth
Fund, Inc.
Shares 109,628
Cost $1,371,449
Market Value...................... -- --
Mentor VIP Perpetual International
Fund, Inc.
Shares 106,262
Cost $1,460,933
Market Value...................... -- --
Mentor VIP Growth Fund, Inc.
Shares 64,247
Cost $676,124
Market Value...................... -- --
Mercury VI US Large Cap Fund -
Class A
Shares 1,173
Cost $13,731
Market Value...................... -- --
Merrill Lynch Global Growth Focus
Fund - Class A
Shares 6,455
Cost $91,458
Market Value...................... -- --
Due from Hartford Life and Annuity
Insurance Company.................... 797,344 1,361,926
------------ ------------
Total Assets.......................... 464,774,506 395,554,240
------------ ------------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... -- --
Payable for fund shares purchased..... 797,460 1,361,681
------------ ------------
Total Liabilities..................... 797,460 1,361,681
------------ ------------
Net Assets (variable annuity contract
liabilities)......................... $463,977,046 $394,192,559
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-4
-------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL HIGH GROWTH AND MENTOR VIP CAPITAL MENTOR VIP PERPETUAL
LEADERS FUND YIELD FUND INCOME FUND GROWTH FUND INTERNATIONAL FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ------------ ------------------ --------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Small Company HLS
Fund, Inc. - Class IA
Shares 212,076,990
Cost $280,439,845
Market Value...................... -- -- -- -- --
Hartford MidCap HLS Fund, Inc. -
Class IA
Shares 191,961,289
Cost $297,691,376
Market Value...................... -- -- -- -- --
Hartford Global Leaders HLS Fund -
Class IA
Shares 61,681,952
Cost $94,610,676
Market Value...................... $117,991,405 -- -- -- --
Hartford High Yield HLS Fund -
Class IA
Shares 24,345,792
Cost $25,309,628
Market Value...................... -- $24,464,405 -- -- --
Hartford Growth and Income HLS Fund
- Class IA
Shares 90,572,348
Cost $114,627,320
Market Value...................... -- -- $129,667,086 -- --
Mentor VIP Capital Growth
Fund, Inc.
Shares 109,628
Cost $1,371,449
Market Value...................... -- -- -- $1,580,833 --
Mentor VIP Perpetual International
Fund, Inc.
Shares 106,262
Cost $1,460,933
Market Value...................... -- -- -- -- $2,082,740
Mentor VIP Growth Fund, Inc.
Shares 64,247
Cost $676,124
Market Value...................... -- -- -- -- --
Mercury VI US Large Cap Fund -
Class A
Shares 1,173
Cost $13,731
Market Value...................... -- -- -- -- --
Merrill Lynch Global Growth Focus
Fund - Class A
Shares 6,455
Cost $91,458
Market Value...................... -- -- -- -- --
Due from Hartford Life and Annuity
Insurance Company.................... 429,704 74,858 432,287 -- --
------------ ----------- ------------ ---------- ----------
Total Assets.......................... 118,421,109 24,539,263 130,099,373 1,580,833 2,082,740
------------ ----------- ------------ ---------- ----------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... -- -- -- 68 104
Payable for fund shares purchased..... 429,387 74,789 431,728 -- --
------------ ----------- ------------ ---------- ----------
Total Liabilities..................... 429,387 74,789 431,728 68 104
------------ ----------- ------------ ---------- ----------
Net Assets (variable annuity contract
liabilities)......................... $117,991,722 $24,464,474 $129,667,645 $1,580,765 $2,082,636
============ =========== ============ ========== ==========
<CAPTION>
MERRILL LYNCH
MENTOR VIP MERCURY VI US GLOBAL GROWTH
GROWTH FUND LARGE CAP FUND FOCUS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- -------------- -------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Small Company HLS
Fund, Inc. - Class IA
Shares 212,076,990
Cost $280,439,845
Market Value...................... -- -- --
Hartford MidCap HLS Fund, Inc. -
Class IA
Shares 191,961,289
Cost $297,691,376
Market Value...................... -- -- --
Hartford Global Leaders HLS Fund -
Class IA
Shares 61,681,952
Cost $94,610,676
Market Value...................... -- -- --
Hartford High Yield HLS Fund -
Class IA
Shares 24,345,792
Cost $25,309,628
Market Value...................... -- -- --
Hartford Growth and Income HLS Fund
- Class IA
Shares 90,572,348
Cost $114,627,320
Market Value...................... -- -- --
Mentor VIP Capital Growth
Fund, Inc.
Shares 109,628
Cost $1,371,449
Market Value...................... -- -- --
Mentor VIP Perpetual International
Fund, Inc.
Shares 106,262
Cost $1,460,933
Market Value...................... -- -- --
Mentor VIP Growth Fund, Inc.
Shares 64,247
Cost $676,124
Market Value...................... $891,105
Mercury VI US Large Cap Fund -
Class A
Shares 1,173
Cost $13,731
Market Value...................... -- $14,105
Merrill Lynch Global Growth Focus
Fund - Class A
Shares 6,455
Cost $91,458
Market Value...................... -- -- $95,403
Due from Hartford Life and Annuity
Insurance Company.................... -- -- --
-------- ------- -------
Total Assets.......................... 891,105 14,105 95,403
-------- ------- -------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... 35 -- --
Payable for fund shares purchased..... -- -- --
-------- ------- -------
Total Liabilities..................... 35 -- --
-------- ------- -------
Net Assets (variable annuity contract
liabilities)......................... $891,070 $14,105 $95,403
======== ======= =======
</TABLE>
------------------------------------------------- SA-5
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- --------- ---------------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Bond Fund Sub-Account..................................... 26,834 $0.994578 $ 26,688
Bond Fund Sub-Account..................................... 1,184,617 2.182434 2,585,349
Bond Fund Sub-Account..................................... 465 1.007093 469
Bond Fund Sub-Account..................................... 2,499 1.007410 2,518
Bond Fund Sub-Account..................................... 11,256,103 0.994947 11,199,226
Bond Fund Sub-Account..................................... 197,574,642 2.184598 431,621,166
Stock Fund Sub-Account.................................... 210,327 1.222948 257,219
Stock Fund Sub-Account.................................... 5,858,621 7.168535 41,997,729
Stock Fund Sub-Account.................................... 74,387 1.136485 84,539
Stock Fund Sub-Account.................................... 1,647,138 1.136847 1,872,544
Stock Fund Sub-Account.................................... 53,638,914 1.223394 65,621,525
Stock Fund Sub-Account.................................... 638,407,205 7.175612 4,580,962,400
Money Market Fund Sub-Account............................. 35,300 1.049997 37,065
Money Market Fund Sub-Account............................. 917,155 1.775591 1,628,493
Money Market Fund Sub-Account............................. 0 1.009271 0
Money Market Fund Sub-Account............................. 522 1.009591 527
Money Market Fund Sub-Account............................. 60,490,202 1.050377 63,537,517
Money Market Fund Sub-Account............................. 270,072,357 1.777341 480,010,674
Advisers Fund Sub-Account................................. 342,934 1.127468 386,647
Advisers Fund Sub-Account................................. 7,318,141 4.798347 35,114,981
Advisers Fund Sub-Account................................. 57,191 1.083555 61,970
Advisers Fund Sub-Account................................. 1,601,663 1.083900 1,736,043
Advisers Fund Sub-Account................................. 99,547,381 1.127880 112,277,500
Advisers Fund Sub-Account................................. 1,425,393,462 4.803097 6,846,303,062
Capital Appreciation Fund Sub-Account..................... 297,634 1.334003 397,044
Capital Appreciation Fund Sub-Account..................... 2,064,035 7.494011 15,467,902
Capital Appreciation Fund Sub-Account..................... 62,274 1.235938 76,966
Capital Appreciation Fund Sub-Account..................... 775,935 1.236331 959,313
Capital Appreciation Fund Sub-Account..................... 27,329,043 1.334491 36,470,362
Capital Appreciation Fund Sub-Account..................... 537,835,362 7.501418 4,034,527,863
Mortgage Securities Fund Sub-Account...................... 0 1.022060 0
Mortgage Securities Fund Sub-Account...................... 269,500 2.214471 596,801
Mortgage Securities Fund Sub-Account...................... 0 1.006743 0
Mortgage Securities Fund Sub-Account...................... 2,763 1.007064 2,783
Mortgage Securities Fund Sub-Account...................... 5,585,485 1.022434 5,710,790
Mortgage Securities Fund Sub-Account...................... 52,197,499 2.216665 115,704,370
Index Fund Sub-Account.................................... 83,406 1.239923 103,417
Index Fund Sub-Account.................................... 1,310,125 5.602011 7,339,336
Index Fund Sub-Account.................................... 1,381 1.144312 1,580
Index Fund Sub-Account.................................... 334,670 1.144675 383,089
Index Fund Sub-Account.................................... 27,071,357 1.240377 33,578,689
Index Fund Sub-Account.................................... 191,224,666 5.607574 1,072,306,463
International Opportunities Fund Sub-Account.............. 58,213 1.273000 74,106
International Opportunities Fund Sub-Account.............. 970,042 2.264582 2,196,739
International Opportunities Fund Sub-Account.............. 500 1.199943 600
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-6
-------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- --------- ---------------
<S> <C> <C> <C>
GROUP SUB-ACCOUNTS -- (CONTINUED)
International Opportunities Fund Sub-Account.............. 88,714 $1.200325 $ 106,485
International Opportunities Fund Sub-Account.............. 5,998,131 1.273461 7,638,386
International Opportunities Fund Sub-Account.............. 391,870,958 2.266827 888,303,667
Dividend and Growth Fund Sub-Account...................... 102,974 1.045671 107,677
Dividend and Growth Fund Sub-Account...................... 2,452,827 2.567396 6,297,378
Dividend and Growth Fund Sub-Account...................... 3,271 1.064013 3,480
Dividend and Growth Fund Sub-Account...................... 227,845 1.064354 242,507
Dividend and Growth Fund Sub-Account...................... 19,290,169 1.046052 20,178,520
Dividend and Growth Fund Sub-Account...................... 760,046,046 2.569946 1,953,277,297
International Advisers Fund Sub-Account................... 15,134 1.178048 17,829
International Advisers Fund Sub-Account................... 953,594 1.793926 1,710,677
International Advisers Fund Sub-Account................... 1,202 1.121881 1,348
International Advisers Fund Sub-Account................... 22,473 1.122237 25,220
International Advisers Fund Sub-Account................... 3,025,244 1.178481 3,565,193
International Advisers Fund Sub-Account................... 149,494,531 1.795704 268,447,928
Small Company Fund Sub-Account............................ 42,607 1.592576 67,856
Small Company Fund Sub-Account............................ 1,735,342 2.248401 3,901,745
Small Company Fund Sub-Account............................ 258 1.364431 352
Small Company Fund Sub-Account............................ 150,069 1.364863 204,823
Small Company Fund Sub-Account............................ 198,856,386 2.250630 447,552,149
Small Company Fund Sub-Account............................ 6,084,767 1.593152 9,693,959
MidCap Fund Sub-Account................................... 69,564 1.520083 105,743
MidCap Fund Sub-Account................................... 3,184,542 2.053534 6,539,565
MidCap Fund Sub-Account................................... 3,815 1.292197 4,930
MidCap Fund Sub-Account................................... 249,883 1.292607 323,000
MidCap Fund Sub-Account................................... 8,978,236 1.520630 13,652,575
MidCap Fund Sub-Account................................... 181,141,994 2.055574 372,350,771
Global Leaders Fund Sub-Account........................... 3,764,460 1.946293 7,326,743
Global Leaders Fund Sub-Account........................... 60,499 1.945587 117,706
Global Leaders Fund Sub-Account........................... 1,465,474 1.950512 2,858,424
Global Leaders Fund Sub-Account........................... 3,636 1.293486 4,703
Global Leaders Fund Sub-Account........................... 300,137 1.293896 388,346
Global Leaders Fund Sub-Account........................... 54,890,185 1.952453 107,170,506
High Yield Fund Sub-Account............................... 2,071,284 1.066776 2,209,596
High Yield Fund Sub-Account............................... 1,731 1.066388 1,845
High Yield Fund Sub-Account............................... 481,332 1.069043 514,565
High Yield Fund Sub-Account............................... 0 1.019709 0
High Yield Fund Sub-Account............................... 6,836 1.020038 6,973
High Yield Fund Sub-Account............................... 20,234,594 1.070110 21,653,242
Growth and Income Fund Sub-Account........................ 129,575 1.308008 169,485
Growth and Income Fund Sub-Account........................ 3,576,088 1.420460 5,079,689
Growth and Income Fund Sub-Account........................ 37,993 1.158303 44,008
Growth and Income Fund Sub-Account........................ 246,069 1.158668 285,112
Growth and Income Fund Sub-Account........................ 8,930,138 1.308485 11,684,951
Growth and Income Fund Sub-Account........................ 78,909,139 1.421882 112,199,485
Mentor VIP Capital Growth Fund Sub-Account................ 8,587 1.129778 9,701
Mentor VIP Capital Growth Fund Sub-Account................ 1,389,225 1.130892 1,571,064
</TABLE>
------------------------------------------------- SA-7
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- --------- ---------------
<S> <C> <C> <C>
Mentor VIP Perpetual International Fund Sub-Account......... 8,183 $1.531949 $ 12,536
Mentor VIP Perpetual International Fund Sub-Account......... 1,349,950 1.533464 2,070,100
Mentor VIP Growth Fund Sub-Account.......................... 12,522 1.085030 13,586
Mentor VIP Growth Fund Sub-Account.......................... 805,875 1.086100 875,260
Mercury VI US Large Cap Fund Sub-Account.................... 2,255 1.104998 2,491
Mercury VI US Large Cap Fund Sub-Account.................... 10,508 1.105269 11,614
Merrill Lynch Global Growth Focus Fund Sub-Account.......... 46,526 1.248875 58,105
Merrill Lynch Global Growth Focus Fund Sub-Account.......... 29,858 1.249180 37,298
---------------
SUB-TOTAL................................................. 22,283,922,258
---------------
ANNUITY CONTRACTS IN THE ANNUITY PERIOD:
GROUP SUB-ACCOUNTS:
Bond Fund Sub-Account..................................... 764,861 2.184598 1,670,914
Stock Fund Sub-Account.................................... 2,789,773 7.175612 20,018,327
Money Market Fund Sub-Account............................. 1,818,279 1.777341 3,231,702
Advisers Fund Sub-Account................................. 4,104,516 4.803097 19,714,390
Capital Appreciation Fund Sub-Account..................... 1,151,979 7.501418 8,641,473
Mortgage Securities Fund Sub-Account...................... 234,629 2.216665 520,093
Index Fund Sub-Account.................................... 646,522 5.607574 3,625,420
International Opportunities Fund Sub-Account.............. 931,333 2.266827 2,111,171
Dividend and Growth Fund Sub-Account...................... 1,801,721 2.569946 4,630,326
International Advisers Fund Sub-Account................... 268,082 1.795704 481,396
Small Company Fund Sub-Account............................ 1,135,754 2.250630 2,556,162
MidCap Fund Sub-Account................................... 591,550 2.055574 1,215,975
Global Leaders Fund Sub-Account........................... 64,172 1.952453 125,294
High Yield Fund Sub-Account............................... 73,126 1.070110 78,253
Growth & Income Fund Sub-Account.......................... 144,116 1.421882 204,915
Mentor VIP Growth Fund Sub-Account........................ 2,048 1.086100 2,224
---------------
SUB-TOTAL................................................. 68,828,035
---------------
GRAND TOTAL................................................. $22,352,750,293
===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-8
-------------------------------------------------
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 24,593,727 $ 32,121,491
EXPENSES:
Mortality and expense undertakings.... (5,518,904) (50,004,645)
------------ ------------
Net investment income (loss)........ 19,074,823 (17,883,154)
------------ ------------
CAPITAL GAINS INCOME.................... 2,910,226 297,745,384
------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 58,228 170,224
Net unrealized (depreciation)
appreciation of investments during
the period........................... (36,187,007) 402,196,558
------------ ------------
Net (loss) gain on investments...... (36,128,779) 402,366,782
------------ ------------
Net (decrease) increase in net
assets resulting from operations... $(14,143,730) $682,229,012
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-10
-------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- ----------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $21,324,529 $146,368,182 $ 12,342,082 $ 6,851,063 $ 10,341,697
EXPENSES:
Mortality and expense undertakings.... (5,620,086) (79,151,221) (40,991,208) (1,515,206) (11,624,230)
----------- ------------ -------------- ----------- ------------
Net investment income (loss)........ 15,704,443 67,216,961 (28,649,126) 5,335,857 (1,282,533)
----------- ------------ -------------- ----------- ------------
CAPITAL GAINS INCOME.................... 8,648 473,055,258 188,426,299 -- 13,517,068
----------- ------------ -------------- ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... -- 78,597 (457,576) (16,786) 53,550
Net unrealized (depreciation)
appreciation of investments during
the period........................... -- 22,727,549 892,664,508 (5,088,216) 153,057,340
----------- ------------ -------------- ----------- ------------
Net (loss) gain on investments...... -- 22,806,146 892,206,932 (5,105,002) 153,110,890
----------- ------------ -------------- ----------- ------------
Net (decrease) increase in net
assets resulting from operations... $15,713,091 $563,078,365 $1,051,984,105 $ 230,855 $165,345,425
=========== ============ ============== =========== ============
<CAPTION>
INTERNATIONAL DIVIDEND AND INTERNATIONAL
OPPORTUNITIES FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------ -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 8,691,519 $31,884,385 $ 4,847,238
EXPENSES:
Mortality and expense undertakings.... (9,068,100) (24,246,739) (2,826,348)
------------ ----------- -----------
Net investment income (loss)........ (376,581) 7,637,646 2,020,890
------------ ----------- -----------
CAPITAL GAINS INCOME.................... -- 73,317,212 --
------------ ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 6,651,839 (442,117) 39,305
Net unrealized (depreciation)
appreciation of investments during
the period........................... 245,333,665 (4,845,420) 44,681,650
------------ ----------- -----------
Net (loss) gain on investments...... 251,985,504 (5,287,537) 44,720,955
------------ ----------- -----------
Net (decrease) increase in net
assets resulting from operations... $251,608,923 $75,667,321 $46,741,845
============ =========== ===========
</TABLE>
------------------------------------------------- SA-11
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL MIDCAP
COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ -- $ --
EXPENSES:
Mortality and expense undertakings.... (3,422,328) (2,370,115)
------------ -----------
Net investment (loss) income........ (3,422,328) (2,370,115)
------------ -----------
CAPITAL GAINS INCOME.................... 617,854 16,614,969
------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 674,034 (76)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 163,127,296 82,609,085
------------ -----------
Net gain (loss) on investments...... 163,801,330 82,609,009
------------ -----------
Net increase in net assets resulting
from operations.................... $160,996,856 $96,853,863
============ ===========
</TABLE>
* From inception, May 11, 1999 to December 31, 1999
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-12
-------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MENTOR VIP MENTOR VIP
GLOBAL HIGH GROWTH AND CAPITAL GROWTH PERPETUAL
LEADERS FUND YIELD FUND INCOME FUND FUND INTERNATIONAL FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 150,490 $1,359,521 $ 347,049 $ 2,097 $--
EXPENSES:
Mortality and expense undertakings.... (440,649) (195,616) (683,916) (19,998) (20,341)
----------- ---------- ----------- -------- --------
Net investment (loss) income........ (290,159) 1,163,905 (336,867) (17,901) (20,341)
----------- ---------- ----------- -------- --------
CAPITAL GAINS INCOME.................... 539,412 2,165 799,084 2,428 1,053
----------- ---------- ----------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 12,511 (9,962) (7,190) 9,551 7,458
Net unrealized appreciation
(depreciation) of investments during
the period........................... 23,328,310 (859,225) 13,132,965 91,216 574,300
----------- ---------- ----------- -------- --------
Net gain (loss) on investments...... 23,340,821 (869,187) 13,125,775 100,767 581,758
----------- ---------- ----------- -------- --------
Net increase in net assets resulting
from operations.................... $23,590,074 $ 296,883 $13,587,992 $ 85,294 $562,470
=========== ========== =========== ======== ========
<CAPTION>
MENTOR VIP MERRILL LYNCH
GROWTH MERCURY VI US GLOBAL GROWTH
FUND LARGE CAP FUND FOCUS FUND
SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT*
----------- -------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 1,072 $ 27 $ 576
EXPENSES:
Mortality and expense undertakings.... (9,090) (8) (45)
-------- ---- ------
Net investment (loss) income........ (8,018) 19 531
-------- ---- ------
CAPITAL GAINS INCOME.................... -- 21 563
-------- ---- ------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... (7,232) -- --
Net unrealized appreciation
(depreciation) of investments during
the period........................... 158,548 376 3,949
-------- ---- ------
Net gain (loss) on investments...... 151,316 376 3,949
-------- ---- ------
Net increase in net assets resulting
from operations.................... $143,298 $416 $5,043
======== ==== ======
</TABLE>
* From inception, May 11, 1999 to December 31, 1999
------------------------------------------------- SA-13
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 19,074,823 $ (17,883,154)
Capital gains income.................. 2,910,226 297,745,384
Net realized gain (loss) on security
transactions......................... 58,228 170,224
Net unrealized (depreciation)
appreciation of investments during
the period........................... (36,187,007) 402,196,558
------------ --------------
Net (decrease) increase in net assets
resulting from operations............ (14,143,730) 682,229,012
------------ --------------
UNIT TRANSACTIONS:
Purchases............................. 40,898,140 423,849,947
Net transfers......................... 40,556,582 426,490,471
Surrenders for benefit payments and
fees................................. (31,895,263) (201,860,525)
Net annuity transactions.............. 434,093 7,775,030
------------ --------------
Net increase (decrease) in net assets
resulting from unit transactions..... 49,993,552 656,254,923
------------ --------------
Net increase in net assets............ 35,849,822 1,338,483,935
NET ASSETS:
Beginning of period................... 411,256,508 3,372,330,348
------------ --------------
End of period......................... $447,106,330 $4,710,814,283
============ ==============
</TABLE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 15,464,795 $ (7,691,830)
Capital gains income.................. -- 76,061,613
Net realized (loss) gain on security
transactions......................... (5,587) (1,418,674)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 5,072,560 663,245,884
------------ --------------
Net increase in net assets resulting
from operations...................... 20,531,768 730,196,993
------------ --------------
UNIT TRANSACTIONS:
Purchases............................. 58,804,116 385,880,357
Net transfers......................... 123,611,549 325,699,308
Surrenders for benefit payments and
fees................................. (20,698,247) (105,089,407)
Net annuity transactions.............. 632,000 6,055,572
------------ --------------
Net increase in net assets resulting
from unit transactions............... 162,349,418 612,545,830
------------ --------------
Net increase in net assets............ 182,881,186 1,342,742,823
NET ASSETS:
Beginning of period................... 228,375,322 2,029,587,525
------------ --------------
End of period......................... $411,256,508 $3,372,330,348
============ ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-14
-------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ----------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 15,704,443 $ 67,216,961 $ (28,649,126) $ 5,335,857 $ (1,282,533)
Capital gains income.................. 8,648 473,055,258 188,426,299 -- 13,517,068
Net realized gain (loss) on security
transactions......................... -- 78,597 (457,576) (16,786) 53,550
Net unrealized (depreciation)
appreciation of investments during
the period........................... -- 22,727,549 892,664,508 (5,088,216) 153,057,340
------------ -------------- -------------- ------------ --------------
Net (decrease) increase in net assets
resulting from operations............ 15,713,091 563,078,365 1,051,984,105 230,855 165,345,425
------------ -------------- -------------- ------------ --------------
UNIT TRANSACTIONS:
Purchases............................. 121,514,425 553,278,445 204,353,783 10,455,451 117,361,306
Net transfers......................... 199,660,729 726,127,643 142,107,778 13,740,703 116,603,220
Surrenders for benefit payments and
fees................................. (136,368,048) (395,371,857) (170,334,783) (11,130,292) (45,795,636)
Net annuity transactions.............. 2,186,026 8,508,756 1,937,989 283,866 1,387,602
------------ -------------- -------------- ------------ --------------
Net increase (decrease) in net assets
resulting from unit transactions..... 186,993,132 892,542,987 178,064,767 13,349,728 189,556,492
------------ -------------- -------------- ------------ --------------
Net increase in net assets............ 202,706,223 1,455,621,352 1,230,048,872 13,580,583 354,901,917
NET ASSETS:
Beginning of period................... 345,739,755 5,559,973,241 2,866,492,051 108,954,254 762,436,077
------------ -------------- -------------- ------------ --------------
End of period......................... $548,445,978 $7,015,594,593 $4,096,540,923 $122,534,837 $1,117,337,994
============ ============== ============== ============ ==============
<CAPTION>
INTERNATIONAL DIVIDEND AND INTERNATIONAL
OPPORTUNITIES FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ -------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ (376,581) $ 7,637,646 $ 2,020,890
Capital gains income.................. -- 73,317,212 --
Net realized gain (loss) on security
transactions......................... 6,651,839 (442,117) 39,305
Net unrealized (depreciation)
appreciation of investments during
the period........................... 245,333,665 (4,845,420) 44,681,650
------------ -------------- ------------
Net (decrease) increase in net assets
resulting from operations............ 251,608,923 75,667,321 46,741,845
------------ -------------- ------------
UNIT TRANSACTIONS:
Purchases............................. 28,399,437 122,792,647 18,919,242
Net transfers......................... (2,401,768) 54,502,249 17,826,840
Surrenders for benefit payments and
fees................................. (36,408,990) (94,489,028) (10,676,542)
Net annuity transactions.............. 782,800 1,856,944 281,999
------------ -------------- ------------
Net increase (decrease) in net assets
resulting from unit transactions..... (9,628,521) 84,662,812 26,351,539
------------ -------------- ------------
Net increase in net assets............ 241,980,402 160,330,133 73,093,384
NET ASSETS:
Beginning of period................... 658,450,752 1,824,407,052 201,156,207
------------ -------------- ------------
End of period......................... $900,431,154 $1,984,737,185 $274,249,591
============ ============== ============
</TABLE>
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ----------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 9,775,262 $ 53,393,050 $ (16,365,803) $ 5,495,664 $ (1,160,481)
Capital gains income.................. -- 130,454,479 150,932,848 -- 11,566,682
Net realized (loss) gain on security
transactions......................... -- (287,760) (3,541,507) 1,531 (301,028)
Net unrealized appreciation
(depreciation) of investments during
the period........................... -- 750,363,179 201,102,863 (691,300) 129,513,479
------------ -------------- -------------- ------------ --------------
Net increase in net assets resulting
from operations...................... 9,775,262 933,922,948 332,128,401 4,805,895 139,618,652
------------ -------------- -------------- ------------ --------------
UNIT TRANSACTIONS:
Purchases............................. 75,815,780 600,914,213 285,756,586 9,674,424 107,850,968
Net transfers......................... 120,297,377 671,280,081 116,427,127 20,420,247 98,345,205
Surrenders for benefit payments and
fees................................. (60,700,173) (226,423,137) (108,713,408) (6,506,845) (22,295,418)
Net annuity transactions.............. 717,935 4,552,594 2,969,562 225,614 1,399,655
------------ -------------- -------------- ------------ --------------
Net increase in net assets resulting
from unit transactions............... 136,130,919 1,050,323,751 296,439,867 23,813,440 185,300,410
------------ -------------- -------------- ------------ --------------
Net increase in net assets............ 145,906,181 1,984,246,699 628,568,268 28,619,335 324,919,062
NET ASSETS:
Beginning of period................... 199,833,574 3,575,726,542 2,237,923,783 80,334,919 437,517,015
------------ -------------- -------------- ------------ --------------
End of period......................... $345,739,755 $5,559,973,241 $2,866,492,051 $108,954,254 $ 762,436,077
============ ============== ============== ============ ==============
<CAPTION>
INTERNATIONAL DIVIDEND AND INTERNATIONAL
OPPORTUNITIES FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ -------------- --------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 668,487 $ 9,816,261 $ 14,628,419
Capital gains income.................. 39,050,857 44,842,140 4,004,303
Net realized (loss) gain on security
transactions......................... (1,485,356) (541,832) 13,013
Net unrealized appreciation
(depreciation) of investments during
the period........................... 27,913,220 151,447,604 (335,247)
------------ -------------- -------------
Net increase in net assets resulting
from operations...................... 66,147,208 205,564,173 18,310,488
------------ -------------- -------------
UNIT TRANSACTIONS:
Purchases............................. 39,589,829 264,852,722 23,124,347
Net transfers......................... (4,225,169) 249,782,849 22,048,417
Surrenders for benefit payments and
fees................................. (26,163,417) (61,426,410) (7,181,403)
Net annuity transactions.............. 434,251 2,178,448 67,952
------------ -------------- -------------
Net increase in net assets resulting
from unit transactions............... 9,635,494 455,387,609 38,059,313
------------ -------------- -------------
Net increase in net assets............ 75,782,702 660,951,782 56,369,801
NET ASSETS:
Beginning of period................... 582,668,050 1,163,455,270 144,786,406
------------ -------------- -------------
End of period......................... $658,450,752 $1,824,407,052 $ 201,156,207
============ ============== =============
</TABLE>
------------------------------------------------- SA-15
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL MIDCAP
COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $(3,422,328) $ (2,370,115)
Capital gains income.................. 617,854 16,614,969
Net realized gain (loss) on security
transactions......................... 674,034 (76)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 163,127,296 82,609,085
------------ ------------
Net increase in net assets resulting
from operations...................... 160,996,856 96,853,863
------------ ------------
UNIT TRANSACTIONS:
Purchases............................... 31,132,986 54,146,905
Net transfers........................... 67,507,616 159,587,148
Surrenders for benefit payments and
fees................................... (12,711,095) (8,059,665)
Net annuity transactions................ 1,448,874 819,581
------------ ------------
Net increase in net assets resulting
from unit transactions................. 87,378,381 206,493,969
------------ ------------
Net increase in net assets.............. 248,375,237 $303,347,832
NET ASSETS:
Beginning of period................... 215,601,809 90,844,727
------------ ------------
End of period......................... $463,977,046 $394,192,559
============ ============
</TABLE>
*** From inception, May 11, 1999 to December 31, 1999
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
SMALL MIDCAP
COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $(2,126,815) $ (602,824)
Capital gains income.................. 2,433,792 --
Net realized (loss) gain on security
transactions......................... (74,920) (2,834)
Net unrealized appreciation of
investments during the period........ 17,782,782 13,252,169
------------ ------------
Net increase in net assets resulting
from operations...................... 18,014,839 12,646,511
------------ ------------
UNIT TRANSACTIONS:
Purchases............................... 37,657,549 28,291,639
Net transfers........................... 31,192,792 36,483,561
Surrenders for benefit payments and
fees................................... (6,343,764) (1,424,845)
Net annuity transactions................ 298,211 109,553
------------ ------------
Net increase in net assets resulting
from unit transactions................. 62,804,788 63,459,908
------------ ------------
Net increase in net assets.............. 80,819,627 76,106,419
NET ASSETS:
Beginning of period................... 134,782,182 14,738,308
------------ ------------
End of period......................... $215,601,809 $ 90,844,727
============ ============
</TABLE>
* From inception, June 1, 1998 to December 31, 1998
** From inception, September 30, 1998 to December 31, 1998
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-16
-------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MENTOR VIP MENTOR VIP PERPETUAL
GLOBAL HIGH GROWTH AND CAPITAL GROWTH INTERNATIONAL
LEADERS FUND YIELD FUND INCOME FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ------------ -------------- --------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (290,159) $ 1,163,905 $ (336,867) $ (17,901) $ (20,341)
Capital gains income.................. 539,412 2,165 799,084 2,428 1,053
Net realized gain (loss) on security
transactions......................... 12,511 (9,962) (7,190) 9,551 7,458
Net unrealized appreciation
(depreciation) of investments during
the period........................... 23,328,310 (859,225) 13,132,965 91,216 574,300
------------ ----------- ------------ ---------- ----------
Net increase in net assets resulting
from operations...................... 23,590,074 296,883 13,587,992 85,294 562,470
------------ ----------- ------------ ---------- ----------
UNIT TRANSACTIONS:
Purchases............................... 21,579,201 7,629,629 32,753,873 46,506 94,565
Net transfers........................... 72,852,417 15,016,945 70,693,683 177,612 568,196
Surrenders for benefit payments and
fees................................... (1,320,605) (979,313) (2,805,059) (199,015) (155,582)
Net annuity transactions................ 90,872 76,676 192,208 -- --
------------ ----------- ------------ ---------- ----------
Net increase in net assets resulting
from unit transactions................. 93,201,885 21,743,937 100,834,705 25,103 507,179
------------ ----------- ------------ ---------- ----------
Net increase in net assets.............. 116,791,959 22,040,820 114,422,697 110,397 1,069,649
NET ASSETS:
Beginning of period................... 1,199,763 2,423,654 15,244,948 1,470,368 1,012,987
------------ ----------- ------------ ---------- ----------
End of period......................... $117,991,722 $24,464,474 $129,667,645 $1,580,765 $2,082,636
============ =========== ============ ========== ==========
<CAPTION>
MERRILL LYNCH
MENTOR VIP MERCURY VI US GLOBAL GROWTH
GROWTH FUND LARGE CAP FUND FOCUS FUND
SUB-ACCOUNT SUB-ACCOUNT*** SUB-ACCOUNT***
----------- -------------- --------------
<S> <C> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (8,018) $ 19 $ 531
Capital gains income.................. -- 21 563
Net realized gain (loss) on security
transactions......................... (7,232) -- --
Net unrealized appreciation
(depreciation) of investments during
the period........................... 158,548 376 3,949
-------- ------- -------
Net increase in net assets resulting
from operations...................... 143,298 416 5,043
-------- ------- -------
UNIT TRANSACTIONS:
Purchases............................... 19,924 2,499 82,968
Net transfers........................... 179,242 11,190 7,393
Surrenders for benefit payments and
fees................................... (44,998) -- (1)
Net annuity transactions................ 1,932 -- --
-------- ------- -------
Net increase in net assets resulting
from unit transactions................. 156,100 13,689 90,360
-------- ------- -------
Net increase in net assets.............. 299,398 14,105 95,403
NET ASSETS:
Beginning of period................... 591,672 -- --
-------- ------- -------
End of period......................... $891,070 $14,105 $95,403
======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
GLOBAL HIGH GROWTH AND MENTOR VIP MENTOR VIP PERPETUAL
LEADERS FUND YIELD FUND INCOME FUND CAPITAL GROWTH INTERNATIONAL
SUB-ACCOUNT** SUB-ACCOUNT** SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT
------------- ------------- ------------ -------------- --------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ 128 $ 39,679 $ 13,479 $ (3,951) $ (3,170)
Capital gains income.................. 29,044 -- -- -- --
Net realized (loss) gain on security
transactions......................... (3,023) (1,553) 140 55 38
Net unrealized appreciation of
investments during the period........ 52,419 14,002 1,906,801 118,168 47,507
------------ ----------- ------------ ---------- ----------
Net increase in net assets resulting
from operations...................... 78,568 52,128 1,920,420 114,272 44,375
------------ ----------- ------------ ---------- ----------
UNIT TRANSACTIONS:
Purchases............................... 463,522 815,158 5,482,553 92,146 38,705
Net transfers........................... 657,728 1,561,354 7,951,308 1,266,689 937,906
Surrenders for benefit payments and
fees................................... (55) (4,986) (109,333) (2,739) (7,999)
Net annuity transactions................ -- -- -- -- --
------------ ----------- ------------ ---------- ----------
Net increase in net assets resulting
from unit transactions................. 1,121,195 2,371,526 13,324,528 1,356,096 968,612
------------ ----------- ------------ ---------- ----------
Net increase in net assets.............. 1,199,763 2,423,654 15,244,948 1,470,368 1,012,987
NET ASSETS:
Beginning of period................... -- -- -- -- --
------------ ----------- ------------ ---------- ----------
End of period......................... $ 1,199,763 $ 2,423,654 $ 15,244,948 $1,470,368 $1,012,987
============ =========== ============ ========== ==========
<CAPTION>
MENTOR VIP
GROWTH
SUB-ACCOUNT
-----------
<S> <C>
OPERATIONS:
Net investment (loss) income.......... $ (2,316)
Capital gains income.................. --
Net realized (loss) gain on security
transactions......................... 2
Net unrealized appreciation of
investments during the period........ 56,433
--------
Net increase in net assets resulting
from operations...................... 54,119
--------
UNIT TRANSACTIONS:
Purchases............................... 39,810
Net transfers........................... 497,486
Surrenders for benefit payments and
fees................................... 257
Net annuity transactions................ --
--------
Net increase in net assets resulting
from unit transactions................. 537,553
--------
Net increase in net assets.............. 591,672
NET ASSETS:
Beginning of period................... --
--------
End of period......................... $591,672
========
</TABLE>
* From inception, June 1, 1998 to December 31, 1998
** From inception, September 30, 1998 to December 31, 1998
------------------------------------------------- SA-17
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT ONE
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION:
Separate Account One (the Account) is a separate investment account within
Hartford Life & Annuity Insurance Company (the Company) and is registered
with the Securities and Exchange Commission (SEC) as a unit investment trust
under the Investment Company Act of 1940, as amended. Both the Company and
the Account are subject to supervision and regulation by the Department of
Insurance of the State of Connecticut and the SEC. The Account invests
deposits by variable annuity contractholders of the Company in various
mutual funds (the Funds) as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Realized gains and
losses on the sales of securities are computed on the basis of identified
cost of the fund shares sold. Dividend and capital gains income is
accrued as of the ex-dividend date. Capital gains income represents those
dividends from the Funds which are characterized as capital gains under
tax regulations.
b) SECURITY VALUATION--The investments in shares of the Funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 1999.
c) UNIT TRANSACTIONS--Unit transactions are executed based on the unit
values calculated at the close of the business day.
d) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no
federal income taxes are payable with respect to the operations of the
Account.
e) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expense 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:
Certain amounts are deducted from the contracts on a monthly basis, as
decribed below:
a) MORTALITY AND EXPENSE RISK CHARGE--The Company, will make deductions at a
maximum annual rate of 1.25% of the contract's value for the mortality
and expense risks which the Company undertakes.
b) TAX EXPENSE CHARGE--If applicable, the Company will make deductions at a
maximum rate of 3.5% of the contract's value to meet premium tax
requirements. An additional tax charge based on a percentage of the
contract's value may be assessed to partial withrawals or surrenders.
These expenses are included in surrenders for benefit payments and fees
in the accompanying statements of changes in net assets.
c) ANNUAL MAINTENANCE FEE--An annual maintenance fee in the amount of $30
may be deducted from the contract's value each contract year. However,
this fee is not applicable to contracts with values of $50,000 or more,
as determined on the most recent contract anniversary. These expenses are
included in surrenders for benefit payments and fees in the accompanying
statements of changes in net assets.
_____________________________________ SA-18 ____________________________________
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------------------
To the Board of Directors of
Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory balance sheets of Hartford Life and
Annuity Insurance Company (a Connecticut Corporation and wholly owned subsidiary
of Hartford Life Insurance Company) (the Company) as of December 31, 1999 and
1998, and the related statutory statements of operations, changes in capital and
surplus, and cash flows for each of the three years in the period ended December
31, 1999. These statutory financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statutory financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 2 of notes to statutory financial
statements. When financial statements are presented for purposes other than for
filing with a regulatory agency, auditing standards generally accepted in the
United States require that an auditors' report on them state whether they are
presented in conformity with accounting principles generally accepted in the
United States. The accounting practices used by the Company vary from accounting
principles generally accepted in the United States as explained and quantified
in Note 2.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the statutory financial statements referred to above do not present
fairly, in conformity with accounting principles generally accepted in the
United States, the financial position of the Company as of December 31, 1999 and
1998, or the results of its operations or its cash flows for each of the three
years in the period ended December 31, 1999.
In our opinion, the statutory financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with statutory accounting practices as described in Note 2.
Hartford, Connecticut
January 31, 2000 ARTHUR ANDERSEN LLP
F-1
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
BALANCE SHEETS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Bonds $ 1,465,815 $ 1,453,792
Common stocks 42,430 40,650
Mortgage loans 63,784 59,548
Policy loans 59,429 47,212
Cash and short-term investments 267,579 469,955
- ------------------------------------------------------------------------------------------------
Other invested assets 2,892 2,188
- ------------------------------------------------------------------------------------------------
Total cash and invested assets 1,901,929 2,073,345
Investment income due and accrued 21,069 20,126
Other assets 39,576 45,691
Separate account assets 44,865,042 32,876,278
- ------------------------------------------------------------------------------------------------
TOTAL ASSETS $46,827,616 $35,015,440
- ------------------------------------------------------------------------------------------------
LIABILITIES
Aggregate reserves for future benefits $ 591,621 $ 579,140
Policy and contract claim liabilities 7,677 5,667
Liability for premium and other deposit funds 1,969,262 2,011,672
Asset valuation reserve 4,935 21,782
Payable to affiliates 14,084 19,271
Accrued expense allowances and other amounts due from
separate accounts (1,377,927) (1,173,513)
Remittances and items not allocated 111,582 87,449
Other liabilities 118,464 111,182
Separate account liabilities 44,865,042 32,876,278
- ------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 46,304,740 34,538,928
- ------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS
Common stock 2,500 2,500
Gross paid-in and contributed surplus 226,043 226,043
Unassigned funds 294,333 247,969
- ------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS 522,876 476,512
- ------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $46,827,616 $35,015,440
- ------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-2
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums and annuity considerations $ 621,789 $ 469,343 $ 296,645
Annuity and other fund deposits 2,991,363 2,051,251 1,981,246
Net investment income 122,322 129,982 102,285
Commissions and expense allowances on reinsurance ceded 379,905 444,241 396,921
Reserve adjustment on reinsurance ceded 1,411,342 3,185,590 3,672,076
Fee income 647,565 448,260 290,675
Other revenues 842 9,930 (2,043)
- -------------------------------------------------------------------------------------------------------
TOTAL REVENUES 6,175,128 6,738,597 6,737,805
- -------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Death and annuity benefits 47,372 43,152 65,961
Disability and other benefits 6,270 6,352 7,532
Surrenders and other fund withdrawals 1,250,813 739,663 454,417
Commissions 467,338 435,994 470,334
Increase (Decrease) in aggregate reserves for future
benefits 12,481 (10,711) 33,213
(Decrease) Increase in liability for premium and other
deposit funds (47,852) 218,642 640,840
General insurance expenses 192,196 190,979 77,237
Net transfers to separate accounts 4,160,501 4,956,007 4,914,980
Other expenses 35,385 22,091 15,671
- -------------------------------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 6,124,504 6,602,169 6,680,185
- -------------------------------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS
Before federal income tax (benefit) expense 50,624 136,428 57,620
Federal income tax (benefit) expense (10,231) 35,887 (14,878)
- -------------------------------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS 60,855 100,541 72,498
Net realized capital (losses) gains, after tax (36,428) 2,085 1,544
- -------------------------------------------------------------------------------------------------------
NET INCOME $ 24,427 $ 102,626 $ 74,042
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-3
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Beginning and end of year $ 2,500 $ 2,500 $ 2,500
- -------------------------------------------------------------------------------------------------
GROSS PAID-IN AND CONTRIBUTED SURPLUS
Beginning and end of year 226,043 226,043 226,043
- -------------------------------------------------------------------------------------------------
UNASSIGNED FUNDS
Balance, beginning of year 247,969 143,257 74,570
Net income 24,427 102,626 74,042
Change in net unrealized capital gains on common stocks
and other invested assets 2,258 1,688 2,186
Change in asset valuation reserve 16,847 (8,112) (6,228)
Change in non-admitted assets 6,557 (1,277) (1,313)
Credit on reinsurance ceded (3,725) 9,787 --
- -------------------------------------------------------------------------------------------------
Balance, end of year 294,333 247,969 143,257
- -------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS,
End of year $522,876 $476,512 $371,800
- -------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-4
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums and annuity considerations $3,613,217 $2,520,655 $2,277,874
Net investment income 122,998 127,425 101,991
Fee income 647,565 448,260 290,675
Other income 1,799,323 3,644,704 4,091,043
- -------------------------------------------------------------------------------------------------------
Total income 6,183,103 6,741,044 6,761,583
- -------------------------------------------------------------------------------------------------------
Benefits paid 1,303,801 790,051 529,733
Federal income tax (recoveries) payments (8,815) 25,780 (14,499)
Net transfers to separate accounts 4,364,914 5,222,144 5,199,354
Other expenses 669,525 626,240 547,692
- -------------------------------------------------------------------------------------------------------
Total benefits and expenses 6,329,425 6,664,215 6,262,280
- -------------------------------------------------------------------------------------------------------
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES (146,322) 76,829 499,303
- -------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD
Bonds 753,358 633,926 614,413
Common stocks 939 34,010 11,481
Mortgage loans 53,704 85,275 --
Other 1,490 19,990 152
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT PROCEEDS 809,491 773,201 626,046
- -------------------------------------------------------------------------------------------------------
COST OF INVESTMENTS ACQUIRED
Bonds 804,947 586,913 848,267
Common stocks 464 7,012 28,302
Mortgage loans 57,665 59,702 85,103
Other 14,211 11,847 26,227
- -------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS ACQUIRED 877,287 665,474 987,899
- -------------------------------------------------------------------------------------------------------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES $ (67,796) $ 107,727 $ (361,853)
- -------------------------------------------------------------------------------------------------------
FINANCING AND MISCELLANEOUS ACTIVITIES
Net other cash provided (used) 11,742 (24,033) (4,848)
- -------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) FINANCING
AND MISCELLANEOUS ACTIVITIES 11,742 (24,033) (4,848)
- -------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and short-term investments (202,376) 160,523 132,602
Cash and short-term investments, beginning of year 469,955 309,432 176,830
- -------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF YEAR $ 267,579 $ 469,955 $ 309,432
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(STATUTORY BASIS)
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS:
Hartford Life and Annuity Insurance Company (the "Company") is a wholly owned
subsidiary of Hartford Life Insurance Company ("HLIC"), which is an indirect
subsidiary of Hartford Life, Inc. ("HLI"). HLI is indirectly majority owned by
The Hartford Financial Services Group, Inc. ("The Hartford"). On February 10,
1997, HLI filed a registration statement, as amended, with the Securities and
Exchange Commission relating to the initial public offering of HLI Class A
Common Stock (the "Offering"). Pursuant to the Offering on May 22, 1997, HLI
sold to the public 26 million shares, representing approximately 18.6% of the
equity ownership of HLI.
In 1998, the Company changed its name to Hartford Life and Annuity Insurance
Company from ITT Hartford Life and Annuity Insurance Company.
The Company offers a complete line of fixed and variable annuities, as well as
variable, universal and traditional individual life insurance.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying statutory basis financial statements of the Company were
prepared in conformity with statutory accounting practices prescribed or
permitted by the National Association of Insurance Commissioners ("NAIC") and
the State of Connecticut Department of Insurance. Certain reclassifications have
been made to prior year financial information to conform to the current year
presentation.
Current prescribed statutory accounting practices include accounting
publications of the NAIC, as well as state laws, regulations and general
administrative rules. Permitted statutory accounting practices encompass
accounting practices approved by state insurance departments. The Company does
not follow any permitted statutory accounting practices that have a material
effect on statutory surplus, statutory net income or risk-based capital.
The preparation of financial statements in conformity with statutory accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reported periods. Actual results could
differ from those estimates. The most significant estimates include those used
in determining the liability for aggregate reserves for future benefits and the
liability for premium and other deposit funds. Although some variability is
inherent in these estimates, management believes the amounts provided are
adequate.
STATUTORY ACCOUNTING PRACTICES VERSUS GAAP
Statutory accounting practices and generally accepted accounting principles
("GAAP") differ in certain significant respects. These differences principally
involve:
(1) treatment of policy acquisition costs (commissions, underwriting and selling
expenses, etc.) which are charged to expense when incurred for statutory
purposes rather than on a pro-rata basis over the expected life and gross
profit stream of the policy for GAAP purposes;
(2) recognition of premium revenues, which for statutory purposes are generally
recorded as collected or when due during the premium paying period of the
contract and which for GAAP purposes, for universal life policies and
investment products, generally only consist of charges assessed to policy
account balances for cost of insurance, policy administration and
surrenders. When policy charges received relate to coverage or services to
be provided in the future, the charges are recognized as revenue on a
pro-rata basis over the expected life and gross profit stream of the policy.
Also, for GAAP purposes, premiums for traditional life insurance policies
are recognized as revenues when they are due from policyholders;
(3) development of liabilities for future policy benefits, which for statutory
purposes predominantly use interest rate and mortality assumptions
prescribed by the NAIC which may vary considerably from interest and
mortality assumptions used under GAAP;
(4) providing for income taxes based on current taxable income only for
statutory purposes, rather than establishing additional assets or
liabilities for deferred Federal income taxes to recognize the tax effect
related to reporting revenues and expenses in different periods for
financial reporting and tax return purposes or required under GAAP;
(5) excluding certain assets designated as non-admitted assets (e.g., negative
Interest Maintenance Reserve, and past due agents' balances) from the
balance sheet for statutory purposes by directly charging surplus;
(6) the calculation of post retirement benefits obligation which, for statutory
accounting, excludes non-vested employees whereas GAAP liabilities include a
provision for such employees; statutory and GAAP accounting permit either
immediate recognition of the liability or straight-line amortization of the
liability over a period not to exceed 20 years. For GAAP, The Hartford's
obligation was immediately recognized, whereas for statutory accounting, the
obligation is being recognized ratably over a 20 year period;
F-6
<PAGE>
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve) for statutory purposes; as well as the deferral and
amortization of realized gains and losses, caused by changes in interest
rates during the period the asset is held, into income over the remaining
life to maturity of the asset sold (Interest Maintenance Reserve) for
statutory purposes; whereas on a GAAP basis, no such formula reserve is
required and realized gains and losses are recognized in the period the
asset is sold;
(8) the reporting of reserves and benefits net of reinsurance ceded for
statutory purposes; whereas on a GAAP basis, reserves are reported gross of
reinsurance with reserve credits presented as recoverable assets;
(9) the reporting of fixed maturities at amortized cost for statutory purposes,
whereas GAAP requires that fixed maturities be classified as
"held-to-maturity," "available-for-sale" or "trading," based on the
Company's intentions with respect to the ultimate disposition of the
security and its ability to affect those intentions. The Company's bonds
were classified on a GAAP basis as available-for-sale and accordingly, those
investments and common stocks were reflected at fair value with the
corresponding impact included as a separate component of Stockholder's
Equity; as well as the change in the basis of the Company's other invested
assets, which consist primarily of limited partnership investments, which is
recognized as income under GAAP and as a change in surplus under statutory
accounting; and
(10) statutory accounting calculates separate account liabilities using
prescribed actuarial methodologies, which approximate the market value of
separate account assets less applicable surrender charges. The separate
account surplus generated by these reserving methods is recorded as an
amount due to or from the separate account on the statutory basis balance
sheet, with changes reflected in the statutory basis results of operations.
On a GAAP basis, separate account assets and liabilities are held at fair
value.
As of and for the years ended December 31, the significant differences between
Statutory and GAAP basis net income and capital and surplus for the Company are
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
----------------------------------------
GAAP Net Income $ 75,654 $ 74,525 $ 58,050
Deferral and amortization of policy
acquisition costs, net (272,171) (331,882) (345,657)
Change in unearned revenue reserve (64,915) 23,118 4,058
Deferred taxes 57,833 2,476 47,092
Separate account expense allowance 214,388 259,287 282,818
Asset impairments and write-downs (17,250) 17,250 --
Benefit reserve adjustment 11,491 5,360 24,666
Gain on commutation of reinsurance
(Note 4) -- 52,026 --
Prepaid reinsurance premium (3,524) -- --
Statutory voluntary reserve (6,286) -- --
Other, net 29,207 466 3,015
----------------------------------------
STATUTORY NET INCOME $ 24,427 $ 102,626 $ 74,042
----------------------------------------
GAAP Stockholder's Equity $ 676,428 $ 648,097 $ 570,469
Deferred policy acquisition costs (1,887,824) (1,615,653) (1,283,771)
Unearned revenue reserve 95,965 160,951 134,789
Deferred taxes 122,105 68,936 64,522
Separate account expense allowance 1,398,030 1,183,642 924,355
Asset impairments and write-downs -- 17,250 --
Unrealized losses (gains) on
investments 26,292 (24,955) (21,451)
Benefit reserve adjustment 81,111 69,233 16,378
Asset valuation reserve (4,935) (21,782) (13,670)
Adjustment relating to Lyndon
contribution (Note 4) -- -- (23,671)
Prepaid reinsurance premium (7,728) (4,204) --
Statutory voluntary reserve (6,286) -- --
Other, net 29,718 (5,003) 3,850
----------------------------------------
STATUTORY CAPITAL AND SURPLUS $ 522,876 $ 476,512 $ 371,800
----------------------------------------
</TABLE>
F-7
<PAGE>
AGGREGATE RESERVES FOR FUTURE BENEFITS AND LIABILITY FOR PREMIUM AND OTHER
DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits were
computed in accordance with applicable actuarial standards. Reserves for life
insurance policies are generally based on the 1958 and 1980 Commissioner's
Standard Ordinary Mortality Tables and various valuation rates ranging from 2.5%
to 6%. Accumulation and on-benefit annuity reserves are based principally on
individual annuity tables at various rates ranging from
2.5% to 8.75% and using the Commissioners Annuity Reserve Valuation Method
("CARVM").
The Company has established separate accounts to segregate the assets and
liabilities of certain life insurance and annuity contracts that must be
segregated from the Company's general assets under the terms of its contracts.
The assets consist primarily of marketable securities and are reported at market
value. Premiums, benefits and expenses of these contracts are reported in the
statutory basis statements of operations.
An analysis of Annuity Actuarial Reserves and Deposit Liabilities by Withdrawal
Characteristics as of December 31, 1999 (including general and separate account
liabilities) is as follows:
<TABLE>
<CAPTION>
% of
Amount Total
<S> <C> <C>
--------------------
Subject to discretionary withdrawal:
--------------------
With market value adjustment $ 4,564 0.0%
At book value less current surrender charge of 5% or more 1,427,302 3.2%
At market value 42,431,996 95.4%
--------------------
Total with adjustment or at market value 43,863,862 98.6%
At book value without adjustment (minimal or no charge or
adjustment): 573,583 1.3%
Not subject to discretionary withdrawal: 34,816 0.1%
--------------------
Total, gross 44,472,261 100.0%
Reinsurance ceded --
------------
Total, net $44,472,261
------------
</TABLE>
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds that are deemed
ineligible to be held at amortized cost by the NAIC Securities Valuation Office
("SVO") are carried at the appropriate SVO published value. When a reduction in
the value of a security is deemed to be unrecoverable, the decline in value is
reported as a realized loss and the carrying value is adjusted accordingly.
Short-term investments consist of money market funds and are stated at cost,
which approximates fair value. Common stocks are carried at fair value with the
current year change in the difference from cost reflected in surplus. Mortgage
loans, which are carried at cost and approximate fair value, include investments
in assets backed by mortgage loan pools. Other invested assets are generally
recorded at fair value.
The Asset Valuation Reserve ("AVR") is designed to provide a standardized
reserving process for realized and unrealized losses due to default and equity
risks associated with invested assets. The AVR balances were $4,935 and $21,782
as of December 31, 1999 and 1998, respectively. Additionally, the Interest
Maintenance Reserve ("IMR") captures net realized capital gains and losses, net
of applicable income taxes, resulting from changes in interest rates and
amortizes these gains or losses into income over the life of the bond or
mortgage sold. The IMR balance as of December 31, 1999 is an asset balance of
$981 and is reflected as a component of non-admitted assets in Unassigned Funds
in accordance with statutory accounting practices. The IMR balance as of
December 31, 1998 is a liability balance of $452 and is reflected as an other
liability. The net capital (losses) gains transferred to the IMR in 1999, 1998
and 1997 were $(1,255), $852 and $(719), respectively. The amount of income
(expense) amortized from the IMR in 1999, 1998 and 1997 included in the
Company's Statements of Operations, was $178, $(207), and $(85), respectively.
Realized capital gains and losses, net of taxes, not included in the IMR are
reported in the statutory basis statements of operations. Realized investment
gains and losses are determined on a specific identification basis.
CODIFICATION
The NAIC adopted the Codification of Statutory Accounting Principles in March
1998. The proposed effective date for this statutory accounting guidance is
January 1, 2001. It is expected that Connecticut, the Company's domiciliary
state, will adopt these accounting standards and, therefore, the Company will
make the necessary accounting and reporting changes required for implementation.
The Company has not yet determined the impact that these new accounting
standards will have on its statutory basis financial statements.
F-8
<PAGE>
3. INVESTMENTS:
(a) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
-----------------------------
Interest income from bonds and short-term investments $113,646 $123,370 $100,475
Interest income from policy loans 3,494 3,133 1,958
Interest and dividends from other investments 6,371 4,482 1,005
-----------------------------
Gross investment income 123,511 130,985 103,438
Less: investment expenses 1,189 1,003 1,153
-----------------------------
NET INVESTMENT INCOME $122,322 $129,982 $102,285
-----------------------------
</TABLE>
(b) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND
SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
-----------------------------
Gross unrealized capital gains $ 561 $ 10,905 $23,357
Gross unrealized capital losses (6,441) (833) (1,906)
-----------------------------
Net unrealized capital (losses) gains (5,880) 10,072 21,451
Balance, beginning of year 10,072 21,451 7,979
-----------------------------
CHANGE IN NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND
SHORT-TERM INVESTMENTS $(15,952) $(11,379) $13,472
-----------------------------
</TABLE>
(c) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON COMMON STOCKS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Gross unrealized capital gains $2,508 $ 2,204 $ 537
Gross unrealized capital losses (24) (1,871) (1,820)
--------------------------
Net unrealized capital gains (losses) 2,484 333 (1,283)
Balance, beginning of year 333 (1,283) (3,447)
--------------------------
CHANGE IN NET UNREALIZED CAPITAL GAINS ON COMMON STOCKS $2,151 $ 1,616 $ 2,164
--------------------------
</TABLE>
(d) COMPONENTS OF NET REALIZED CAPITAL (LOSSES) GAINS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Bonds and short-term investments $(37,959) $1,314 $ (120)
Common stocks 104 1,624 421
Other invested assets 172 (1) (307)
--------------------------
Realized capital (losses) gains (37,683) 2,937 (6)
Capital gains benefit -- -- (831)
--------------------------
Net realized capital (losses) gains (37,683) 2,937 825
Less: amounts transferred to the IMR (1,255) 852 (719)
--------------------------
NET REALIZED CAPITAL (LOSSES) GAINS $(36,428) $2,085 $1,544
--------------------------
</TABLE>
Sales and maturities of investments in bonds and short-term investments for the
years ended December 31, 1999, 1998 and 1997 resulted in proceeds of $1,367,027,
$1,354,563 and $1,435,820, gross realized capital gains of $1,106, $1,705, and
$964 and gross realized capital losses of $39,065, $391, and $1,084,
respectively, before transfers to the IMR. Sale of common stocks for the years
ended December 31, 1999, 1998 and 1997 resulted in proceeds of $939, $33,088,
and $10,168, gross realized capital gains of $115, $1,688, and $421 and gross
realized capital losses of $11, $64, and $0, respectively.
(e) DERIVATIVE INVESTMENTS
The Company had no significant derivative holdings as of December 31, 1999, 1998
or 1997.
(f) CONCENTRATION OF CREDIT RISK
Excluding U.S. government and government agency investments, the Company is not
exposed to any significant concentrations of credit risk in fixed maturities of
a single issuer greater than 10% of capital and surplus as of December 31, 1999.
F-9
<PAGE>
(g) BONDS, SHORT-TERM INVESTMENTS AND COMMON STOCKS
<TABLE>
<CAPTION>
1999
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
----------------------------------------------
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored $ 4,768 $ 1 $ (37) $ 4,732
-- Guaranteed and sponsored -- asset backed 170,746 -- -- 170,746
States, municipalities and political subdivisions 10,401 -- (48) 10,353
International governments 7,351 94 (15) 7,430
Public utilities 18,413 92 (73) 18,432
All other corporate -- excluding asset-backed 592,233 374 (6,194) 586,413
All other corporate -- asset-backed 539,688 -- -- 539,688
Short-term investments 228,105 -- -- 228,105
Certificates of deposit 5,158 -- (74) 5,084
Parents, subsidiaries and affiliates 117,057 -- -- 117,057
----------------------------------------------
TOTAL BONDS AND SHORT-TERM INVESTMENTS $1,693,920 $561 $(6,441) $1,688,040
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------
Common stock -- unaffiliated $ 4,562 $1,105 $ (24) $ 5,643
Common stock -- affiliated 35,384 1,403 -- 36,787
--------------------------------------------
TOTAL COMMON STOCKS $39,946 $2,508 $ (24) $42,430
--------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1999
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
----------------------------------------------
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored $ 4,982 $ 35 $ (2) $ 5,015
-- Guaranteed and sponsored -- asset-backed 75,615 -- -- 75,615
States, municipalities and political subdivisions 10,402 415 -- 10,817
International governments 7,466 568 -- 8,034
Public utilities 94,475 1,330 (39) 95,766
All other corporate -- excluding asset-backed 607,679 8,473 (792) 615,360
All other corporate -- asset-backed 505,900 -- -- 505,900
Short-term investments 343,783 -- -- 343,783
Certificates of deposit 130,216 84 -- 130,300
Parents, subsidiaries and affiliates 117,057 -- -- 117,057
----------------------------------------------
TOTAL BONDS AND SHORT-TERM INVESTMENTS $1,897,575 $10,905 $(833) $1,907,647
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------
Common stock -- unaffiliated $ 4,933 $ 290 $ (50) $ 5,173
Common stock -- affiliated 35,384 1,914 (1,821) 35,477
--------------------------------------------
TOTAL COMMON STOCKS $40,317 $2,204 $(1,871) $40,650
--------------------------------------------
</TABLE>
The amortized cost and estimated fair value of bonds and short-term investments
as of December 31, 1999 by estimated maturity year are shown below. Asset-backed
securities, including mortgage-backed securities and collaterialized mortgage
obligations, are distributed to maturity year based on the Company's estimates
of the rate of
F-10
<PAGE>
future prepayments of principal over the remaining lives of the securities.
Expected maturities differ from contractual maturities due to call or prepayment
provisions.
<TABLE>
<CAPTION>
Amortized Estimated
Maturity Cost Fair Value
<S> <C> <C>
--------------------------
One year or less $ 545,290 $ 543,397
Over one year through five years 692,881 690,476
Over five years through ten years 370,835 369,548
Over ten years 84,914 84,619
--------------------------
TOTAL $1,693,920 $1,688,040
--------------------------
</TABLE>
Bonds with a carrying value of $10,457 were on deposit as of December 31, 1999
with various regulatory authorities as required.
(h) FAIR VALUE OF FINANCIAL INSTRUMENTS-BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1999 1998
------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
------------------------------------------------------
ASSETS
Bonds and short-term investments $1,694 $1,688 $1,898 $1,908
Common stocks 42 42 41 41
Policy loans 59 59 47 47
Mortgage loans 64 64 60 60
Other invested assets 3 3 2 2
LIABILITIES
Deposit funds and other benefits $2,051 $2,017 $2,078 $2,053
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments: fair value of bonds, short-term
investments, common stock, and other invested assets approximate those
quotations published by the NAIC; policy loans and mortgage loans carrying
amounts approximates fair value; and fair value of liabilities on deposit funds
and other benefits is determined by forecasting future cash flows and
discounting the forecasted cash flows at current market rates.
4. REINSURANCE:
The Company cedes insurance to other insurers in order to limit its maximum
losses. Such transfer does not relieve the Company of its primary liability to
the policyholder. Failure of reinsurers to honor their obligations could result
in losses to the Company. The Company reduces this risk by evaluating the
financial condition of reinsurers and monitoring for possible concentrations of
credit risk.
The Company cedes significant portions of its variable annuity business written
since 1994 to RGA Reinsurance Company ("RGA"). Certain core annuity products
were excluded from this reinsurance arrangement beginning in the second quarter
of 1999 and, as such, the amounts ceded to RGA have declined significantly.
In 1995, The Hartford was "spun-off" from ITT Industries, Inc. and became its
own, autonomous entity. In conjunction with this spin-off, the assets and
liabilities of Lyndon Insurance Company (Lyndon) were merged into the Company.
The statutory net assets contributed to the Company as a result of this
transaction were approximately $112 million and were reflected as an increase in
Gross Paid-In and Contributed Surplus at December 31, 1995. This amount was
approximately $41 million lower than the value of net assets contributed on a
GAAP basis.
The majority of the business written in Lyndon was assumed from an unaffiliated
insurer. In 1998, this unaffiliated insurer recaptured the inforce blocks of
business it had been ceding to the Company through Lyndon. In conjunction with
this commutation transaction, the Company transferred statutory basis reserves
of $26,404. Additionally, the Company received fair value consideration for the
bonds it transferred which exceeded the statutory statement value of these
assets by $25,622. As a result of this activity, the Company recognized a
pre-tax gain from this transaction of $52,026 in its 1998 Statements of
Operations.
There were no material reinsurance recoverables from reinsurers outstanding as
of and for the years ended, December 31, 1999 and 1998.
F-11
<PAGE>
The effect of reinsurance as of and for the years ended December 31, is
summarized as follows:
<TABLE>
<CAPTION>
1999 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 784,502 $ 53 $ (192,934) $ 591,621
Policy and Contract Claim
Liabilities $ 7,827 $ 203 $ (353) $ 7,677
Premium and Annuity Considerations $ 674,219 $ 1,261 $ (53,691) $ 621,789
Annuity and Other Fund Deposits $6,195,917 $ -- $(3,204,554) $2,991,363
Death, Annuity, Disability and
Other Benefits $ 65,251 $ 1,104 $ (12,713) $ 53,642
Surrenders $2,541,449 $ -- $(1,290,636) $1,250,813
</TABLE>
<TABLE>
<CAPTION>
1998 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 713,375 $ 50 $ (134,285) $ 579,140
Policy and Contract Claim
Liabilities $ 5,895 $ 85 $ (313) $ 5,667
Premium and Annuity Considerations $ 483,328 $24,954 $ (38,939) $ 469,343
Annuity and Other Fund Deposits $6,461,470 $ -- $(4,410,219) $2,051,251
Death, Annuity, Disability and
Other Benefits $ 64,331 $ 1,574 $ (16,401) $ 49,504
Surrenders $1,481,797 $ -- $ (742,134) $ 739,663
</TABLE>
<TABLE>
<CAPTION>
1997 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Premium and Annuity Considerations $ 266,427 $51,630 $ (21,412) $ 296,645
Annuity and Other Fund Deposits $6,515,347 $ -- $(4,534,101) $1,981,246
Death, Annuity, Disability and
Other Benefits $ 79,779 $ 839 $ (7,126) $ 73,492
Surrenders $ 882,094 $ -- $ (427,677) $ 454,417
</TABLE>
5. RELATED PARTY TRANSACTIONS:
Transactions between the Company and its affiliates, relate principally to tax
settlements, reinsurance, insurance coverages, rental and service fees, capital
contributions and payments of dividends. In addition, certain affiliated
insurance companies purchased group annuity contracts from the Company to fund
pension costs and claim annuities to settle casualty claims. Substantially all
general insurance expenses related to the Company, including rent and benefit
plan expenses, are initially paid by The Hartford. Direct expenses are allocated
using specific identification and indirect expenses are allocated using other
applicable methods. Indirect expenses include those for corporate areas which,
depending on type, are allocated based on either a percentage of direct expenses
or on utilization.
The Company has also invested in bonds of its affiliates, Hartford Financial
Services Corporation and HL Investment Advisors, Inc., and common stock of its
subsidiary, Hartford Life, LTD.
For additional information, see Notes 4, 6, and 8.
6. FEDERAL INCOME TAXES:
The Company and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. Federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were filing separate Federal, state and local
income tax returns.
As long as The Hartford continues to own at least 80% of the combined voting
power and 80% of the value of the outstanding capital stock of HLI, the Company
will be included for Federal income tax purposes in the affiliated group of
which The Hartford is the common parent. The Hartford and its non-life
subsidiaries filed a single consolidated Federal income tax return for 1998 and
1997 and intend to file a separate consolidated Federal income tax return for
1999. The life insurance companies filed a separate consolidated Federal income
tax return for 1998 and 1997 and intend to file a separate consolidated Federal
income tax return for 1999. Federal income taxes (received) paid by the Company
for operations and capital gains (losses) were $(8,815), $25,780, and $(14,499)
in 1999, 1998 and 1997, respectively. The effective tax rate was (73)%, 27%, and
(28)% in 1999, 1998 and 1997, respectively.
F-12
<PAGE>
The following schedule provides a reconciliation of the tax provision (including
realized capital gains(losses)) at the U.S. Federal Statutory rate to Federal
income tax (benefit) expense (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
------------------
Tax provision at U.S. Federal Statutory rate $ 5 $48 $ 20
Tax deferred acquisition costs 31 25 25
Statutory to tax reserve differences (7) 8 1
Investments (31) (60) (61)
Other (8) 15 (1)
------------------
FEDERAL INCOME TAX (BENEFIT) EXPENSE $(10) $36 $(16)
------------------
</TABLE>
7. CAPITAL AND SURPLUS AND SHAREHOLDER DIVIDEND RESTRICTIONS:
The maximum amount of dividends which can be paid to shareholders by Connecticut
domiciled insurance companies, without prior approval, is generally restricted
to the greater of 10% of surplus as of the preceding December 31st or the net
gain from operations for the previous year. Dividends are paid as determined by
the Board of Directors and are not cumulative. No dividends were paid in 1999,
1998 or 1997. The amount available for dividend in 2000 is approximately
$60,855.
8. PENSION, RETIREMENT, AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:
All employees that work for The Hartford's life insurance companies are included
in The Hartford's non-contributory defined benefit pension plans. These plans
provide pension benefits that are based on years of service and the employee's
compensation during the last ten years of employment. The Hartford's funding
policy is to contribute annually an amount between the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974,
as amended, and the maximum amount that can be deducted for U.S. Federal income
tax purposes. Generally, pension costs are funded through the purchase of group
pension contracts sold by affiliates. The costs that were allocated to the
Company for pension related expenses were $762, $1,045 and $840 for 1999, 1998
and 1997, respectively.
Employees of The Hartford's life insurance companies are also provided, through
The Hartford, certain health care and life insurance benefits for eligible
retired employees. The contribution for health care benefits depends on the
retiree's date of retirement and years of service. In addition, this benefit
plan has a defined dollar cap, which limits average company contributions. The
Hartford has prefunded a portion of the health care and life insurance
obligations through trust funds where such prefunding can be accomplished on a
tax effective basis. Postretirement health care and life insurance benefits
expense allocated to the Company was not material to the results of operations
for 1999, 1998 or 1997.
The assumed rate in the per capita cost of health care (the health care trend
rate) was 7.1% for 1999, decreasing ratably to 5.0% in the year 2003. Increasing
the health care trend rates by one percent per year would have an immaterial
impact on the accumulated postretirement benefit obligation and the annual
expense. To the extent that the actual experience differs from the inherent
assumptions, the effect will be amortized over the average future service of
covered employees.
Substantially all of The Hartford's life insurance companies' employees are
eligible to participate in The Hartford's Investment and Savings Plan. Under
this plan, designated contributions, which may be invested in Class A Common
Stock of HLI or certain other investments, are matched to a limit of 3% of
compensation.
9. SEPARATE ACCOUNTS:
The Company maintains separate account assets totaling $44.9 billion and $32.9
billion as of December 31, 1999 and 1998, respectively. Separate account assets
are segregated from other investments and reported at fair value. Separate
account liabilities are determined in accordance with prescribed actuarial
methodologies, which approximate the market value less applicable surrender
charges. The resulting surplus is recorded in the general account statement of
operations as a component of Net Transfers to Separate Accounts. The Company's
separate accounts are non-guaranteed, wherein the policyholder assumes
substantially all the investment risk and rewards. Investment income (including
investment gains and losses) and interest credited to policyholders on separate
account assets are not separately reflected in the statutory statements of
operations.
Separate account management fees, net of minimum guarantees, were $493 million,
$363 million, and $252 million in 1999, 1998 and 1997, respectively, and are
recorded as a component of fee income on the Company's statutory basis
Statements of Operations.
F-13
<PAGE>
10. COMMITMENTS AND CONTINGENT LIABILITIES:
(a) LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for alleged economic and punitive damages
have been asserted. Some of these cases have been filed as purported class
actions and some cases have been filed in certain jurisdictions that permit
punitive damage awards disproportionate to the actual damages incurred. Although
there can be no assurances, at the present time, the Company does not anticipate
that the ultimate liability, arising from such pending or threatened litigation,
will have a material adverse effect on the statutory capital and surplus of the
Company.
(b) GUARANTY FUNDS
Under insurance guaranty fund laws in each state, the District of Columbia and
Puerto Rico, insurers licensed to do business can be assessed by state insurance
guaranty associations for certain obligations of insolvent insurance companies
to policyholders and claimants. Recent regulatory actions against certain large
life insurers encountering financial difficulty have prompted various state
insurance guaranty associations to begin assessing life insurance companies for
the deemed losses. Most of these laws do provide, however, that an assessment
may be excused or deferred if it would threaten an insurer's solvency and
further provide annual limits on such assessments. Part of the assessments paid
by the Company pursuant to these laws may be used as credits for a portion of
the associated premium taxes. The Company paid guaranty fund assessments of
approximately $523, $1,043 and $1,544 in 1999, 1998, and 1997, respectively, of
which $318, $995, and $548 in 1999, 1998 and 1997, respectively were estimated
to be creditable against premium taxes.
(c) TAX MATTERS
The Company's Federal income tax returns are routinely audited by the Internal
Revenue Service ("IRS"). The Company's 1997 and 1996 Federal income tax returns
are currently under audit by the IRS. As of March 31, 2000, the audit was in its
initial stage and no material issues had been raised.
F-14
