<PAGE>
File No. 33-60702
Securities and Exchange Commission
Washington, D.C.
Form N-4
Registration Statement Under the Securities Act of 1933
-----
Pre-Effective Amendment No. / /
---- ----
-----
Post-Effective Amendment No. 4 / X /
---- ----
and/or
Registration Statement Under the Investment Company Act of 1940
Amendment No. 4
----
(check appropriate box or boxes)
ITT Hartford Life and Annuity Insurance Company
(formerly ITT Life Insurance Corporation)
Putnam Capital Manager Trust Separate Account Two
(Exact Name of Registrant)
ITT Hartford Life and Annuity Insurance Corporation
(Name of Depositor)
Waterford Park
505 Highway, 169 North
Minneapolis, MN 55441
(Address of Depositor's Principal Offices)
Depositor's Telephone Number: (612) 545-2100
Rodney J. Vessels, Esquire
P.O. Box 2999
Hartford, CT 06104-2999
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.
<PAGE>
- 2 -
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
-----
X on (May 1, 1995) pursuant to paragraph (b)(1)(v) of Rule 485
-----
60 days after filing pursuant to paragraph (a)(1) of Rule 485
-----
on May 1, 1995 pursuant to paragraph (a)(1) of Rule 485
-----
75 days after filing pursuant to paragraph (a)(2) of Rule 485
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on ____________ pursuant to paragraph (a)(2) of Rule 485
-----
Calculation of Registration Fee Under Securities Act of 1933
- -------------------------------------------------------------------------------
Title of Amount Proposed Maximum Proposed Maximum Amount of
Securities Being Offering Aggregate Registration
Being Requested Registered Price Per Unit Offering Price Fee
- -------------------------------------------------------------------------------
Pursuant to Regulation 270.24f-2 Paid
ITT Hartford Life and Annuity under the Investment Company Act
Insurance Company - Putnam of 1940, Registrant hereby elects to
Capital Manager Trust Separate register an indefinite number of units of
Account Two Units of Interest interest in this Separate Account.
- -------------------------------------------------------------------------------
A Rule 24f-2 Notice for the Registrant's most recent fiscal year will be filed
on or about February 28, 1995.
<PAGE>
- 3 -
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 ITEM NO. PROSPECTUS HEADING
-------------------------- ----------------------
1. Cover Page Cover Page
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Information Statement of Additional Information
5. General Description of Registrant, The Contract; The Separate Account Two;
Depositor, and Portfolio Companies The Fixed Account; The Company; The
Funds; General Matters
6. Deductions Charges Under the Contract
7. General Description of Operation of the Contract
Annuity Contracts Accumulation Period; Death Benefit; The
Contract; The Separate Account Two;
General Matters
8. Annuity Period Annuity/Payout Period
9. Death Benefit Death Benefit
10. Purchases and Contract Value Operation of the Contract/
Accumulation Period
11. Redemptions Operation of the Contract/
Accumulation Period
12. Taxes Federal Tax Considerations
13. Legal Proceedings General Matters - Legal
Proceedings
14. Table of Contents of the Statement Table of Contents to Statement
of Additional Information of Additional Information
<PAGE>
- 4 -
PART A
<PAGE>
- 5 -
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY--
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO
This Prospectus describes the Putnam Capital Manager Plan, a tax deferred
variable annuity issued by ITT Hartford Life and Annuity Insurance Company ("ITT
Hartford"). Payments for the Contract will be held in a series of ITT Hartford
Life and Annuity Insurance Company - Putnam Capital Manager Trust Separate
Account Two (the "Putnam Separate Account Two" or the "Separate Account") or in
the Fixed Account of ITT Hartford. Allocations to and transfers to and from the
Fixed Account are not permitted in certain states.
There are currently ten Sub-Accounts available under the Contract. The
underlying investment portfolios ("Funds") of Putnam Capital Manager Trust for
the Sub-Accounts are PCM Diversified Income Fund, PCM Global Asset Allocation
Fund, PCM Global Growth Fund, PCM Growth and Income Fund, PCM High Yield Fund,
PCM Money Market Fund, PCM New Opportunities Fund, PCM U.S. Government and High
Quality Bond Fund, PCM Utilities Growth and Income Fund and PCM Voyager Fund.
This Prospectus sets forth the information concerning the Separate Account and
the Fixed Account that investors should know before investing. This Prospectus
should be kept for future reference. Additional information about the Separate
Account and the Fixed Account has been filed with the Securities and Exchange
Commission and is available without charge upon request. To obtain the
Statement of Additional Information send a written request to ITT Hartford Life
and Annuity Insurance Company, Attn: Individual Annuity Operations, P.O. Box
5085, Hartford, CT 06102-5085. The Table of Contents for the Statement of
Additional Information may be found on page_____of this Prospectus. The
Statement of Additional Information is incorporated by reference into this
Prospectus.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
THIS PROSPECTUS IS ACCOMPANIED BY A CURRENT PROSPECTUS FOR PUTNAM CAPITAL
MANAGER TRUST AND IS VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE
TRUST.
- --------------------------------------------------------------------------------
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED
BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- --------------------------------------------------------------------------------
Prospectus Dated: May 1, 1995
Statement of Additional Information Dated: May 1, 1995
<PAGE>
- 6 -
TABLE OF CONTENTS
PAGE
GLOSSARY OF SPECIAL TERMS. . . . . . . . . . . . . . . . . . . . . . . . .
FEE TABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACCUMULATION UNIT VALUES . . . . . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE RELATED INFORMATION. . . . . . . . . . . . . . . . . . . . . .
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE CONTRACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right to Cancel Period. . . . . . . . . . . . . . . . . . . . . . . .
THE SEPARATE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE FIXED ACCOUNT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OPERATION OF THE CONTRACT/ACCUMULATION PERIOD. . . . . . . . . . . . . . .
Premium Payments. . . . . . . . . . . . . . . . . . . . . . . . . . .
Value of Accumulation Units . . . . . . . . . . . . . . . . . . . . .
Value of the Fixed Account. . . . . . . . . . . . . . . . . . . . . .
Value of the Contract . . . . . . . . . . . . . . . . . . . . . . . .
Transfers Among Sub-Accounts. . . . . . . . . . . . . . . . . . . . .
Transfers Between the Fixed Account and the Sub-Accounts. . . . . . .
Redemption/Surrender of a Contract. . . . . . . . . . . . . . . . . .
DEATH BENEFIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CHARGES UNDER THE CONTRACT . . . . . . . . . . . . . . . . . . . . . . . .
Contingent Deferred Sales Charges . . . . . . . . . . . . . . . . . .
Free Withdrawal Privilege . . . . . . . . . . . . . . . . . . . . . .
Mortality and Expense Risk Charge . . . . . . . . . . . . . . . . . .
Administration and Maintenance Fees . . . . . . . . . . . . . . . . .
<PAGE>
- 7 -
Premium Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ANNUITY/PAYOUT PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . .
Electing an Annuity Commencement Date and Form of Annuity . . . . . .
Optional Forms of Annuity . . . . . . . . . . . . . . . . . . . . . .
The Annuity Unit and Valuation. . . . . . . . . . . . . . . . . . . .
Determination of Payment Amount . . . . . . . . . . . . . . . . . . .
FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxation of ITT Hartford and the Separate Account . . . . . . . . . .
Taxation of Annuities in General - Non-Tax Qualified Purchasers . . .
Federal Income Tax Withholding. . . . . . . . . . . . . . . . . . . .
General Provisions Affecting Tax Qualified Plans. . . . . . . . . . .
Aggregation of Two or More Annuity Contracts. . . . . . . . . . . . .
GENERAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Modification. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Delay of Payments . . . . . . . . . . . . . . . . . . . . . . . . . .
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution of the Contracts . . . . . . . . . . . . . . . . . . . .
Other Contracts Offered . . . . . . . . . . . . . . . . . . . . . . .
Custodian of Separate Account Assets. . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Information. . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION . . . . . . . . .
<PAGE>
- 8 -
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT: An accounting unit of measure used to calculate values
before Annuity payments begin.
ANNUITANT: The person or participant upon whose life the Contract is issued.
ANNUITY: A series of payments for life, or for life with a minimum number of
payments or a determinable sum guaranteed, or for a joint lifetime and
thereafter during the lifetime of the survivor, or for a designated period.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to commence.
For group unallocated Contracts, the date for each participant is determined by
the Contract Owner in accordance with the terms of the Plan.
ANNUITY UNIT: An accounting unit of measure used to calculate the value of
Annuity payments.
BENEFICIARY: The person(s) who receive Contract Values in the event of the
Annuitant's or Contract Owner's death under certain conditions. Under a group
unallocated Contract, the person named within the Plan documents/enrollment
forms by each Participant entitled to receive benefits as per the terms of the
Contract in case of the death of the Participant.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: Securities and Exchange Commission.
CONTINGENT ANNUITANT: The person so designated by the Contract Owner, who upon
the Annuitant's death, prior to the Annuity Commencement Date, becomes the
Annuitant.
CONTRACT ANNIVERSARY: The anniversary of the Contract Date.
CONTRACT OWNER(S): The owner(s) of the Contract, trustee or other entity,
sometimes herein referred to as "you".
CONTRACT VALUE: The aggregate value of any Sub-Account Accumulation Units held
under the Contract plus the value of the Fixed Account.
CONTRACT YEAR: A period of 12 months commencing with the Contract Date or any
anniversary thereof.
DEATH BENEFIT: The amount payable upon the Death of a Contract Owner,
Annuitant, or Participant in the case of group Contracts prior to age 90 and
before annuity payments have started.
<PAGE>
- 9 -
FIXED ACCOUNT: Part of the General Account of ITT Hartford to which a Contract
Owner may allocate all or a portion of his Premium Payment or Contract Value.
FIXED ANNUITY: An Annuity providing for guaranteed payments which remain fixed
in amount throughout the payment period and which do not vary with the
investment experience of a separate account.
FUNDS: Currently, the portfolios of Putnam Capital Manager Trust described on
page ___ of this Prospectus.
GENERAL ACCOUNT: The General Account of ITT Hartford which consists of all
assets of ITT Hartford Life and Annuity Insurance Company other than those
allocated to the separate accounts of the ITT Hartford Life and Annuity
Insurance Company.
HOME OFFICE OF THE COMPANY: Currently located at 200 Hopmeadow Street,
Simsbury, Connecticut. All correspondence concerning the Contract should be
sent to P.O. Box 5085, Hartford, CT 06102-5085, Attn: Individual Annuity
Operations.
ITT HARTFORD: ITT Hartford Life and Annuity Insurance Company.
MINIMUM DEATH BENEFIT: The minimum amount payable upon the death of the
Contract Owner/Annuitant or Participant in the case of group Contracts before
annuity payments have commenced.
PARTICIPANT: (For Group Unallocated Contracts Only). Any eligible employee of
an employer/Contract Owner participating in the Plan.
PLAN: A voluntary Plan of an Employer which qualifies for special tax treatment
under a section of the Internal Revenue Code.
PREMIUM PAYMENT: A payment made to ITT Hartford pursuant to the terms of the
Contract.
PREMIUM TAX: A tax charged by a state or municipality on Premium Payments or
Contract Values.
SEPARATE ACCOUNT: The ITT Hartford separate account entitled "ITT Hartford Life
and Annuity Insurance Company - Putnam Capital Manager Trust Separate Account
Two".
SPECIFIED CONTRACT ANNIVERSARY: Every seventh Contract Anniversary (i.e., the
7th, 14th, 21st, etc. Contract Anniversaries).
SUB-ACCOUNT: Accounts established within the Separate Account with respect to a
Fund.
<PAGE>
- 10 -
TERMINATION VALUE: The Contract Value upon termination of the Contract prior to
the Annuity Commencement Date, less any applicable Premium Taxes, the Annual
Maintenance Fee and any applicable contingent deferred sales charges.
TRUST: Putnam Capital Manager Trust.
UNALLOCATED CONTRACTS - Contracts issued to employers or such other entities as
Contract Owners with no allocation to a specific Participant, as defined herein.
The Plans will be responsible for the individual allocations.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined at the close of the New York Stock
Exchange (currently 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
VARIABLE ANNUITY: An Annuity providing for payments varying in amount in
accordance with the investment experience of the assets of the Separate Account.
<PAGE>
SUMMARY
Contract Owner Transaction Expense
(All Sub Accounts)
<TABLE>
<CAPTION>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of premium payments). . . . . . . . . . . . . . . . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0
Deferred Sales Load (as a percentage of amounts withdrawn) . . . . .
First Year (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7%
Second Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%
Third Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%
Fourth Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4%
Fifth Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3%
Sixth Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2%
Seventh Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1%
Eighth Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0%
Annual Contract Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25 (2)
Annual Expenses-Separate Account
(as a percentage of average account value)
Mortality and Expense Risk 1.250%
Administration Fees 0.150%
-------
Total 1.400%
</TABLE>
Annual Fund Operating Expense
(as a percentage of net assets)
<TABLE>
<CAPTION>
Total Fund
Management Other Operating
Fees Expenses Expenses
---------- -------- ----------
<S> <C> <C> <C>
PCM Growth and Income Fund . . . . . . . . . . . . 0.57% 0.05% 0.62%
PCM High Yield Fund. . . . . . . . . . . . . . . . 0.66% 0.08% 0.74%
PCM Global Growth Fund . . . . . . . . . . . . . . 0.60% 0.17% 0.77%
PCM Money Market Fund. . . . . . . . . . . . . . . 0.42% 0.13% 0.55%
PCM Global Asset Allocation Fund . . . . . . . . . 0.66% 0.10% 0.76%
PCM U.S. Government and High Quality Bond Fund . . 0.60% 0.07% 0.67%
PCM Utilities Growth and Income Fund . . . . . . . 0.60% 0.08% 0.68%
PCM Voyager Fund . . . . . . . . . . . . . . . . . 0.63% 0.08% 0.71%
PCM Diversified Income Fund. . . . . . . . . . . . 0.67% 0.13% 0.80%
PCM New Opportunities Fund (3) . . . . . . . . . . 0.70% 0.01% 0.71%
<FN>
(1) Length of time from premium payment.
(2) The annual maintenance charge is a single $25 charge on a Contract. It is
deducted proportionally from the investment options in use at the time of the
charge. In the Example, the annual maintenance charge is approximated as a 0.07%
annual asset charge based on the experience of the Contracts.
(3) Annualized expenses.
</TABLE>
<PAGE>
EXAMPLE
<TABLE>
<CAPTION>
If you surrender your contract at If you annuitize at the end of the
the end of the applicable time period: applicable time period:
You would pay the following expenses You would pay the following expenses
on a $1,000 investment, assuming a 5% on 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>
PCM Growth and Income Fund . . . . . . . . . . . . $91 $116 $143 $244 $21 $65 $113 $243
PCM High Yield Fund. . . . . . . . . . . . . . . . 93 120 150 257 22 69 119 256
PCM Global Growth Fund . . . . . . . . . . . . . . 93 121 151 260 22 70 120 259
PCM Money Market Fund. . . . . . . . . . . . . . . 91 114 140 237 20 63 109 236
PCM Global Asset Allocation Fund . . . . . . . . . 93 120 151 259 22 70 120 258
PCM U.S. Government and High Quality Bond Fund . . 92 118 146 249 21 67 115 248
PCM Utilities Growth and Income Fund . . . . . . . 92 118 147 250 21 67 116 249
PCM Voyager Fund . . . . . . . . . . . . . . . . . 92 119 148 253 22 68 117 252
PCM Diversified Income Fund. . . . . . . . . . . . 93 122 153 263 23 71 122 262
PCM New Opportunities Fund . . . . . . . . . . . . 92 119 148 253 22 68 117 252
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>
PCM Growth and Income Fund . . . . . . . . . . . . $21 $66 $113 $244
PCM High Yield Growth Fund . . . . . . . . . . . . 23 70 120 257
PCM Global Growth Fund . . . . . . . . . . . . . . 23 71 121 260
PCM Money Market Fund. . . . . . . . . . . . . . . 21 64 110 237
PCM Global Asset Allocation Fund . . . . . . . . . 23 70 121 259
PCM U.S. Government and High Quality Bond Fund . . 22 68 116 249
PCM Utilities Growth and Income Fund . . . . . . . 22 68 117 250
PCM Voyager Fund . . . . . . . . . . . . . . . . . 22 69 118 253
PCM Diversified Income Fund. . . . . . . . . . . . 23 72 123 263
PCM New Opportunities Fund . . . . . . . . . . . . 22 69 118 253
</TABLE>
The purpose of this table is to assist the contract owner in understanding
various costs and expenses that a contract owner will bear directly or
indirectly. The table reflects expenses of the Separate Account and underlying
Funds. Premium taxes may also be applicable.
This Example should not be considered a representation of passed or future
expenses and actual expenses may be greater or less than those shown.
<PAGE>
- 11 -
SUMMARY
WHAT IS THE CONTRACT AND HOW MAY I PURCHASE ONE?
The Contract offered is a tax-deferred Variable Annuity Contract (see "Taxation
of Annuities in General," page__). Generally, the Contract is purchased by
completing an application or an order to purchase a Contract and submitting it,
along with the initial Premium Payments, to ITT Hartford for its approval. The
minimum initial Premium Payment is $1,000 with a minimum allocation to any Fund
of $500. Certain plans may make smaller initial and subsequent periodic premium
payments. Subsequent Premium Payments, if made, must be a minimum of $500. A
Contract Owner may, at any time within 10 days of delivery of a Contract sold
hereunder, return the Contract to ITT Hartford at its Home Office and the value
of the Contract (without deduction for any charges normally assessed thereunder)
will be refunded. The Contract Owner bears the investment risk during the
period prior to the Company's receipt of request for cancellation, except for
Contract Owners in Georgia, North Carolina, South Carolina, Washington, West
Virginia, Utah, and other states where required by law who will be refunded the
premiums (see "Right to Cancel Period," page__).
WHO MAY PURCHASE THE CONTRACT?
Any individual, group or trust may purchase the Contracts, including any trustee
or custodian for a retirement plan which qualifies for special Federal tax
treatment under the Internal Revenue Code including individual retirement
annuities ("Qualified Contracts"). (See "Federal Tax Considerations" commencing
on page__ and Appendix I commencing on page__.)
WHAT TYPES OF INVESTMENTS ARE AVAILABLE UNDER THE CONTRACT?
The underlying investments for the Contract are shares of Putnam Capital Manager
Trust, an open-end diversified series investment company with multiple
portfolios ("the Funds") as follows: PCM Diversified Income Fund, PCM Global
Asset Allocation Fund, PCM Global Growth Fund, PCM Growth and Income Fund, PCM
High Yield Fund, PCM Money Market Fund, PCM New Opportunities Fund, PCM U.S.
Government and High Quality Bond Fund, PCM Utilities Growth and Income Fund, PCM
Voyager Fund, and such other Funds as shall be offered from time to time, and
the Fixed Account, or a combination of the Funds and the Fixed Account. (See
"The Funds" commencing on page__ and "The Fixed Account" commencing on page__.)
<PAGE>
- 12 -
WHAT ARE THE CHARGES UNDER THE CONTRACTS?
SALES EXPENSES
There is no deduction for sales expenses from Premium Payments when made.
However, a contingent deferred sales charge may be assessed against Contract
Values when they are surrendered. (See "Contingent Deferred Sales Charges"
commencing on page__.)
The length of time from receipt of a Premium Payment to the time of surrender
determines the contingent deferred sales charge. For this purpose, Premium
Payments will be deemed to be surrendered in the order in which they are
received and all surrenders will be first from Premium Payments and then from
other Contract values. The charge is a percentage of the amount withdrawn (not
to exceed the aggregate amount of the Premium Payments made). The charge is as
follows:
Length of Time
Charge from Premium Payment
------ --------------------
(Number of Years)
7% 1
6% 2
5% 3
4% 4
3% 5
2% 6
1% 7
0% 8 or more
No contingent deferred sales charge will be assessed in the event of death of
the Annuitant or Contract Owner, or upon the exercise of the withdrawal
privilege or if Contract Values are applied to an Annuity option provided for
under the Contract (except that a surrender out of Annuity Option Four will be
subject to a contingent deferred sales charge where applicable). (See
"Contingent Deferred Sales Charges" commencing on page__.)
FREE WITHDRAWAL PRIVILEGE
Withdrawals of up to 10% per Contract Year, on a noncumulative basis, of the
Premium Payments made to a Contract may be made without the imposition of the
contingent deferred sales charge. (See "Contingent Deferred Sales Charges"
commencing on page__.) Certain plans or programs may have different withdrawal
privileges.
<PAGE>
MORTALITY AND EXPENSE RISKS
For assuming the mortality and expense risks under the Contract, ITT Hartford
will impose a 1.25% per annum charge against all Contract Values held in the
Separate Account (see "Mortality and Expense Risk Charge," page__).
ANNUAL ADMINISTRATION AND MAINTENANCE FEE
The Contract provides for administration and Contract maintenance charges. For
administration, the charge is .15% per annum against all Contract Values held in
the Separate Account. For Contract maintenance, the charge is $25 annually.
(See "Administration and Maintenance Fees," page__.) Contracts with a Contract
Value of $50,000 or more at time of Contract Anniversary will not be assessed
this fee.
PREMIUM TAXES
A deduction will be made for Premium Taxes for Contracts sold in certain states.
(See "Premium Taxes," page__.)
CHARGES BY THE FUNDS
The Funds are subject to certain fees, charges and expenses. (See the
Prospectus for the Trust attached hereto.)
CAN I GET MY MONEY IF I NEED IT?
Subject to any applicable charges, the Contract may be surrendered, or portions
of the value of such Contract may be withdrawn, at any time prior to the Annuity
Commencement Date. However, if less than $500 remains in a Contract as a result
of a withdrawal, ITT Hartford may terminate the Contract in its entirety. (See
"Redemption/Surrender of a Contract," page__.)
DOES THE CONTRACT PAY ANY DEATH BENEFITS?
A death benefit is provided in the event of death of the Annuitant, Contract
Owner, or Joint Contract Owner prior to the Annuitant's, Contract Owner's, or
Joint Contract Owner's 85th birthday and before Annuity payments have commenced.
(See "Death Benefit," page__.)
WHAT ARE THE AVAILABLE ANNUITY OPTIONS UNDER THE CONTRACT?
There are five available Annuity options under the Contract which are described
on page__. The Annuity Commencement Date may not be deferred beyond the
Annuitant's 90th birthday except in certain states where the Annuity
Commencement Date may not be deferred beyond the Annuitant's 85th birthday. If
a Contract Owner does not elect otherwise, the Contract Value less
<PAGE>
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applicable premium taxes will be applied on the Annuity Commencement Date under
the second option to provide a life annuity with 120 monthly payments certain.
DOES THE CONTRACT OWNER HAVE ANY VOTING RIGHTS UNDER THE CONTRACT?
Contract Owners will have the right to vote on matters affecting an underlying
Fund to the extent that proxies are solicited by such Fund. If a Contract Owner
does not vote, ITT Hartford shall vote such interests in the same proportion as
shares of the Fund for which instructions have been received by ITT Hartford.
(See "Voting Rights," page__.)
PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance related information
concerning its Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
The PCM Diversified Income Fund, PCM Global Asset Allocation Fund, PCM Global
Growth Fund, PCM Growth and Income Fund, PCM High Yield Fund, PCM Money Market
Fund, PCM New Opportunities Fund, PCM U.S. Government and High Quality Bond
Fund, PCM Utilities Growth and Income Fund and PCM Voyager Fund Sub-Accounts may
include total return in advertisements or other sales material.
When a Sub-Account advertises its total return, it will usually be calculated
for one year, five years, and ten years or some other relevant periods if the
Sub-Account has not been in existence for at least ten years. Total return is
measured by comparing the value of an investment in the Sub-Account at the
beginning of the relevant period to the value of the investment at the end of
the period (assuming the deduction of any contingent deferred sales charge which
would be payable if the investment were redeemed at the end of the period).
The PCM Diversified Growth Fund, PCM Growth and Income Fund, PCM High Yield
Fund, PCM U.S. Government and High Quality Bond Fund, and PCM Utilities Growth
and Income Fund Sub-Accounts may advertise yield in addition to total return.
The yield will be computed in the following manner: The net investment income
per unit earned during a recent one month period is divided by the unit value on
the last day of the period. This figure reflects the recurring charges at the
Separate Account level including the Contract Maintenance Fee.
The PCM 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
<PAGE>
(For an accumulation unit outstanding throughout the period)
The following information has been examined by Arthur Andersen & Co.,
independent public accountants, whose report thereon is included in the
Statement of Additional Information, which is incorporated by reference to this
Prospectus.
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1994 1993
---- ----
<S> <C> <C>
Voyager Fund Sub-Account
Accumulation unit value at beginning of period . . . . . . . . . . . . . . . . . $ 23.530 $ 10.000 (a)
Accumulation unit value at end of period . . . . . . . . . . . . . . . . . . . . $ 23.445 $ 23.530
Number accumulation units outstanding at end of period (in thousands). . . . . . 13,732 6,509
Growth and Income Fund Sub-Account
Accumulation unit value at beginning of period . . . . . . . . . . . . . . . . . $ 20.390 $ 10.000 (a)
Accumulation unit value at end of period . . . . . . . . . . . . . . . . . . . . $ 20.178 $ 20.390
Number accumulation units outstanding at end of period (in thousands). . . . . . 26,790 15,223
Global Asset Allocation Sub-Account
Accumulation unit value at beginning of period . . . . . . . . . . . . . . . . . $ 16.988 $ 10.000 (a)
Accumulation unit value at end of period . . . . . . . . . . . . . . . . . . . . $ 16.335 $ 16.988
Number accumulation units outstanding at end of period (in thousands). . . . . . 8,665 4,491
High Yield Fund Sub-Account
Accumulation unit value at beginning of period . . . . . . . . . . . . . . . . . $ 17.890 $ 10.000 (a)
Accumulation unit value at end of period . . . . . . . . . . . . . . . . . . . . $ 17.476 $ 17.890
Number accumulation units outstanding at end of period (in thousands). . . . . . 7,152 5,066
U.S. Government and High Quality Bond Fund Sub-Account
Accumulation unit value at beginning of period . . . . . . . . . . . . . . . . . $ 16.277 $ 10.000 (a)
Accumulation unit value at end of period . . . . . . . . . . . . . . . . . . . . $ 15.533 $ 16.277
Number accumulation units outstanding at end of period (in thousands). . . . . . 7,585 7,254
Money Market Fund Sub-Account
Accumulation unit value at beginning of period . . . . . . . . . . . . . . . . . $ 1.294 $ 10.000 (a)
Accumulation unit value at end of period . . . . . . . . . . . . . . . . . . . . $ 1.325 $ 1.294
Number accumulation units outstanding at end of period (in thousands). . . . . . 38,819 12,916
Global Growth Fund Sub-Account
Accumulation unit value at beginning of period . . . . . . . . . . . . . . . . . $ 13.432 $ 10.000 (a)
Accumulation unit value at end of period . . . . . . . . . . . . . . . . . . . . $ 13.119 $ 13.432
Number accumulation units outstanding at end of period (in thousands). . . . . . 20,285 8,312
Utilities Growth and Income Fund Sub-Account
Accumulation unit value at beginning of period . . . . . . . . . . . . . . . . . $ 11.876 $ 10.000 (a)
Accumulation unit value at end of period . . . . . . . . . . . . . . . . . . . . $ 10.889 $ 11.876
Number accumulation units outstanding at end of period (in thousands). . . . . . 11,859 11,003
Diversified Income Fund Sub-Account
Accumulation unit value at beginning of period . . . . . . . . . . . . . . . . . $ 10.000 $ 10.000 (a)
Accumulation unit value at end of period . . . . . . . . . . . . . . . . . . . . $ 9.622 $ 10.188
Number accumulation units outstanding at end of period (in thousands). . . . . . 8,609 4,428
Now Opportunities Fund Sub-Account
Accumulation unit value at beginning of period . . . . . . . . . . . . . . . . . $ 10.000 (b)
Accumulation unit value at end of period . . . . . . . . . . . . . . . . . . . . $ 10.718
Number accumulation units outstanding at end of period (in thousands). . . . . . 2,699
<FN>
(a) Inception date, September 15, 1993.
(b) Inception date, June 20, 1994.
</TABLE>
<PAGE>
- 15 -
reinvested in Sub-Account units and thus compounded in the course of a 52-week
period. Yield reflects the recurring charges at the Separate Account level
including the Contract Maintenance Fee.
Total return at the Separate Account level includes all Contract charges: sales
charges, mortality and expense risk charges, and the Contract Maintenance Fee,
and is therefore lower than total return at the Fund level, with no comparable
charges. Likewise, yield at the Separate Account level includes all recurring
charges (except sales charges), and is therefore lower than yield at the Fund
level, with no comparable charges.
INTRODUCTION
This Prospectus has been designed to provide you with the necessary information
to make a decision on purchasing a tax-deferred Variable Annuity Contract
offered by ITT Hartford and funded by the Fixed Account and/or a series of the
Putnam Separate Account. Please read the Glossary of Special Terms on pages 2
and 3 prior to reading this Prospectus to familiarize yourself with the terms
being used.
THE CONTRACT
The Putnam Capital Manager Plan is a tax-deferred Variable Annuity Contract.
Payments for the Contract will be held in the Fixed Account and/or a series of
the Putnam Separate Account. Initially there are no deductions from your
Premium Payments (except for Premium Taxes, if applicable) so your entire
Premium Payment is put to work in the investment Sub-Account(s) of your choice
or the Fixed Account. Each Sub-Account invests in a different underlying Fund
with its own distinct investment objectives. You pick the Sub-Account(s) with
the investment objectives that meet your needs. You may select one or more
Sub-Accounts and/or the Fixed Account and determine the percentage of your
Premium Payment that is put into a Sub-Account or the Fixed Account. You may
also transfer assets among the Sub-Accounts and the Fixed Account so that your
investment program meets your specific needs over time. There are minimum
requirements for investing in each Sub-Account and the Fixed Account which are
described later in this Prospectus. In addition, there are certain other
limitations on withdrawals and transfers of amounts in the Sub-Accounts and the
Fixed Account as described in this Prospectus. See "Charges Under the Contract"
for a description of the charges for redeeming a Contract and other charges made
under the Contract.
Generally, the Contract contains the five optional forms of Annuity described
later in this Prospectus. Options 2, 4 and 5 are available with respect to
Qualified Contracts only if the guaranteed payment period is less than the life
expectancy of the Annuitant at the time the option becomes effective. Such life
expectancy shall be computed on the basis of the mortality table prescribed by
the IRS, or if none is prescribed, the mortality table then in use by ITT
Hartford.
<PAGE>
- 16 -
The Contract Owner may select an Annuity Commencement Date and an Annuity option
which may be on a fixed or variable basis, or a combination thereof. The
Annuity Commencement Date may not be deferred beyond the Annuitant's 90th
birthday, except in certain states where the Annuity Commencement Date may not
be deferred beyond the Annuitant's 85th birthday.
The Annuity Commencement Date and/or the Annuity option may be changed from time
to time, but any such change must be made at least 30 days prior to the date on
which payments are scheduled to begin. If you do not elect otherwise, payments
will begin at the Annuitant's age 90 under Option 2 with 120 monthly payments
certain (Option 1 for Contracts issued in Texas).
When an Annuity is effected under a Contract, unless otherwise specified,
Contract Values held in the Sub-Accounts will be applied to provide a Variable
Annuity based on the pro rata amount in the various Sub-Accounts. Fixed Account
Contract Values will be applied to provide a Fixed Annuity. Variable Annuity
payments will vary in accordance with the investment performance of the
Sub-Accounts you have selected. The Contract allows the Contract Owner to
change the Sub-Accounts on which variable payments are based after payments have
commenced once every three (3) months. Any Fixed Annuity allocation may not be
changed.
The Contract offered under this Prospectus may be purchased by any individual
("Non-Qualified Contract") or by an individual, trustee or custodian for a
retirement plan qualified under Sections 401(a) or 403(a) of the Internal
Revenue Code; annuity purchase plans adopted by public school systems and
certain tax-exempt organizations according to Section 403(b) of the Internal
Revenue Code; Individual Retirement Annuities adopted according to Section 408
of the Internal Revenue Code; employee pension plans established for employees
by a state, a political subdivision of a state, or an agency or instrumentality
of either a state or a political subdivision of a state, and certain eligible
deferred compensation plans as defined in Section 457 of the Internal Revenue
Code ("Qualified Contracts").
RIGHT TO CANCEL PERIOD
If you are not satisfied with your purchase you may surrender the Contract by
returning it within ten days (or longer in some states) after you receive it. A
written request for cancellation must accompany the Contract. In such event,
ITT Hartford will, without deduction for any charges normally assessed
thereunder, pay you an amount equal to the sum of (i) the difference between the
Premium Payment and the amounts allocated to the Sub-Account(s) and/or the Fixed
Account under the Contract and (ii) the Contract Value on the date of surrender
attributable to the amounts so allocated. You bear the investment risk during
the period prior to the Company's receipt of request for cancellation. ITT
Hartford will refund the premium paid only for individual retirement annuities
and in those states where required by law.
<PAGE>
- 17 -
THE SEPARATE ACCOUNT
The Separate Account was established on May 20, 1991, in accordance with
authorization by the Board of Directors of ITT Hartford. It is the Separate
Account in which ITT Hartford sets aside and invests the assets attributable to
variable annuity Contracts, including the Contracts sold under this Prospectus.
Although the Separate Account is an integral part of ITT Hartford, it is
registered as a unit investment trust under the Investment Company Act of 1940.
This registration does not, however, involve supervision by the Commission of
the management or the investment practices or policies of the Separate Account
or ITT Hartford. The Separate Account meets the definition of "separate
account" under federal securities law.
Under Wisconsin law, the assets of the Separate Account attributable to the
Contracts offered under this Prospectus are held for the benefit of the owners
of, and the persons entitled to payments under, those Contracts. Income, gains,
and losses, whether or not realized, from assets allocated to the Separate
Account, are, in accordance with the Contracts, credited to or charged against
the Separate Account. Also, the assets in the Separate Account are not
chargeable with liabilities arising out of any other business ITT Hartford may
conduct. So Contract Values allocated to the Sub-Accounts will not be affected
by the rate of return of ITT Hartford's General Account, nor by the investment
performance of any of ITT Hartford's other separate accounts. However, the
obligations arising under the Contracts are general obligations of ITT Hartford.
Your investment in the Separate Account is allocated to one or more Sub-Accounts
as per your specifications. Each Sub-Account is invested exclusively in the
shares of one underlying Fund. Net Premium Payments and proceeds of transfers
between Funds are applied to purchase shares in the appropriate Fund at net
asset value determined as of the end of the Valuation Period during which the
payments were received or the transfer made. All distributions from the Funds
are reinvested at net asset value. The value of your investment will therefore
vary in accordance with the net income and the market value of the portfolios of
the underlying Fund(s). During the Variable Annuity payout period, both your
Annuity payments and reserve values will vary in accordance with these factors.
ITT Hartford does not guarantee the investment results of the Funds or any of
the underlying investments. There is no assurance that the value of a Contract
during the years prior to retirement or the aggregate amount of the Variable
Annuity payments will equal the total of Premium Payments made under the
Contract. Since each underlying Fund has different investment objectives and
policies, each is subject to different risks. These risks are more fully
described in the accompanying Trust Prospectus.
ITT Hartford reserves the right, subject to compliance with the law, to
substitute the shares of any other registered investment company for the shares
of any Fund held by the Separate Account. Substitution may occur only if shares
of the Fund(s) become unavailable or if there are changes in applicable law or
interpretations of law. Current law requires notification to you of any such
substitution and approval of the Commission.
<PAGE>
- 18 -
The Separate Account may be subject to liabilities arising from a Series of the
Separate Account whose assets are attributable to other variable annuity
Contracts or variable life insurance policies offered by the Separate Account
which are not described in this Prospectus.
THE FIXED ACCOUNT
THAT PORTION OF THE CONTRACT RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN
ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT,
AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION. THE FOLLOWING DISCLOSURE ABOUT
THE FIXED ACCOUNT MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF
THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURE.
Premium Payments and Contract Values allocated to the Fixed Account become a
part of the general assets of ITT Hartford. ITT Hartford invests the assets the
General Account in accordance with applicable laws governing investments of
Insurance Company General Accounts.
Currently, ITT Hartford guarantees that it will credit interest at a rate of not
less than 3% per year, compounded annually, to amounts allocated to the Fixed
Account under the Contracts. However, ITT Hartford reserves the right to change
the rate according to state insurance law. ITT Hartford may credit a lower
minimum interest rate according to state law. ITT Hartford may credit interest
at a rate in excess of 3% per year; however, ITT Hartford is not obligated to
credit any interest in excess of 3% per year. There is no specific formula for
the determination of excess interest credits. Some of the factors that the
Company may consider in determining whether to credit excess interest to amounts
allocated to the Fixed Account and the amount thereof, are general economic
trends, rates or return currently available and anticipated on the Company's
investments, regulatory and tax requirements and competitive factors. ANY
INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3% PER
YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF THE COMPANY. THE OWNER
ASSUMES THE RISK THAT INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT
EXCEED THE MINIMUM GUARANTEE OF 3% FOR ANY GIVEN YEAR.
<PAGE>
- 19 -
THE COMPANY
ITT Hartford Life and Annuity Insurance Company ("ITT Hartford"), formerly ITT
Hartford Insurance Corporation, is domiciled in the state of Wisconsin at Suite
2100, 111 East Wisconsin Avenue, Milwaukee, Wisconsin 53202 and with its
principal office at 505 Highway 169 North, Minneapolis, Minnesota 55441;
however, its mailing address is P.O. Box 5085, Hartford Connecticut 06102-5085;
Attn: Individual Annuity Operations.
ITT Hartford was incorporated in January 9, 1956 and commenced business July 1,
1965. It is a stock life insurance company engaged in the business of writing
both individual and group life insurance and annuities in all states including
the District of Columbia, except New York.
ITT Hartford is a wholly owned subsidiary of Hartford Life Insurance Company.
ITT Hartford is ultimately 100% owned by Hartford Fire Company, one of the
largest multiple lines insurance carriers in the United States.
ITT Hartford Life and Annuity Insurance Company is rated A++ (superior) by
A.M. Best and Company, Inc. on the basis of its financial soundness and
operating performance. ITT Hartford Life and Annuity Insurance Company has an
AA+ rating from Standard & Poor's and Duff and Phelps' highest rating (AAA) on
the basis of its claims-paying ability.
These ratings do not apply to the performance of the Separate Account. However,
the Contractual obligations under this variable annuity are the general
corporate obligations of ITT Hartford. These ratings do apply to ITT Hartford's
ability to meet its insurance obligations under the Contract.
THE FUNDS
The underlying investment for the Contracts are shares of Putnam Capital Manager
Trust, an open-end diversified series investment company with multiple
portfolios ("Funds"). The underlying Funds corresponding to each Sub-Account
and their investment objectives are described below. ITT Hartford reserves the
right, subject to compliance with the law, to offer additional funds with
differing investment objectives. The Funds may not be available in all states.
PCM DIVERSIFIED INCOME FUND
Seeks high current income consistent with capital preservation by investing in
the following three sectors of the fixed income securities markets: U.S.
government sector, high yield sector, and international sector.
<PAGE>
- 20 -
PCM GLOBAL ASSET ALLOCATION FUND
Seeks a high level of long-term total return consistent with preservation of
capital by investing in U.S. equities, international equities, U.S. fixed income
securities, and international fixed income securities.
PCM GLOBAL GROWTH FUND
Seeks capital appreciation through a globally diversified common stock
portfolio.
PCM GROWTH AND INCOME FUND
Seeks capital growth and current income by investing primarily in common stocks
that offer potential for capital growth, current income, or both.
PCM HIGH YIELD FUND
Seeks high current income by investing primarily in high-yielding, lower-rated
fixed income securities (commonly referred to as junk bonds), constituting a
diversified portfolio which is believed not to involve undue risk to income or
principal. Capital growth is a secondary objective when consistent with the
objectives of seeking high current income. (See the Special Considerations for
Investments in High Yield Securities disclosed in the Trust Prospectus.)
PCM MONEY MARKET FUND
Seeks to achieve as high a level of current income as is consistent with
liquidity and preservation of capital by investing in money market securities.
PCM NEW OPPORTUNITIES FUND
Seeks long-term capital appreciation by investing principally in common stocks
of companies in sectors of the economy which may possess above-average long-term
growth potential.
PCM U.S. GOVERNMENT AND HIGH QUALITY BOND FUND
Seeks current income consistent with preservation of capital through investment
in securities issued or guaranteed as to principal and interest by the U.S.
Government or by its agencies or instrumentalities and in other debt obligations
rated at least A by Standard & Poor's or Moody's or, if not rated, determined by
Putnam Investment to be of comparable quality.
<PAGE>
- 21 -
PCM UTILITIES GROWTH AND INCOME FUND
Seeks capital growth and current income by concentrating its investments in
securities issued by Companies in the public utilities industries.
PCM VOYAGER FUND
Seeks capital appreciation primarily from a portfolio of common stocks which are
believed to have potential for capital appreciation which is significantly
greater than that of market averages.
The PCM Diversified Income Fund, PCM Global Growth Fund, PCM Growth and Income
Fund, PCM High Yield Fund, PCM Money Market Fund, PCM New Opportunities Fund,
PCM Utilities Growth and Income Fund and PCM Voyager Fund are generally managed
in styles similar to other open-end investment companies which are managed by
Putnam Investment and whose shares are generally offered to the public. These
other Putnam Funds may, however, employ different investment practices and may
invest in securities different from those in which their counterpart Funds
invest, and consequently will not have identical portfolios or experience
identical investment results.
The Funds are available only to serve as the underlying investment for variable
annuity and variable life Contracts. A full description of the Funds, their
investment objectives, policies and restrictions, risks, charges and expenses
and other aspects of their operation is contained in the accompanying Trust
Prospectus which should be read in conjunction with this Prospectus before
investing, and in the Trust Statement of Additional Information which may be
ordered without charge from Putnam Investor Services, Inc.
It is conceivable that in the future it may be disadvantageous for variable
annuity separate accounts and variable life insurance separate accounts to
invest in the Funds simultaneously. Although ITT Hartford and the Funds do not
currently foresee any such disadvantages either to variable annuity Contract
Owners or to variable life insurance Policy Owners, the Trust's Board of
Trustees would monitor events in order to identify any material conflicts
between such Contract Owners and Policy Owners and to determine what action, if
any, should be taken in response thereto. If the Board of Trustees of the Funds
were to conclude that separate funds should be established for variable life and
variable annuity separate accounts, the variable annuity Contract Owners would
not bear any expenses attendant upon establishment of such separate funds.
Putnam Investment Management, Inc. ("Putnam Investment"), One Post Office
Square, Boston, Massachusetts, 02109, serves as the investment manager for the
Funds. Two affiliates, The Putnam Advisory Company, Inc. and Putnam Capital
Management, Inc., manage domestic and foreign institutional accounts and mutual
funds. Putnam Investment and its affiliates are
<PAGE>
- 22 -
wholly-owned subsidiaries of Marsh & McLennan Companies, Inc., a publicly owned
holding company whose principal businesses are international insurance brokerage
and employee benefit consulting.
Subject to the general oversight of the Trustees of the Trust, Putnam Investment
manages the Funds' portfolios in accordance with their stated investment
objectives and policies, makes investment decisions for the Funds, places orders
to purchase and sell securities on behalf of the Funds, and administers the
affairs of the Funds. For its services, the Funds pay Putnam Investment a
quarterly fee. See the accompanying Trust Prospectus for a more complete
description of Putnam Investment and the respective fees of the Funds.
OPERATION OF THE CONTRACT/ACCUMULATION PERIOD
PREMIUM PAYMENTS
The balance of each initial Premium Payment remaining after the deduction of any
applicable Premium Tax is credited to your Contract within two business days of
receipt of a properly completed application or an order to purchase a Contract
and the initial Premium Payment by ITT Hartford at its Home Office, P.O. Box
5085, Hartford, CT 06102-5085. It will be credited to the Sub-Account(s)
and/or the Fixed Account in accordance with your election. If the application
or other information is incomplete when received, the balance of each initial
Premium Payment, after deduction of any applicable Premium Tax, will be credited
to the Sub-Account(s) or the Fixed Account within five business days of receipt
or the entire Premium Payment will be immediately returned unless you have been
informed of the delay and request that the Premium Payment not be returned.
Subsequent Premium Payments are priced on the Valuation Day received by ITT
Hartford in its Home Office or other designated administrative offices.
The number of Accumulation Units in each Sub-Account to be credited to a
Contract will be determined by dividing the portion of the Premium Payment being
credited to each Sub-Account by the value of an Accumulation Unit in that
Sub-Account on that date.
The minimum initial Premium Payment is $1,000. Subsequent Premium Payments, if
made, must be a minimum of $500. Certain plans may make smaller initial and
subsequent periodic payments. Each Premium Payment may be split among the
various Sub-Accounts and the Fixed Account subject to minimum amounts then in
effect.
VALUE OF ACCUMULATION UNITS
The Accumulation Unit value for each Sub-Account will vary to reflect the
investment experience of the applicable Fund and will be determined on each
Valuation Day by multiplying the Accumulation Unit value of the particular
Sub-Account on the preceding Valuation Day by a
<PAGE>
- 23 -
"Net Investment Factor" for that Sub-Account for the Valuation Period then
ended. The "Net Investment Factor" for each of the Sub-Accounts is equal to the
net asset value per share of the corresponding Fund at the end of the Valuation
Period (plus the per share amount of any dividends or capital gains distributed
by that Fund if the ex-dividend date occurs in the Valuation Period then ended)
divided by the net asset value per share of the corresponding Fund at the
beginning of the Valuation Period. You should refer to the Trust Prospectus
which accompanies this Prospectus for a description of how the assets of each
Fund are valued since each determination has a direct bearing on the
Accumulation Unit value of the Sub-Account and therefore the value of a
Contract. The Accumulation Unit value is affected by the performance of the
underlying Fund(s), expenses and deduction of the charges described in this
Prospectus.
The shares of the Fund are valued at net asset value on each Valuation Day. A
description of the valuation methods used in valuing Fund shares may be found in
the accompanying Prospectus of the Trust.
VALUE OF THE FIXED ACCOUNT
ITT Hartford will determine the value of the Fixed Account by crediting interest
to amounts allocated to the Fixed Account. The minimum Fixed Account interest
rate is 3%, compounded annually. ITT Hartford may credit a lower minimum
interest rates according to state law. ITT Hartford, also may credit interest
at rates greater than the minimum Fixed Account interest rate.
VALUE OF THE CONTRACT
The value of the Sub-Account investments under your Contract at any time prior
to the commencement of Annuity payments can be determined by multiplying the
total number of Accumulation Units credited to your Contract in each Sub-Account
by the then current Accumulation Unit values for the applicable Sub-Account.
The value of the Fixed Account under your Contract will be the amount allocated
to the Fixed Account plus interest credited. You will be advised at least semi-
annually of the number of Accumulation Units credited to each Sub-Account, the
current Accumulation Unit values, the Fixed Account Value, and the total value
of your Contract.
TRANSFERS AMONG SUB-ACCOUNTS
You may transfer the values of your Sub-Account allocations from one or more
Sub-Accounts to another free of charge. Transfers by telephone may be made by
calling (800) 521-0538. Telephone transfers may not be permitted by some states
for their residents who purchase variable annuities. However, ITT Hartford
reserves the right to limit the number of transfers to twelve (12) per Contract
Year, with no two (2) transfers occurring on consecutive Valuation Days. ITT
Hartford may permit the Contract Owner to preauthorize transfers among Sub-
Accounts and between the Sub-Accounts and the Fixed Account under certain
circumstances. The policy of ITT Hartford and its agents and affiliates is that
they will not be responsible for
<PAGE>
- 24 -
losses resulting from acting upon telephone requests reasonably believed to be
genuine. ITT Hartford will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine; otherwise, ITT Hartford may
be liable for any losses due to unauthorized or fraudulent instructions. The
procedures ITT Hartford follows for transactions initiated by telephone include
requirements that callers on behalf of a Contract Owner identify themselves and
the Contract Owner by name and social security number. All transfer
instructions by telephone are tape recorded.
The right to reallocate Contract Values between the Sub-Accounts is subject to
modification if ITT Hartford determines, in its sole discretion, that the
exercise of that right by one or more Contract Owners is, or would be, to the
disadvantage of other Contract Owners. Any modification could be applied to
transfers to or from some or all of the Sub-Accounts and could include, but not
be limited to, the requirement of a minimum time period between each transfer,
not accepting transfer requests of an agent acting under a power of attorney on
behalf of more than one Contract Owner, or limiting the dollar amount that may
be transferred between the Sub-Accounts and the Fixed Account by a Contract
Owner at any one time. Such restrictions may be applied in any manner
reasonably designed to prevent any use of the transfer right which is considered
by ITT Hartford to be to the disadvantage of other Contract Owners.
Transfers between the Sub-Accounts may be made both before and after Annuity
payments commence (limited to once a quarter) provided that the minimum
allocation to any Sub-Account may not be less than $500. No minimum balance is
presently required in any Sub-Account.
TRANSFERS BETWEEN THE FIXED ACCOUNT AND THE SUB-ACCOUNTS
Subject to the restrictions set forth above, transfers from the Fixed Account
into a Sub-Account may be made at any time during the Contract Year. The
maximum amount which may be transferred from the Fixed Account during any
Contract Year is the greater of 30% of the Fixed Account balance as of the last
Contract Anniversary or the greatest amount of any prior transfer from the Fixed
Account. If ITT Hartford permits preauthorized transfers from the Fixed Account
to the Sub-Accounts, this restriction is inapplicable. However, if any interest
rate is renewed at a rate at least one percentage point less than the previous
rate, the Contract Owner may elect to transfer up to 100% of the funds receiving
the reduced rate within sixty days of notification of the interest rate
decrease. Generally, transfers may not be made from any Sub-Account into the
Fixed Account for the six-month period following any transfer from the Fixed
Account into one or more of the Sub-Accounts. ITT Hartford reserves the right
to defer transfers from the Fixed Account for up to six months from the date of
request.
REDEMPTION/SURRENDER OF A CONTRACT
At any time prior to the Annuity Commencement Date, you have the right, subject
to any IRS provisions applicable thereto, to surrender the value of the Contract
in whole or in part. Surrenders are not permitted after Annuity payments
commence EXCEPT that a full surrender is
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allowed when payments for a designated period (Option 4 or 5) are selected as
the Annuity option.
FULL SURRENDERS. At any time prior to the Annuity Commencement Date (and after
the Annuity Commencement Date with respect to values applied to Option 4), the
Contract Owner has the right to terminate the Contract. In such event, the
Termination Value of the Contract may be taken in the form of a lump sum cash
settlement. The Termination Value of the Contract is equal to the Contract
Value less any applicable Premium Taxes, the Contract Maintenance Fee, if
applicable and any applicable contingent deferred sales charges. The
Termination Value may be more or less than the amount of the Premium Payments
made to a Contract.
PARTIAL SURRENDERS. The Contract Owner may make a partial surrender of Contract
Values at any time prior to the Annuity Commencement Date so long as the amount
surrendered is at least equal to the minimum amount rules then in effect.
Additionally, if the remaining Contract Value following a surrender is less than
$500 (and, for Texas Contracts, there were no Premium Payments made during the
preceding two Contract Years), ITT Hartford may terminate the Contract and pay
the Termination Value.
During the Contract Year, on a non-cumulative basis, partial surrenders of
Contract Values of up to 10% of the aggregate Premium Payments made to the
Contract may be made without being subject to the contingent deferred sales
charge. Certain plans or programs may have different withdrawal privileges.
ITT Hartford may permit the Contract Owner to preauthorize partial surrenders
subject to certain limitations then in effect.
THERE ARE CERTAIN RESTRICTIONS ON SECTION 403(B) TAX SHELTERED ANNUITIES. AS OF
DECEMBER 31, 1988, ALL SECTION 403(B) ANNUITIES HAVE LIMITS ON FULL AND PARTIAL
SURRENDERS. CONTRIBUTIONS TO THE CONTRACT MADE AFTER DECEMBER 31, 1988 AND ANY
INCREASES IN CASH VALUE AFTER DECEMBER 31, 1988 MAY NOT BE DISTRIBUTED UNLESS
THE CONTRACT OWNER/EMPLOYEE HAS A) ATTAINED AGE 59 1/2, B) TERMINATED
EMPLOYMENT, C) DIED, D) BECOME DISABLED OR E) EXPERIENCED FINANCIAL HARDSHIP.
DISTRIBUTIONS DUE TO FINANCIAL HARDSHIP OR SEPARATION FROM SERVICE MAY STILL BE
SUBJECT TO A PENALTY TAX OF 10%.
ITT HARTFORD WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A
WITHDRAWAL IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR
SITUATION; OR IN MONITORING WITHDRAWAL REQUESTS REGARDING PRE OR POST JANUARY 1,
1989 ACCOUNT VALUES.
ANY SUCH FULL OR PARTIAL SURRENDER DESCRIBED ABOVE MAY RESULT IN ADVERSE TAX
CONSEQUENCES TO THE CONTRACT OWNER. THE CONTRACT OWNER, THEREFORE, SHOULD
CONSULT WITH HIS TAX ADVISER BEFORE
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UNDERTAKING ANY SUCH SURRENDER. (SEE "FEDERAL TAX CONSIDERATIONS" COMMENCING ON
PAGE__.)
Payment on any request for a full or partial surrender from the Sub-Accounts
and/or the Fixed Account will be made as soon as possible and in any event no
later than seven days after the written request is received by ITT Hartford at
its Home Office, Attn: Individual Annuity Operations, P.O. Box 5085, Hartford,
CT 06102-5085. ITT Hartford may defer payment of any amounts from the Fixed
Account for up to six months from the date of the request for surrender. If ITT
Hartford defers payment for more than 30 days, ITT Hartford will pay interest of
at least 3% per annum on the amount deferred. In requesting a partial
withdrawal you should specify the Fixed Account and/or the Sub-Account(s) from
which the partial withdrawal is to be taken. Otherwise, such withdrawal and any
applicable contingent deferred sales charges will be effected on a pro rata
basis according to the value in the Fixed Account and each Sub-Account under a
Contract. Within this context, the contingent deferred sales charges are taken
from the Premium Payments in the order in which they were received: from the
earliest Premium Payments to the latest Premium Payments. (See "Contingent
Deferred Sales Charges," page__.)
DEATH BENEFIT
The Contracts provide that in the event the Annuitant dies before the Annuity
Commencement Date, the Contingent Annuitant will become the Annuitant. If the
Annuitant dies before the Annuity Commencement Date and either (a) there is no
designated Contingent Annuitant, (b) the Contingent Annuitant predeceases the
Annuitant, or (c) if any Contract Owner dies before the Annuity Commencement
Date, the Beneficiary as determined under the Contract Control Provisions, will
receive Minimum Death Benefit as determined on the date of receipt of due proof
of death by ITT Hartford in its Home Office. With regard to Joint Contract
Owners, at the first death of a Joint Contract Owner prior to the Annuity
Commencement Date, the Beneficiary will be the surviving Contract Owner
notwithstanding that the beneficiary designation may be different. If the
deceased, the Annuitant or Contract Owner, as applicable, had attained age 85,
then the Death Benefit will equal the Contract Value. However, if, upon death
prior to the Annuity Commencement Date, the Annuitant or Contract Owner, as
applicable, had not attained his 85th birthday, the Beneficiary will receive the
greater of (a) the Contract Value determined as of the day written proof of
death of such person is received by ITT Hartford, or (b) 100% of the total
Premium Payments made to such Contract, reduced by any prior surrenders, or (c)
the Contract Value on the Specified Contract Anniversary immediately preceding
the date of death, increased by the dollar amount of any Premium Payments made
and reduced by the dollar amount of any partial terminations since the
immediately preceding Specified Contract Anniversary in all states except North
Carolina where the Beneficiary will receive the greater of the Contract Value or
the Premium Payments as set forth in (a) and (b) above.
Death Benefit proceeds will remain invested in the Separate Account in
accordance with the allocation instructions given by the Certificate Owner until
the proceeds are paid or ITT Hartford receives new instructions from the
Beneficiary. The death benefit may be taken in one sum, payable within 7 days
after the date Due Proof of Death is received, or under any of the
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settlement options then being offered by the Company provided, however, that:
(a) in the event of the death of any Contract Owner prior to the Annuity
Commencement Date, the entire interest in the Contract will be distributed
within 5 years after the death of the Contract Owner and (b) in the event of the
death of any Contract Owner or Annuitant which occurs on or after the Annuity
Commencement Date, any remaining interest in the Contract will be paid at least
as rapidly as under the method of distribution in effect at the time of death,
or, if the benefit is payable over a period not extending beyond the life
expectancy of the Beneficiary or over the life of the Beneficiary, such
distribution must commence within one year of the date of death.
Notwithstanding the foregoing, in the event of the Contract Owner's death where
the sole Beneficiary is the spouse of the Contract Owner and the Annuitant or
Contingent Annuitant is living, such spouse may elect, in lieu of receiving the
death benefit, to be treated as the Contract Owner. The proceeds due on the
death may be applied to provide variable payments, fixed payments, or a
combination of variable and fixed payments.
If the Contract is owned by a corporation or other non-individual, the Death
Benefit payable upon the death of the Annuitant prior to the Annuity
Commencement Date will be payable only as one sum or under the same settlement
options and in the same manner as if an individual Contract Owner died on the
date of the Annuitant's death.
There may be postponement in the payment of death benefits wherever (a) the New
York Stock Exchange is closed, except for holidays or weekends or trading on the
New York Stock Exchange is restricted as determined by the Commission; (b) the
Commission permits postponement and so orders; or (c) the Commission determines
that an emergency exists making valuation of disposal of securities not
reasonably practicable.
For a discussion of the manner in which Annuity payments are determined and may
vary from month to month see "Determination of Payment Amount," page .
CHARGES UNDER THE CONTRACT
CONTINGENT DEFERRED SALES CHARGES
There is no deduction for sales expenses from Premium Payments when made.
However, a contingent deferred sales charge may be assessed against Contract
Values when they are surrendered.
The length of time from receipt of a Premium Payment to the time of surrender
determines the contingent deferred sales charge. For this purpose, Premium
Payments will be deemed to be surrendered in the order in which they are
received and all surrenders will be first from Premium Payments and then from
other Contract Values. The charge is a percentage of the amount withdrawn, not
to exceed the aggregate amount of the Premium Payments made, and equals:
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Length of Time
Charge from Premium Payment
------ --------------------
(Number of Years)
7% 1
6% 2
5% 3
4% 4
3% 5
2% 6
1% 7
0% 8 or more
No contingent deferred sales charge will be assessed on a distribution due to
the death of the Annuitant or Contract Owner, or if Contract Values are applied
to an Annuity option provided for under the Contract (except that a surrender
out of Option 4 will be subject to a contingent deferred sales charge if
applicable) or upon the exercise of the withdrawal privilege.
In the case of a redemption in which you request a certain dollar amount be
withdrawn, the sales charge is deducted from the amount withdrawn and the
balance is paid to you. Example: You request a total withdrawal of $1,000 and
the applicable sales load is 5%. Your Sub-Account(s) and/or the Fixed Account
will be reduced by $1,000 and you will receive $950 (i.e., the $1,000 total
withdrawal less the 5% sales charge). This is also the method applicable on a
full surrender of your Contract. In the case of a partial redemption in which
you request to receive a specified amount, the sales charge will be calculated
on the total amount that must be withdrawn from your Sub-Account(s) and/or the
Fixed Account in order to provide you with the amount requested. Example: You
request to receive $1,000 and the applicable sales charge is 5%. Your
Sub-Account(s) and/or the Fixed Account will be reduced by $1,052.63 (i.e., a
total withdrawal of $1,052.63 which results in a $52.63 sales charge ($1,052.63
x 5%) and a net amount paid to you of $1,000 as requested). This example does
not take into account the Free Withdrawal Privilege described below.
The contingent deferred sales charges are used to cover expenses relating to the
sale and distribution of the Contracts, including commissions paid to any
distribution organization and its sales personnel, the cost of preparing sales
literature and other promotional activities. To the extent that these charges
do not cover such distribution expenses, the expenses will be borne by ITT
Hartford from its general assets, including surplus. The surplus might include
profits resulting from unused mortality and expense risk charges.
FREE WITHDRAWAL PRIVILEGE
During any Contract year (on a non-cumulative basis), a Contract Owner may make
a partial surrender of Contract Values of up to 10% of the aggregate Premium
Payments made to the Contract (as determined on the date of the requested
withdrawal) without the application of the
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contingent deferred sales charge described above. Certain plans or programs may
have different withdrawal privileges. Any such withdrawal will be deemed to be
from Contract Values other than Premium Payments. From time to time, ITT
Hartford may permit the Contract Owner to preauthorize partial surrenders
subject to certain limitations then in effect. Additional surrenders or any
surrender of the Contract Values in excess of such amount in any Contract Year
during the period when contingent deferred sales charges are applicable will be
subject to the appropriate charge as set forth above.
MORTALITY AND EXPENSE RISK CHARGE
Although Variable Annuity payments made under the Contracts will vary in
accordance with the investment performance of the underlying Fund shares held in
the Sub-Account(s), the payments will not be affected by (a) ITT Hartford's
actual mortality experience among Annuitants before or after the Annuity
Commencement Date or (b) ITT Hartford's actual expenses, if greater than the
deductions provided for in the Contracts because of the expense and mortality
undertakings by ITT Hartford.
For assuming these risks under the Contracts, ITT Hartford will make a daily
charge at the rate of 1.25% per annum against all Contract Values held in the
Sub-Accounts during the life of the Contract, including the payout period,
(estimated at .90% for mortality and .35% for expense).
The mortality undertaking provided by ITT Hartford under the Contracts, assuming
the selection of one of the forms of life Annuities, is to make monthly Annuity
payments (determined in accordance with the 1983a Individual Annuity Mortality
Table and other provisions contained in the Contract) to Annuitants regardless
of how long an Annuitant may live, and regardless of how long all Annuitants as
a group may live. ITT Hartford also assumes the liability for payment of a
minimum death benefit under the Contract.
The mortality undertakings are based on ITT Hartford's determination of expected
mortality rates among all Annuitants. If actual experience among Annuitants
during the Annuity payment period deviates from ITT Hartford's actuarial
determination of expected mortality rates among Annuitants because, as a group,
their longevity is longer than anticipated, ITT Hartford must provide amounts
from its general funds to fulfill its Contract obligations. In that event, a
loss will fall on ITT Hartford. Also, in the event of the death of an Annuitant
or Contract Owner prior to age 85 and before the commencement of Annuity
payments, whichever is earlier, ITT Hartford can, in periods of declining value,
experience a loss resulting from the assumption of the mortality risk relative
to the minimum death benefit.
In providing an expense undertaking, ITT Hartford assumes the risk that the
contingent deferred sales charges and the Administration and Maintenance Fees
for maintaining the Contracts prior to the Annuity Commencement Date may be
insufficient to cover the actual cost of providing such items.
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ADMINISTRATION AND MAINTENANCE FEES
ITT Hartford will deduct certain fees from Contract Values to reimburse it for
expenses relating to the administration and maintenance of the Contract and the
Fixed Account. For Contract maintenance, ITT Hartford will deduct an annual fee
of $25 on each Contract Anniversary on or before the Annuity Commencement Date.
The deduction will be made pro rata according to the value in each Sub-Account
and the Fixed Account under a Contract. If during a Contract Year the Contract
is surrendered for its full value, ITT Hartford will deduct the Contract
Maintenance Fee at the time of such surrender. For administration, ITT Hartford
makes a daily charge at the rate of .15% per annum against all Contract Values
held in the Separate Account during both the accumulation and annuity phases of
the Contract. There is not necessarily a relationship between the amount of
administrative charge imposed on a given Contract and the amount of expenses
that may be attributable to that Contract; expenses may be more or less than the
charge.
The types of expenses incurred by the Separate Account include, but are not
limited to, expenses of issuing the Contract and expenses for confirmations,
Contract quarterly statements, processing of transfers and surrenders,
responding to Contract Owner inquiries, reconciling and depositing cash
receipts, calculation and monitoring daily Sub-Account unit values, Separate
Account reporting, including semiannual and annual reports and mailing and
tabulation of shareholder proxy solicitations.
You should refer to the Trust Prospectus for a description of deductions and
expenses paid out of the assets of the Trust's portfolios.
PREMIUM TAXES
A deduction is also made for Premium Tax, if applicable, imposed by a state or
other governmental entity. Certain states impose a Premium Tax, currently
ranging up to 3.5%. Some states assess the tax at the time purchase payments
are made; others assess the tax at the time of annuitization. ITT Hartford will
pay Premium Taxes at the time imposed under applicable law. At its sole
discretion, ITT Hartford may deduct Premium Taxes at the time ITT Hartford pays
such taxes to the applicable taxing authorities, at the time the Contract is
surrendered, or at the time the Contract annuitizes.
<PAGE>
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ANNUITY BENEFITS
You select an Annuity Commencement Date and an Annuity option which may be on a
fixed or variable basis, or a combination thereof. The Annuity Commencement
Date will not be deferred beyond the Annuitant's 90th birthday except for
certain states where deferral past age 85 is not permitted. The Annuity
Commencement Date and/or the Annuity option may be changed from time to time,
but any change must be at least 30 days prior to the date on which Annuity
payments are scheduled to begin. The Contract allows the Contract Owner to
change the Sub-Accounts on which variable payments are based after payments have
commenced once every three (3) months. Any Fixed Annuity allocation may not be
changed.
ANNUITY OPTIONS
The Contract contains the five optional Annuity forms described below. Options
2, 4 and 5 are available to Qualified Contracts only if the guaranteed payment
period is less than the life expectancy of the Annuitant at the time the option
becomes effective. Such life expectancy shall be computed on the basis of the
mortality table prescribed by the IRS, or if none is prescribed, the mortality
table then in use by ITT Hartford. With respect to Non-Qualified Contracts, if
you do not elect otherwise, payments in most states will automatically begin at
the Annuitant's age 90 (with the exception of states that do not allow deferral
past age 85) under Option 2 with 120 monthly payments certain. For Qualified
Contracts and Contracts issued in Texas, if you do not elect otherwise, payments
will begin automatically at the Annuitant's age 90 under Option 1 to provide a
life Annuity.
Under any of the Annuity options excluding Options 4 and 5, no surrenders are
permitted after Annuity payments commence. Only full surrenders are allowed out
of Option 4 and any such surrender will be subject to contingent deferred sales
charges, if applicable. Full or partial withdrawals may be made from Option 5
at any time and contingent deferred sales charges will not be applied.
Option 1: Life Annuity
A life Annuity is an Annuity payable during the lifetime of the Annuitant and
terminating with the last payment preceding the death of the Annuitant. This
options offers the largest payment amount of any of the life Annuity options
since there is no guarantee of a minimum number of payments nor a provision for
a death benefit payable to a Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity payment,
two if he died before the date of the third Annuity payment, etc.
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Option 2: Life Annuity with 120, 180 or 240 Monthly Payments Certain
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that payments will be made for a minimum of 120,
180 or 240 months, as elected. If, at the death of the Annuitant, payments have
been made for less than the minimum elected number of months, then the present
value as of the date of the Annuitant's death, of any remaining guaranteed
payments will be paid in one sum to the Beneficiary or Beneficiaries designated
unless other provisions have been made and approved ILA.
Option 3: Joint and Last Survivor Annuity
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
Based on the options currently offered by ITT Hartford, the Annuitant may elect
that the payment to the survivor be less than the payment made during the joint
lifetime of the Annuitant and a designated second person.
It would be possible under this option for an Annuitant and designated second
person to receive only one payment in the event of the common or simultaneous
death of the parties prior to the due date for the second payment and so on.
Option 4: Payments for a Designated Period
An amount payable monthly for the number of years selected which may be from 5
to 30 years. Under this option, you may, at any time, surrender the Contract
and receive, within seven days, the Termination Value of the Contract as
determined by ITT Hartford.
In the event of the Annuitant's death prior to the end of the designated period,
the present value as of the date of the Annuitant's death, of any remaining
guaranteed payments will be paid in one sum to the Beneficiary or Beneficiaries
designated unless other provisions have been made and approved ITT Hartford.
Option 4 is an option that does not involve life contingencies and thus no
mortality guarantee. Charges made for the mortality undertaking under the
Contracts thus provide no real benefit to a Contract Owner.
Option 5: Death Benefit Remaining with ITT Hartford
Proceeds from the Death Benefit may be left with ITT Hartford for a period not
to exceed five years from the date of the Contract Owner's death prior to the
Annuity Commencement Date. These proceeds will remain in the Sub-Account(s) to
which they were allocated at the time of death unless the Beneficiary elects to
reallocate them. Full or partial withdrawals may be made at any time. In the
event of withdrawals, the remaining value will equal the Contract Value of the
proceeds left with ITT Hartford, minus any withdrawals.
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ITT Hartford may offer other annuity options from time to time.
THE ANNUITY UNIT AND VALUATION
The value of the Annuity Unit for each Sub-Account in the Separate Account for
any day is determined by multiplying the value for the preceding day by the
product of (1) the net investment factor (See "Valuation of Accumulation Units,"
commencing on page__) for the day for which the Annuity Unit value is being
calculated and (2) a factor to neutralize the assumed investment rate of 4.00%
per annum discussed below.
DETERMINATION OF PAYMENT AMOUNT
When Annuity payments are to commence, the value of the Contract is determined
as the sum of the value of the Fixed Account no earlier than the close of
business on the fifth Valuation Day preceding the date the first Annuity payment
is due plus the product of the value of the
Accumulation Unit of each Sub-Account on that same day, and the number of
Accumulation Units credited to each Sub-Account as of the date the Annuity is to
commence.
The Contract contains tables indicating the minimum dollar amount of the first
monthly payment under the optional forms of Annuity for each $1,000 of value of
a Sub-Account under a Contract. The first monthly payment varies according to
the form and type of Annuity selected. The Contract contains Annuity tables
derived from the 1983a Individual Annuity Mortality Table with ages set back one
year and with an assumed investment rate ("A.I.R.") of 4% per annum.
The total first monthly Variable Annuity payment is determined by multiplying
the value (expressed in thousands of dollars) of a Sub-Account (less any
applicable Premium Taxes) by the amount of the first monthly payment per $1,000
of value obtained from the tables in the Contracts.
Fixed Annuity payments are determined at annuitization by multiplying the values
allocated to the Fixed Account (less applicable Premium Taxes) by a rate to be
determined by ITT Hartford which is no less than the rate specified in the
Annuity tables in the Contract. The Annuity payment will remain level for the
duration of the Annuity.
The amount of the first monthly Variable Annuity payment, determined as
described above, is divided by the value of an Annuity Unit for the appropriate
Sub-Account no earlier than the close of business on the fifth Valuation Day
preceding the day on which the payment is due in order to determine the number
of Annuity Units represented by the first payment. This number of Annuity Units
remains fixed during the Annuity payment period, and in each subsequent month
the dollar amount of the Variable Annuity payment is determined by multiplying
this fixed number of Annuity Units by the then current Annuity Unit value.
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THE A.I.R. ASSUMED IN THE MORTALITY TABLES WOULD PRODUCE LEVEL VARIABLE ANNUITY
PAYMENTS IF THE INVESTMENT RATE REMAINED CONSTANT. IN FACT, PAYMENTS WILL VARY
UP OR DOWN AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE A.I.R.
The Annuity Unit value used in calculating the amount of the Variable Annuity
payments will be based on an Annuity Unit value determined as of the close of
business on a day no earlier than the fifth Valuation Day preceding the date of
the Annuity payment.
FEDERAL TAX CONSIDERATIONS
What are some of the Federal tax consequences which affect these Contracts?
A. GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING TO
THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED AND THE TYPE OF PLAN UNDER
WHICH THE CONTRACT IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A PERSON,
TRUSTEE OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A CONTRACT DESCRIBED
HEREIN.
It should be understood that any detailed description of the Federal income tax
consequences regarding the purchase of these Contracts cannot be made in this
Prospectus and that special tax rules may be applicable with respect to certain
purchase situations not discussed herein. In addition, no attempt is made here
to consider any applicable state or other tax laws. For detailed information, a
qualified tax adviser should always be consulted. The discussion here and in
Appendix II, commencing on page__, is based on ITT Hartford's understanding of
current Federal income tax laws as they are currently interpreted.
B. TAXATION OF ITT HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of ITT Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code (the "Code").
Accordingly, the Separate Account will not be taxed as a "regulated investment
company" under subchapter M of Chapter 1 of the Code. Investment income and any
realized capital gains on the assets of the Separate Account are reinvested and
are taken into account in determining the value of the Accumulation and Annuity
Units (See "Value of Accumulation Units" commencing on page 11). 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.
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C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER THAN
QUALIFIED PLANS
Section 72 of the Internal Revenue Code governs the taxation of annuities
in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC. Section 72 contains
provisions for Contract Owners which are non-natural persons. Non-
natural persons include corporations, trusts, and partnerships. The
annual net increase in the value of the Contract is currently
includable in the gross income of a non-natural person unless the non-
natural person holds the Contract as an agent for a natural person.
There is an exception from current inclusion for certain annuities
held by structured settlement companies, certain annuities held by an
employer with respect to a terminated Qualified Plan and certain
immediate annuities. A non-natural person which is a tax-exempt
entity for Federal tax purposes will not be subject to income tax as a
result of this provision.
If the Contract Owner is not an individual, the primary Annuitant
shall be treated as the Contract Owner for purposes of making
distributions which are required to be made upon the death of the
Contract Owner. If there is a change in the primary Annuitant, such
change shall be treated as the death of the Contract Owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS). A Contract Owner is not
taxed on increases in the value of the Contract until an amount is
received or deemed received, e.g., in the form of a lump sum payment
(full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are
summarized briefly below. Also summarized are special rules affecting
distributions from Contracts obtained in a tax-free exchange for other
annuity contracts or life insurance contracts which were purchased
prior to August 14, 1982.
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less prior withdrawals which were not
includable in gross income equal the "investment in the
contract" under Section 72 of the Code.
ii. When the value of the Contract (ignoring any surrender
charges) exceeds the "investment in the contract," any
amount surrendered which is less than or equal to the
difference between such value of the Contract and the
"investment in the contract" will be included in gross
income.
iii. When such value of the Contract is less than or equal to the
"investment in the contract," any amount surrendered which
is less than or equal to the "investment in the contract"
shall be treated as a return of "investment in the contract"
and will not be included in gross income.
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iv. The receipt of any amount as a loan under the Contract or
the assignment or pledge of any portion of the value of the
Contract shall be treated as an amount surrendered which
will be covered by the provisions in subparagraph ii. or
iii. above.
v. In general, the transfer of the Contract, without full and
adequate consideration, will be treated as an amount
surrendered which will be covered by the provisions in
subparagraph ii. or iii. above. This transfer rule does not
apply, however, to certain transfers of property between
spouses or incident to divorce.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE. Annuity payments
made after the Annuity Commencement Date are includable in gross
income to the extent the payments exceed the amount determined by
the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity
Commencement Date (the "exclusion ratio").
i. When the total of amounts excluded from income by
application of the exclusion ratio is equal to the
investment in the contract as of the Annuity Commencement
Date, any additional payments (including surrenders) will be
entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the
Annuitant and, as of the date of death, the amount of
annuity payments excluded from gross income by the exclusion
ratio does not exceed the investment in the contract as of
the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for
the last taxable year of the Annuitant.
iii. Certain distributions, such as surrenders made after the
Annuity Commencement Date, are not treated as annuity
payments, and shall be included in gross income.
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or
affiliated insurer) to the same Contract Owner within the same
calendar year (other than certain contracts held in connection
with a tax-qualified retirement arrangement) will be treated as
one annuity Contract for the purpose of determining the taxation
of distributions prior to the Annuity Commencement Date. An
annuity contract received in a tax-free exchange for another
annuity contract or life insurance contract may be treated as a
new Contract for this purpose. ITT Hartford believes that for
any annuity subject to such aggregation, the values under the
Contracts and the investment in the contracts will be added
together to determine the taxation of amounts received or deemed
received prior to the Annuity Commencement Date. Withdrawals
will first be treated
<PAGE>
- 37 -
as withdrawals of income until all of the income from all such
Contracts is withdrawn. As of the date of this Prospectus, there
are no regulations interpreting this provision.
d. PENALTY -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract
(before or after the Annuity Commencement Date), the Code
applies a penalty tax equal to ten percent of the portion of
the amount includable in gross income, unless an exception
applies.
ii. The penalty will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient
has attained the age of 59 1/2.
2. Distributions made on or after the death of the holder
or where the holder is not an individual, the death of
the primary Annuitant.
3. Distributions attributable to a recipient's becoming
disabled.
4. A distribution that is part of a scheduled series of
substantially equal periodic payments for the life (or
life expectancy) of the recipient (or the joint lives
or life expectancies of the recipient and the
recipient's Beneficiary).
5. Distributions of amounts which are allocable to
"investments in the contract" made prior to August 14,
1982.
e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-
FREE EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS
PURCHASED PRIOR TO AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life
insurance or annuity Contract purchased prior to August 14, 1982,
then any amount surrendered prior to the Annuity Commencement
Date which does not exceed the portion of the "investment in the
contract" (generally premiums paid into the prior Contract, less
amounts deemed received) prior to August 14, 1982, shall not be
included in gross income. In all other respects, the general
provisions apply to distributions from such Contracts.
f. REQUIRED DISTRIBUTIONS IN THE EVENT OF CONTRACT OWNER'S DEATH.
i. If any Contract Owner dies before the Annuity Commencement
Date, the entire interest must be distributed within five
years of the date of death; however, a portion or all of
such interest may be payable to a designated Beneficiary
over the
<PAGE>
- 38 -
life of such Beneficiary or for a period not extending
beyond the life expectancy of such Beneficiary with payments
starting within one year of the date of death.
ii. If any Contract Owner or Annuitant dies on or after the
Annuity Commencement Date and before the entire interest in
the Contract has been distributed, any remaining portion of
such interest must be distributed at least as rapidly as
under the method of distribution in effect at the time of
death.
iii. If a spouse is designated as a Beneficiary at the time of
the Contract Owner's death and there is a surviving
Annuitant or Contingent Annuitant, then such spouse will be
treated as the Contract Owner under subparagraph i. and ii.
above.
iv. If the Contract Owner is not an individual, the primary
Annuitant shall be treated as the Contract Owner under
subparagraphs i. and ii. above. If there is a change in the
primary Annuitant, such change shall be treated as the death
of the Contract Owner.
3. DIVERSIFICATION REQUIREMENTS.
Section 817 of the Code provides that a variable annuity contract
(other than certain contracts held in connection with a tax-qualified
retirement arrangement) will not be treated as an annuity contract for
any period during which the investments made by the separate account
or underlying fund are not adequately diversified in accordance with
regulations prescribed by the Treasury. If a Contract is not treated
as an annuity contract, the Contract Owner will be subject to income
tax on the annual increases in cash value. The Treasury has issued
diversification regulations which, among other things, require that no
more than 55% of the assets of a mutual fund (such as the ITT Hartford
mutual funds) underlying a variable annuity contract, be invested in
any one investment. In determining whether the diversification
standards are met, each United States Government Agency or
instrumentality shall be treated as a separate issuer.
D. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will be
subject to Federal income tax withholding, pursuant to Section 3405 of the
Internal Revenue Code. The application of this provision is summarized below:
1. NON-PERIODIC DISTRIBUTIONS
The portion of a non-periodic distribution which constitutes taxable income
will be subject to Federal income tax withholding unless the recipient
elects not to have taxes withheld. If an election not to have taxes
withheld is not provided, 10% of the taxable distribution will be withheld
as Federal income tax. Election forms will be provided at the time
distributions are requested. If the necessary election forms are not
submitted to ITT Hartford, ITT Hartford will automatically withhold 10% of
the taxable distribution.
<PAGE>
- 39 -
2. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER
THAN ONE YEAR)
The portion of a periodic distribution which constitutes taxable income
will be subject to Federal income tax withholding as if the recipient were
married claiming three exemptions. A recipient may elect not to have
income taxes withheld or have income taxes withheld at a different rate by
providing a completed election form. Election forms will be provided at
the time distributions are requested.
E. GENERAL PROVISIONS AFFECTING TAX QUALIFIED PLANS
The Contract may be used for a number of qualified plans. If the Contract is
being purchased with respect to some form of Qualified Plan, please refer to
Appendix II commencing on page__ for information relative to the types of plans
for which it may be used and the general explanation of the tax features of such
plans.
GENERAL MATTERS
ASSIGNMENT
Ownership of a Contract described herein is generally assignable. However, if
the Contracts are issued pursuant to some form of Qualified Plan, it is possible
that the ownership of the Contracts may not be transferred or assigned depending
on the type of qualified retirement plan involved. An assignment of a
Non-Qualified Contract may subject the assignment proceeds to income taxes and
certain penalty taxes. (See "Taxation of Annuities in General - Non-Tax
Qualified Purchasers," page__.)
MODIFICATION
ITT Hartford reserves the right to modify the Contract, but only if such
modification: (i) is necessary to make the Contract or the Separate Account
comply with any law or regulation issued by a governmental agency to which ITT
Hartford is subject; or (ii) is necessary to assure continued qualification of
the Contract under the Code or other federal or state laws relating to
retirement annuities or annuity Contracts; or (iii) is necessary to reflect a
change in the operation of the Separate Account or the Sub-Account(s) or (iv)
provides additional Separate Account options or (v) withdraws Separate Account
options. In the event of any such modification ITT
Hartford will provide notice to the Contract Owner or to the payee(s) during the
Annuity period. ITT Hartford may also make appropriate endorsement in the
Contract to reflect such modification.
DELAY OF PAYMENTS
There may be postponement of a surrender payment or death benefit whenever (a)
the New York Stock Exchange is closed, except for holidays or weekends, or
trading on the New York Stock Exchange is restricted as determined by the
Commission; (b) the Commission permits
<PAGE>
- 40 -
postponement and so orders; or (c) the Commission determines that an emergency
exists making valuation or disposal of securities not reasonably practicable.
VOTING RIGHTS
ITT Hartford is the legal owner of all Fund shares held in the Separate Account.
As the owner, ITT Hartford has the right to vote at the Funds' shareholder
meetings. However, to the extent required by federal securities laws or
regulations, ITT Hartford will:
1. Vote all Fund shares attributable to a Contract according to instructions
received from Contract Owner, and
2. Vote shares attributable to a Contract for which no voting instructions are
received in the same proportion as shares for which instructions are
received.
If any federal securities laws or regulations, or their present interpretation
change to permit ITT Hartford to vote Fund shares in its own right, ITT Hartford
may elect to do so.
ITT Hartford will notify you of any Fund shareholders' meeting if the shares
held for your account may be voted at such meetings. ITT Hartford will also
send proxy materials and a form of instruction by means of which you can
instruct ITT Hartford with respect to the voting of the Fund shares held for
your account.
In connection with the voting of Fund shares held by it, ITT Hartford will
arrange for the handling and tallying of voting instructions received from
Contract Owners. ITT Hartford as such, shall have no right, except as
hereinafter provided, to vote any Fund shares held by it hereunder which may be
registered in its name or the names of its nominees. ITT Hartford will,
however, vote the Fund shares held by it in accordance with the instructions
received from the Contract Owners for whose accounts the Fund shares are held.
If a Contract Owner desires to attend any meeting at which shares held for the
Contract Owner's benefit may be voted, the Contract Owner may request ITT
Hartford to furnish a proxy or otherwise arrange for the exercise of voting
rights with respect to the Fund shares held for such Contract Owner's account.
In the event that the Contract Owner gives no instructions or leaves the manner
of voting discretionary, ITT Hartford will vote such shares of the appropriate
Fund in the same proportion as shares of that Fund for which instructions have
been received. During the Annuity period under a Contract the number of votes
will decrease as the assets held to Fund Annuity benefits decrease.
DISTRIBUTION OF THE CONTRACTS
Hartford Equity Sales Company, Inc. ("HESCO") currently serves as Principal
Underwriter for the securities issued with respect to the Separate Account.
Hartford Securities Distribution Company, Inc. ("HSD") will replace HESCO as
principal underwriter upon approval by the
<PAGE>
- 41 -
Commission, the National Association of Securities Dealers, Inc. ("NASD") and
applicable state regulatory authorities.
Both HESCO and HSD are wholly-owned subsidiaries of Hartford Life Insurance
Company. The principal business address of HESCO and HSD is the same as
Hartford Life Insurance Company.
The securities will be sold by salespersons of HESCO, and subsequently, HSD, who
represent HL as insurance and Variable Annuity agents and who are registered
representatives or Broker-Dealers who have entered into distribution agreements
with HESCO, and subsequently HSD.
HESCO is registered with the Commission under the Securities and Exchange Act of
1934 as a Broker-Dealer and is a member of the NASD. HSD will be registered
with the Commission under the Securities Exchange Act of 1934 as a Broker-Dealer
and will become a member of the NASD.
Commissions will be paid by ITT Hartford and will not be more than 6% of Premium
Payments.
From time to time, ITT Hartford may pay or permit other promotional incentives,
in cash or credit or other compensation.
OTHER CONTRACTS OFFERED
In addition to the Contracts described in this Prospectus, it is contemplated
that other forms of group or individual Variable Annuities may be sold providing
benefits which vary in accordance with the investment experience of the Separate
Account.
CUSTODIAN OF SEPARATE ACCOUNT ASSETS
The assets of the Separate Account are held by ITT Hartford under a safekeeping
arrangement.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. ITT Hartford and Putnam
Investment are engaged in various matters of routine litigation which in their
judgments are not of material importance in relation to their respective total
assets.
EXPERTS
The financial statements and schedules included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing.
<PAGE>
- 42 -
ADDITIONAL INFORMATION
Inquiries will be answered by calling your representative or by writing:
ITT Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Operations
P.O. Box 5085
Hartford, CT 06102-5085
Telephone: (800) 862-6668
<PAGE>
- 43 -
APPENDIX I
INFORMATION REGARDING TAX QUALIFIED PLANS
THE TAX REFORM ACT OF 1986 AND THE TECHNICAL AND MISCELLANEOUS REVENUE ACT OF
1988 HAVE MADE SUBSTANTIAL CHANGES TO QUALIFIED PLANS. YOU SHOULD CONSULT YOUR
TAX ADVISER TO FULLY ADDRESS ALL CHANGES OCCURRING AS A RESULT OF THE TAX REFORM
ACT AND THE TECHNICAL AND MISCELLANEOUS REVENUE ACT OF 1988 AND THEIR EFFECT ON
QUALIFIED PLANS.
A. Contributions
1. Pension, Profit-Sharing and Simplified Employee Pension Plans
Contributions to pension or profit-sharing plans (described in Section
401(a) and 401(k), if applicable, and exempt from taxation under Section
501(a) of the Code), and Simplified Employee Pension Plans (described in
Section 408(k)), which do not exceed certain limitations prescribed in the
Code are fully tax-deductible to the employer. Such contributions are not
currently taxable to the covered employees, and increases in the value of
Contracts purchased with such contributions are not subject to taxation
until received by the covered employees or their Beneficiaries in the form
of Annuity payments or other distributions.
2. Tax-Deferred Annuity Plans for Public School Teachers and Employers
and Employees of Certain Tax-Exempt Organizations
Contributions to tax-deferred annuity plans (described in Section 403(a)
and 403(b) of the Code) by employers are not includable within the
employee's income to the extent those contributions do not exceed the
lesser of $9,500 or the exclusion allowance. Generally, the exclusion
allowance is equal to 20% of the employee's includable compensation for his
most recent full year of employment multiplied by the number of years of
his service, less the aggregate amount contributed by the employer for
Annuity Contracts which were not included within the gross income of the
employee for any prior taxable year. There are special provisions which
may allow an employee of an educational institution, a hospital or a home
health service agency to elect an overall limitation different from the
limitation described above.
3. Deferred Compensation Plans for Tax-Exempt Organizations and State and
Local Governments
Employees may contribute on a before tax basis to The Deferred Compensation
Plan of their employer in accordance with The employer's Plan and Section
457 of the Code. Section 457
<PAGE>
- 44 -
places limitations on contributions to Deferred Compensation Plans
maintained by a State ("State" means a State, a political sub-division of a
State, and an agency or instrumentality of a State or political
sub-division of a State) or other tax-exempt organization. Generally, the
limitation is 33 1/3% of includable compensation (25% of gross
compensation) or $7,500, whichever is less. The plan may also provide for
additional contributions during the three taxable years ending before
normal retirement age of a Participant for a total of up to $15,000 per
year for such three years.
An employee electing to participate in a plan should understand that his
rights and benefits are governed strictly by the terms of the plan, that he
is in fact a general creditor of the employer under the terms of the plan,
that the employer is legal owner of any Contract issued with respect to the
plan and that the employer as owner of the Contract(s) retains all voting
and redemption rights which may accrue to the Contract(s) issued with
respect to the plan. The participating employee should look to the terms
of his plan for any charges in regard to participating therein other than
those disclosed in this Prospectus.
Certain distributions are required to be made upon the death of a
Participant. These requirements are generally described in Section C.2.f.
of "Federal Tax Considerations" on page__.
4. Individual Retirement Annuities ("IRA's")
Individuals may contribute and deduct the lesser of $2,000 or 100 percent
of their compensation to an IRA. In the case of a spousal IRA, the maximum
deduction is the lesser of $2,250 or 100 percent of compensation. The
deduction for contributions is phased out between $40,000 and $50,000 of
adjusted gross income (AGI) for a married individual (and between $25,000
and $35,000 for single individuals) if either the individual or his or her
spouse is an active participant in any Section 401(a), 403(a), 403(b) or
408(k) plan regardless of whether the individual's interest is vested.
To the extent deductible contributions are not allowed, individuals may
make designated non-deductible contributions to an IRA, subject to the
above limits.
B. Distributions
1. Pension and Profit-Sharing Plans, Tax-Sheltered Annuities, Individual
Retirement Annuities.
Annuity payments made under the Contracts are taxable under Section 72 of
the Code as
<PAGE>
- 45 -
ordinary income, in the year of receipt, to the extent that they exceed the
"excludable amount." The investment in the Contract is the aggregate
amount of the contributions made by or on behalf of an employee which were
included as a part of his taxable income and not deducted. Thus, annual
premiums deducted for an IRA are not included in the investment in the
Contract. The employee's investment in the Contract is divided by the
expected number of payments to be made under the Contract. The amount so
computed constitutes the "excludable amount," which is the amount of each
annuity payment considered a return of investment in each year and,
therefore, not taxable. Once the employee's investment in the Contract is
recouped, the full amount of each payment will be fully taxable. If the
employee dies prior to recouping his or her investment in the Contract, a
deduction is allowed for the last taxable year. The rules for determining
the excludable amount are contained in Section 72 of the Code.
Generally, distributions or withdrawals prior to age 59 1/2 may be subject
to an additional income tax of 10% of the amount includable in income.
This additional tax does not apply to distributions made after the
employee's death, on account of disability and distributions in the form of
a life annuity and, except in the case of an IRA, certain distributions
after separation from service at or after age 55, and certain distributions
for eligible medical expenses. A life annuity is defined as a scheduled
series of substantially equal periodic payments for the life or life
expectancy of the Participant (or the joint lives or life expectancies of
the Participant and Beneficiary). The taxation of withdrawals and other
distributions varies depending on the type of distribution and the type of
plan from which the distribution is made. With respect to tax-deferred
annuity Contracts under Section 403(b) contributions to the Contract made
after December 31, 1988 and any increases in cash value. After that date
may not be distributed prior to attaining age 59 1/2, separation from
service, death or disability. Contributions (but not earnings) made after
December 31, 1988 may also be distributed by reason of financial hardship.
Generally, in order to avoid a penalty tax, annuity payments, periodic
payments or annual distributions MUST commence by April 1 of the calendar
year following the year in which the Participant attains age 70 1/2. The
entire interest of the Participant must be distributed beginning no later
than this required beginning date over a period which may not extend beyond
a maximum of the lives or life expectancies of the Participant and a
designated Beneficiary. Each annual distribution must equal or exceed a
"minimum distribution amount" which is determined by dividing the account
balance by the applicable life expectancy. With respect to a section
403(b) plan, this account balance is based upon earnings and contributions
after December 31, 1986. In addition, minimum distribution incidental
benefit rules may require a larger annual distribution based upon dividing
the entire account balance as of the close of business on the last day of
the previous calendar year by a factor promulgated by the Internal Revenue
Service which ranges from 26.2 (at age 70) to 1.8 (at age 115). Special
rules apply to require that distributions be made to Beneficiaries after
the death of the Participant. A penalty tax of up to 50% of the amount
which should be distributed may be imposed by the Internal Revenue Service
for failure to make such distribution.
<PAGE>
- 46 -
2. Deferred Compensation Plans for Tax-Exempt Organizations and State and
Local Governments
Generally, in order to avoid a penalty tax, annuity payments, periodic
payments or annual distributions must commence by April 1 of the
calendar year following the year in which the Participant attains age
70 1/2. Minimum distributions under a Section 457 Deferred
Compensation Plan may be further deferred if the Participant remains
employed. The entire interest of the Participant must be distributed
beginning no later than this required beginning date over a period
which may not extend beyond a maximum of the life expectancy of the
Participant and a designated Beneficiary. Each annual distribution
must equal or exceed a "minimum distribution amount" which is
determined by dividing the account balance by the applicable life
expectancy. This account balance is generally based upon the account
value as of the close of business on the last day of the previous
calendar year. In addition, minimum distribution incidental benefit
rules may require a larger annual distribution based upon dividing the
account balance by a factor promulgated by the Internal Revenue
Service which ranges from 26.2 (at age 70) to 1.8 (at age 115).
Special rules apply to require that distributions be made to
Beneficiaries after the death of the Participant. A penalty tax of up
to 50% of the amount which should be distributed may be imposed by the
Internal Revenue Service for failure to make a distribution.
Upon receipt of any monies pursuant to the terms of a Deferred
Compensation Plans for a tax-exempt organization, state or local
government under Section 457 of the Code, such monies are taxable to
such employee as ordinary income in the year in which received.
C. Federal Income Tax Withholding
The portion of a distribution which is taxable income to the recipient will be
subject to Federal income tax withholding, pursuant to Section 3405 of the
Internal Revenue Code. The application of this provision is summarized below:
1. Eligible Rollover Distributions
a. The Unemployment Compensation Amendments Act of 1992 requires
that federal income taxes be withheld from certain distributions
from tax-qualified retirement plans and from tax-sheltered
annuities under Section 403(b). These provisions DO NOT APPLY to
distributions from individual retirement annuities under section
408(b) or from deferred compensation programs under section 457.
b. If any portion of a distribution is an "eligible rollover
distribution", the law requires that 20% of that amount be
withheld. This amount is sent to the IRS as withheld income
taxes. The following types of payments DO NOT constitute an
eligible rollover distribution (and, therefore, the mandatory
withholding rules will not apply):
<PAGE>
- the non-taxable portion of the distribution;
- distributions which are part of a series of equal (or
substantially equal) payments made at least annually for your
lifetime (or your life expectancy), or your lifetime and your
beneficiary's lifetime (or life expectancies), or for a period of
ten years or more.
- required minimum distributions made pursuant to section 401(a)(9)
of the IRC.
c. However, these mandatory withholding requirements do not apply in
the event of all or a portion of any eligible rollover
distribution is paid in a "direct rollover". A direct rollover
is the direct payment of an eligible rollover distribution or
portion thereof to an individual retirement arrangement or
annuity (IRA) or to another qualified employer plan. IF A DIRECT
ROLLOVER IS ELECTED, NO INCOME TAX WILL BE WITHHELD.
d. If any portion of a distribution is not an eligible rollover
distribution but is taxable, the mandatory withholding rules
described above do not apply. In this case, the voluntary
withholding rules described below apply.
2. Non-Eligible Rollover Distributions
a. Non-Periodic Distributions
The portion of a non-periodic distribution which constitutes taxable
income will be subject to Federal income tax withholding unless the
recipient elects not to have taxes withheld. If an election not to
have taxes withheld is not provided, 10% of the taxable distribution
will be withheld as Federal income tax. Election forms will be
provided at the time distributions are requested.
b. Periodic Distributions (distributions payable over a period
greater than one year)
The portion of a periodic distribution which constitutes taxable
income will be subject to Federal income tax withholding as if the
recipient were married claiming three exemptions. A recipient may
elect not to have income taxes\
withheld or have income taxes withheld at a different rate by
providing a completed election form. Election forms will be provided
at the time distributions are requested.
D. Any distribution from plans described in A.3 on page__ is subject to the
regular wage withholding rules.
<PAGE>
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TABLE OF CONTENTS
TO
STATEMENT OF ADDITIONAL INFORMATION
SECTION PAGE
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DESCRIPTION OF ITT HARTFORD LIFE AND
ANNUITY INSURANCE COMPANY . . . . . . . . . . . . . . . . . . . . . . .
SAFEKEEPING OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . .
ANNUITY/PAYOUT PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . .
Annuity Payments. . . . . . . . . . . . . . . . . . . . . . . . . . .
The Annuity Unit and Valuation. . . . . . . . . . . . . . . . . . . .
Determination of Payment Amount . . . . . . . . . . . . . . . . . . .
CALCULATION OF YIELD AND RETURN. . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .
6619s/disk 0160s
Putnam/ITT Hartford
<PAGE>
- 49 -
THIS FORM MUST BE COMPLETED FOR ALL TAX SHELTERED ANNUITIES.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The Hartford variable annuity Contract which you have recently purchased is
subject to certain restrictions imposed by the Tax Reform Act of 1986.
Contributions to the Contract after December 31, 1989 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:
a. attained age 59 1/2
b. terminated employment
c. died, or
d. become disabled.
Distributions of post December 31, 1988 contributions may also be made if you
have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made because of financial
hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Hartford variable annuity. Please refer to your
Plan.
Please complete the following and return to:
ITT Hartford Life and Annuity Insurance Company
Individual Annuity Operations
P.O. Box 5085
Hartford, CT 06102-5085
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Name of Contract Owner/Participant
Address
City or Plan/School District
Date:
<PAGE>
- 50 -
- - - - - - - - - - - - - - - - - -
To Obtain a Statement of Additional Information, please complete the form below
and mail to:
ITT Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Operations
P.O. Box 5085
Hartford, CT 06102-5085
Please send a Statement of Additional Information for the PCM Capital Manager to
me at the following address:
- ---------------------------------------
Name
- ---------------------------------------
Address
- ---------------------------------------
City/State Zip Code
- - - - - - - - - - - - - - - - - -
6619s/disk 0160s
Putnam/ITT Hartford
<PAGE>
PART B
<PAGE>
- 2 -
PART B
STATEMENT OF ADDITIONAL INFORMATION
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO
This Statement of Additional Information is not a Prospectus. The information
contained herein should be read in conjunction with the Prospectus.
To obtain a Prospectus, send a written request to ITT Hartford Life and Annuity
Insurance Company, Attn: Individual Annuity Operations, P.O. Box 5085,
Hartford, CT 06102-5085.
Date of Prospectus: May 1, 1995
Date of Statement of Additional Information: May 1, 1995
Printed in U.S.A.
<PAGE>
- 3 -
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DESCRIPTION OF ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . .
SAFEKEEPING OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . .
ANNUITY/PAYOUT PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . .
Annuity Payments. . . . . . . . . . . . . . . . . . . . . . . . . . .
The Annuity Unit and Valuation. . . . . . . . . . . . . . . . . . . .
Determination of Payment Amount . . . . . . . . . . . . . . . . . . .
CALCULATION OF YIELD AND RETURN. . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
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INTRODUCTION
The tax deferred variable annuity contracts described in the prospectus are
designed to provide Annuity benefits to individuals who have established or wish
to establish retirement programs which may or may not qualify for special
Federal income tax treatment. The Annuitant under these contracts may receive
Annuity benefits in accordance with the Annuity option selected and the
retirement program, if any, under which the contracts have been purchased.
Annuity payments under a contract will begin on a particular future date which
may be selected at any time under the contract or automatically when the
Annuitant reaches age 90, except in certain states where deferral past age 85
is not permitted. There are several alternative annuity payment options
available under the contract (see "Optional Forms of Annuity," page__ of the
prospectus).
The Premium Payments under a contract, less any applicable Premium Taxes, will
be applied to the Separate Account and/or the Fixed Account. Accordingly, the
net Premium Payment under the contract will be applied to purchase interests in
one or more of the following ten portfolios ("Funds") of Putnam Capital Manager
Trust, an open-end diversified series investment company: PCM Diversified
Income Fund, PCM Global Asset Allocation Fund, PCM Global Growth Fund, PCM
Growth and Income Fund, PCM High Yield Fund, PCM Money Market Fund, PCM New
Opportunities Fund, PCM U.S. Government and High Quality Bond Fund, PCM
Utilities Growth and Income Fund and PCM Voyager Fund.
Shares of the Funds are purchased by the Separate Account without the imposition
of any additional sales charge. The value of a contract depends on the value of
the shares of the Fund held by the Separate Account pursuant to that contract.
As a result, the Contract Owner bears the investment risk since market value of
the shares may increase or decrease.
The contracts provide that in the event the Annuitant dies before the selected
Annuity Commencement Date, the Contingent Annuitant will become the Annuitant.
If the Annuitant dies before the Annuity Commencement Date and there is no
designated Contingent Annuitant, or the Contingent Annuitant predeceases the
Annuitant, or if the Contract Owner dies before the Annuity Commencement Date,
the Beneficiary will receive the Contract Value determined on the date of
receipt of due proof of death by ITT Hartford in its Home Office. However, if,
upon death prior to the Annuity Commencement Date, the Annuitant or Contract
Owner, as applicable, had not attained his 85th birthday, the Beneficiary will
receive the greater of (a) the Contract Value determined as of the day written
proof of death of such person is received by ITT Hartford, or (b) 100% of the
total Premium Payments made to such contract, reduced by any prior surrenders,
or (c) the Contract Value on the Specified Contract Anniversary immediately
preceding the date of death, increased by the dollar amount of any Premium
Payments made and reduced by the dollar amount of any partial terminations since
the immediately preceding Specified Contract Anniversary.
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DESCRIPTION OF ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
ITT Hartford Life and Annuity Insurance Company formerly ITT Life Insurance
Corporation is domiciled in the state of Wisconsin at Suite 2100, 111 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202 and with its principal office at
505 Highway 169 North, Minneapolis, Minnesota 55441; however, its mailing
address is P.O. Box 5085, Hartford, CT 06102-5085.
ITT Hartford was incorporated in January 9, 1956 and commenced business July 1,
1965. It is a stock life insurance company engaged in the business of writing
both individual and group life insurance and annuities in all states including
the District of Columbia, except New York.
ITT Hartford is a wholly owned subsidiary of Hartford Life Insurance Company.
ITT Hartford is ultimately 100% owned by Hartford Fire Company, one of the
largest multiple lines insurance carriers in the United States.
ITT Hartford Life and Annuity Insurance Company is rated A++ (superior) by
A.M. Best and Company, Inc. on the basis of its financial soundness and
operating performance. ITT Hartford Life and Annuity Insurance Company has an
AA+ rating from Standard and Poor's and Duff and Phelps' highest rating (AAA)
on the basis of its claims-paying ability.
These ratings do not apply to the performance of the Separate Account. However,
the contractual obligations under this variable annuity are the general
corporate obligations of ITT Hartford. These ratings do apply to ITT Hartford's
ability to meet its insurance obligations under the contract.
SAFEKEEPING OF ASSETS
The assets of the Separate Account are held by ITT Hartford under a safekeeping
arrangement.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, One Financial Plaza, Hartford, Connecticut, independent
public accountants, will perform an annual audit of the Separate Account. The
financial statements included in this Statement of Additional Information have
been audited by Arthur Andersen LLP to the extent and for the periods indicated
in their report and are included herein in reliance upon the report of said firm
as experts in accounting and auditing.
DISTRIBUTION OF CONTRACTS
Hartford Equity Sales Company, Inc. ("HESCO") currently serves as Principal
Underwriter for the securities issued with respect to the Separate Account.
Hartford Securities Distribution
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Company, Inc. ("HSD") will replace HESCO as principal underwriter upon approval
by the Commission, the National Association of Securities Dealers, Inc. ("NASD")
and applicable state regulatory authorities.
Both HESCO and HSD are wholly-owned subsidiaries of Hartford Life Insurance
Company. The principal business address of HESCO and HSD is the same as
Hartford Life Insurance Company.
The securities will be sold by salespersons of HESCO, and subsequently, HSD, who
represent HL as insurance and Variable Annuity agents and who are registered
representatives or Broker-Dealers who have entered into distribution agreements
with HESCO, and subsequently HSD.
HESCO is registered with the Commission under the Securities and Exchange Act of
1934 as a Broker-Dealer and is a member of the NASD. HSD will be registered
with the Commission under the Securities Exchange Act of 1934 as a Broker-Dealer
and will become a member of the NASD.
Commissions will be paid by ITT Hartford and will not be more than 6% of Premium
Payments.
From time to time, ITT Hartford may pay or permit other promotional incentives,
in cash or credit or other compensation.
The offering of the Separate Account contracts is continuous.
ANNUITY/PAYOUT PERIOD
ANNUITY PAYMENTS
Variable Annuity payments are determined on the basis of (1) a mortality table
set forth in the contracts and the type of Annuity payment option selected, and
(2) the investment performance of the investment medium selected. Fixed Annuity
payments are based on the Annuity tables contained in the contracts, and will
remain level for the duration of the Annuity.
The amount of the Annuity payments will not be affected by adverse mortality
experience or by an increase in expenses in excess of the expense deduction for
which provision has been made (see "Mortality and Expense Risk Charge," page___
of the Prospectus).
For a Variable Annuity, the Annuitant will be paid the value of a fixed number
of Annuity Units each month. The value of such units and the amounts of the
monthly Variable Annuity payments will, however, reflect investment income
occurring after retirement, and thus the Variable Annuity payments will vary
with the investment experience of the Fund shares selected.
<PAGE>
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THE ANNUITY UNIT AND VALUATION
The value of the Annuity Unit for each Sub-Account in the Separate Account for
any day is determined by multiplying the value for the preceding day by the
product of (1) the net investment factor (see "Valuation of Accumulation Units,"
page__ the Prospectus) for the day for which the Annuity Unit value is being
calculated, and (2) a factor to neutralize the assumed investment rate discussed
below.
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
1. Net Investment Factor for period 1.011225
2. Adjustment for 4% Assumed Investment Rate .999892
3. 2x1 1.011116
4. Annuity Unit value, beginning of period .995995
5. Annuity Unit value, end of period (3x4) 1.007066
DETERMINATION OF PAYMENT AMOUNT
When Annuity payments are to commence, the value of the Contract is determined
as the sum of the value of the Fixed Account no earlier than the close of
business on the fifth Valuation Day preceding the date the first Annuity payment
is due plus the product of the value of the Accumulation Unit of each
Sub-Account on that same day, and the number of Accumulation Units credited to
each Sub-Account as of the date the Annuity is to commence.
The Contract contains tables indicating the minimum dollar amount of the first
monthly payment under the optional forms of Annuity for each $1,000 of value of
a Sub-Account under a Contract. The first monthly payment varies according to
the form and type of Annuity selected. The Contract s contains Annuity tables
derived from the 1983a Individual Annuity Mortality Table with ages set back
one year with an assumed investment rate ("A.I.R.") of 4.00% per annum. The
total first monthly Variable Annuity payment is determined by multiplying the
value (expressed in thousands of dollars) of a Sub-Account (less any applicable
Premium Taxes) by the amount of the first monthly payment per $1,000 of value
obtained from the tables in the Contracts.
Fixed Annuity payments are determined at annuitization by multiplying the values
allocated to the Fixed Account by a rate to be determined by ITT Hartford which
is no less than the rate specified in the Annuity tables in the Contract. The
Annuity payment will remain level for the duration of the Annuity.
The amount of the first monthly Variable Annuity payment, determined as
described above, is divided by the value of an Annuity Unit for the appropriate
Sub-Account no earlier than the close of business on the fifth Valuation Day
preceding the day on which the payment is due in order to
<PAGE>
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determine the number of Annuity Units represented by the first payment. This
number of Annuity Units remains fixed during the Annuity Period, and in each
subsequent month the dollar amount of the Variable Annuity payment is determined
by multiplying this fixed number of Annuity Units by the then current Annuity
Unit value.
The A.I.R. assumed in the mortality tables would produce level Variable Annuity
payments if the investment rate remained constant. In fact, payments will vary
up or down as the investment rate varies up or down from the A.I.R.
The Annuity payments will be made on the fifteenth day of each month following
selection. The Annuity Unit value used in calculating the amount of the
Variable Annuity payments will be based on an Annuity Unit value determined as
of the close of business on a day no earlier than the fifth Valuation Day
preceding the date of the Annuity payment.
1398s
(Putnam Sep. Acct.)
<PAGE>
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CALCULATION OF YIELD AND RETURN
YIELD OF THE PCM MONEY MARKET FUND SUB-ACCOUNT. As summarized in the Prospectus
under the heading "Performance Related Information," the yield of the
Sub-Account for a seven day period (the "base period") will be computed by
determining the "net change in value" of a hypothetical account having a balance
of one unit at the beginning of the period, dividing the net change in account
value by the value of the account at the beginning of the base period to obtain
the base period return, and multiplying the base period return by 365/7 with the
resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include net investment income of
the account (accrued dividends as declared by the underlying funds, less expense
and Contract charges of the account) for the period, but will not include
realized gains or losses or unrealized appreciation or depreciation on the
underlying fund shares.
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from the
result, according to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
The Money Market Fund Sub-Account's yield and effective yield will vary in
response to fluctuations in interest rates and in the expenses of the
Sub-Account.
The yield and effective yield for the sub-account for the seven-day period
ending December 31, 1994 is as follows:
Yield = 4.44%
Effective Yield = 4.54%
The Diversified Income Fund, Global Asset Allocation Fund, Growth and Income
Fund, High Yield Fund, Utilities Growth and Income Fund, and U.S. Government and
High Quality Bond Fund Sub-Accounts' yields will vary from time to time
depending upon market conditions and, the composition of the underlying funds'
portfolios. Yield should also be considered relative to changes in the value of
the Sub-Accounts' shares and to the relative risks associated with the
investment objectives and policies of the Funds.
DIVERSIFIED INCOME FUND
Yield calculations of the Sub-Account used for illustration purposes reflect the
interest earned by the Sub-Account, less applicable asset charges assessed
against a Contract Owner's account over the base period. The following is the
method used to determine the yield for the 30-day period ended December 31,
1994.
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Example:
6
Current Yield Formula for the Sub-Account 2*[((A-B)/(C*D) + 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.
Yield = 6.06%
GLOBAL ASSET ALLOCATION FUND
Yield calculations of the Sub-Account used for illustration purposes reflect the
interest earned by the Sub-Account, less applicable asset charges assessed
against a Contract Owner's account over the base period. The following is the
method used to determine the yield for the 30-day period ended December 31,
1994.
Example:
6
Current Yield Formula for the Sub-Account 2*[((A-B)/(C*D) + 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.
Yield = 1.62%
GROWTH & INCOME FUND SUB-ACCOUNT
Yield calculations of the Sub-Account used for illustration purposes reflect the
interest earned by the Sub-Account, less applicable asset charges assessed
against a Contract Owner's account over the base period. The following is the
method used to determine the yield for the 30-day period ended December 31,
1994.
Example:
6
Current Yield Formula for the Sub-Account 2*[((A-B)/(C*D) + 1) - 1]
<PAGE>
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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.
Yield = 2.34%
HIGH YIELD FUND SUB-ACCOUNT
Yield calculations of the Sub-Account used for illustration purposes reflect the
interest earned by the Sub-Account, less applicable asset charges assessed
against a Contract Owner's account over the base period. The following is the
method used to determine the yield for the 30-day period ended December 31,
1994.
Example:
6
Current Yield Formula for the Sub-Account 2*[((A-B)/(C*D) + 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.
Yield = 9.21%
UTILITIES GROWTH AND INCOME FUND
Yield calculations of the Sub-Account used for illustration purposes reflect the
interest earned by the Sub-Account, less applicable asset charges assessed
against a Contract Owner's account over the base period. The following is the
method used to determine the yield for the 30-day period ended December 31,
1994.
Example:
6
Current Yield Formula for the Sub-Account 2*[((A-B)/(C*D) + 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.
<PAGE>
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D = The maximum offering price per unit on the last day of the period.
Yield = 3.47%
U.S. GOVERNMENT AND HIGH QUALITY BOND FUND SUB-ACCOUNT
Yield calculations of the Sub-Account used for illustration purposes reflect the
interest earned by the Sub-Account, less applicable asset charges assessed
against a Contract Owner's account over the base period. The following is the
method used to determine the yield for the 30-day period ended December 31,
1994.
Example:
6
Current Yield Formula for the Sub-Account 2*[((A-B)/(C*D) + 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.
Yield = 5.93%
CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the heading
"Performance Related Information", total return is a measure of the change in
value of an investment in a Sub-Account over the period covered. The formula
for total return used herein includes three steps: (1) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of units owned at the end of the period by the unit
value per unit on the last trading day of the period; (2) assuming redemption at
the end of the period and deducting any applicable contingent deferred sales
charge and (3) dividing this account value for the hypothetical investor by the
initial $1,000 investment and annualizing the result for periods of less than
one year. Total return will be calculated for one year, five years, and ten
years or some other relevant periods if a Sub-Account has not been in existence
for at least ten years.
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.
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PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. The total return and yield may also be used to compare
the performance of the Sub-Accounts against certain widely acknowledged outside
standards or indices for stock and bond market performance. Index performance
is not representative of the performance of the PCM Sub-Account to which it is
compared and is not adjusted for commissions and other costs. Portfolio
holdings of the PCM Sub-Account will differ from those of the index to which it
is compared. Performance comparison indices include the following:
The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics, is a
commonly used measure of the rate of inflation. The index shows the average
change in the cost of selected consumer goods and services and does not
represent a return on an investment vehicle.
The Dow Jones Industrial Average is an unmanaged list of 30 common stocks
frequently used as a general measure of stock market performance. Its
performance figures reflect changes of market prices and reinvestment of all
distributions.
Lehman Brothers Corporate Bond Index is an unmanaged list of publicly issued,
fixed-rate, non-convertible investment-grade domestic corporate debt securities
frequently used as a general measure of the performance of fixed-income
securities. The average quality of bonds included in the index may be higher
than the average quality of those bonds in which PCM High Yield Fund customarily
invests. The index does not include bonds in certain of the lower rating
classifications in which the Fund may invest. The performance figures the index
reflect changes in market prices and reinvestment of all interest payments.
The Lehman Brothers Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
The Lehman Brothers Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency. The index does not include bonds in certain of the lower-rating
classifications in which PCM High Yield Fund invests. Its performance figures
reflect changes in market prices and reinvestment of all interest payments.
<PAGE>
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Morgan Stanley Capital International World Index is an unmanaged list of
approximately 1,450 equity securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand and the Far East, with all
values expressed in U.S. dollars. Performance figures reflect changes in market
prices and reinvestment of distributions net of withholding taxes. The
securities in the index change over time to maintain representativeness.
The NASDAQ-OTC Industrial Average (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded. Its performance figures reflect changes of market prices but do not
reflect reinvestment of cash dividends.
Salomon Brothers Long-Term High-Grade Corporate Bond Index is an unmanaged list
of publicly traded corporate bonds having a rating of at least AA by Standard &
Poors's or Aa by Moody's and is frequently used as general measure of the
performance of fixed-income securities. The average quality of bonds included
in the index may be higher than the average quality of those bonds in which PCM
High Yield customarily invests. The index does not include bonds in certain of
the lower rating classifications in which the Fund may invest. Performance
figures for the index reflect changes of market prices and reinvestment of all
distributions.
The Salomon Brothers 7-10 Year Government Bond Index is an unmanaged list of
U.S. Government and government agency securities with maturities of 7 to 10
years. Performance figures for the index reflect changes of market prices and
reinvestment of all interest payments.
The Standard & Poor's Composite Index of 500 stocks (the "S&P 500") a market
value-weighted and unmanaged index showing changes in the aggregate market value
of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40 financial services
concerns. The S&P 500 represents about 80% of the market value of all issues
traded on the New York Stock Exchange. Its performance figures reflect changes
of market prices and reinvestment of all regular cash dividends.
The Standard & Poor's 40 Utilities Index is unmanaged list of 40 utility stocks.
The Index assumes reinvestment of all distributions and reflects changes in
market prices but does not take into account brokerage commissions or other
fees. PCM Utilities Growth and Income Fund's telephone and electric utility
stocks are generally held in the same proportion as the telephone and electric
stocks in the S&P Utilities Index. However, there are some utility stocks held
by the Fund that are not part of the Index.
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The manner in which total return and yield will be calculated for public use is
described above. The following table summarizes the calculation of total return
and yield for each Sub-Account, where applicable, through December 31, 1994.
Putnam/ITT Hartford
<PAGE>
AVERAGE ANNUAL TOTAL RETURN as of December 31,1994
<TABLE>
<CAPTION>
Putnam III PERIODS ENDED
- -----------------------------------------------------------------------------------------------------------------------------
Sub-Account Inception
Date 1 YEAR 5 YEAR INCEPTION
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PCM Growth and Income Fund 02/01/88 -10.47% 4.58% 8.77%
PCM High Yield Fund 02/01/88 -11.65% 8.78% 6.00%
PCM Money Market Fund 02/01/88 -7.11% 0.38% 1.70%
PCM Global Asset Allocation Fund 02/01/88 -13.08% 3.42% 5.11%
PCM U.S. Government and High Quality Bond Fund 02/01/88 -13.75% 3.64% 4.28%
PCM Voyager Fund 02/01/88 -9.84% 9.58% 11.14%
PCM Global Growth Fund 05/01/90 -11.67% N/A 2.83%
PCM Utilities Growth and Income Fund 05/01/92 -17.23% N/A -1.19%
PCM Diversified Income Fund 09/15/93 -14.67% N/A -10.23%
PCM New Opportunities Fund 06/20/94 N/A N/A -2.32%
</TABLE>
NOTE: Average annual total return assumes a hypothetical initial payment of
$1,000. At the end of each period, a total surrender is assumed.
Maintenance fees and contingent deferred sales loads, if applicable, are
deducted to determine ending redeemable value of the original payment.
Then, the ending redeemable value is divided by the original investment to
calculate total return.
<PAGE>
PUTNAM-Money Market Sub-Account
The following is an example of this yield calculation for the Sub-Account based
on a seven day period ending December 31,1994.
Assumption:
Value of a hypothetical pre-existing account
with exactly one unit at the beginning of the
period: . . . . . . . . . . . . . . . . . . . . . . . . $1.323996
Value of the same account (excluding capital
changes) at the end of the seven day period . . . . . . $1.325124
Calculation:
Ending account value. . . . . . . . . . . . . . . . . . $1.325124
Less beginning account value. . . . . . . . . . . . . . 1.323996
Net change in account value . . . . . . . . . . . . . . $0.001128
Base period return:
(adjusted change/beginning account value)
$0.001128/ $1.323996 $0.000852
Current yield = $0.000852 *(365/7) =. . . . . . . . . 4.44%
Effective yield = (1 + 0.000852) to the power of 365/7 365/7 - 1 = . 4.54%
<PAGE>
Putnam Diversified Income Fund - Sub-Account - ILA
The following is an example of this yield calculation for the Sub-Account
based on a one month period ending December 31,1994.
Formula:
6
YIELD = 2[(A-B + 1) - 1]
---
CD
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.
Calculation: 2[(A-B/CD + 1) RAISED TO THE POWER OF 6-1]
INTEREST INCOME a = 508,000
EXPENSES b = 95,040
AVERAGE UNITS c = 8,608,855
UNIT VALUE d = $9.621589
UIT YIELD = 6.06%
<PAGE>
Putnam Global Asset Allocation Fund - Sub-Account - ILA
The following is an example of this yield calculation for the Sub-Account
based on a one month period ending December 31,1994.
Formula:
YIELD = 2[(A-B + 1) RAISED TO THE POWER OF 6-1]
---
CD
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.
Calculation: 2[(A-B/CD + 1) RAISED TO THE POWER OF 6-1]
INTEREST INCOME a = 350,750
EXPENSES b = 160,832
AVERAGE UNITS c = 8,664,584
UNIT VALUE d = $16.334545
UIT YIELD = 1.62%
<PAGE>
Putnam Growth & Income Fund - Sub-Account - ILA
The following is an example of this yield calculation for the Sub-Account
based on a one month period ending December 31,1994.
Formula:
YIELD = 2[(A-B + 1) RAISED TO THE POWER OF 6-1]
---
CD
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.
Calculation: 2[(A-B/CD + 1) RAISED TO THE POWER OF 6-1]
INTEREST INCOME a = 1,658,000
EXPENSES b = 608,445
AVERAGE UNITS c = 26,789,912
UNIT VALUE d = $20.177784
UIT YIELD = 2.34%
<PAGE>
Putnam High Yield Fund - Sub-Account - ILA
The following is an example of this yield calculation for the Sub-Account
based on a one month period ending December 31,1994.
Formula:
YIELD = 2[(A-B + 1) RAISED TO THE POWER OF 6-1]
---
CD
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.
Calculation: 2[(A-B/CD + 1) RAISED TO THE POWER OF 6-1]
INTEREST INCOME a = 1,081,000
EXPENSES b = 139,661
AVERAGE UNITS c = 7,152,340
UNIT VALUE d = $17.476456
UIT YIELD = 9.21%
<PAGE>
Putnam U.S. Government and High Quality Bond Fund - Sub-Account - ILA
The following is an example of this yield calculation for the Sub-Account
based on a one month period ending December 31,1994.
Formula:
YIELD = 2[(A-B + 1) RAISED TO THE POWER OF 6-1]
---
CD
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.
Calculation: 2[(A-B/CD + 1) RAISED TO THE POWER OF 6-1]
INTEREST INCOME a = 710,000
EXPENSES b = 135,028
AVERAGE UNITS c = 7,585,196
UNIT VALUE d = $15.532869
UIT YIELD = 5.93%
<PAGE>
To ITT Hartford Life & Annuity Insurance Company Putnam Capital Manager Trust
Separate Account Two and to the Owners of Units of Interest therein:
We have audited the accompanying statement of assets and liabilities of ITT
Hartford Life & Annuity Insurance Company Putnam Capital Manager Trust Separate
Account Two as of December 31, 1994, and the related statement of operations for
the year then ended and the statements of changes in net assets for the year
then ended and for the period from inception, June 14, 1993, to December 31,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ITT Hartford Life & Annuity
Insurance Company Putnam Capital Manager Trust Separate Account Two as of
December 31, 1994, and the results of its operations for the year then ended and
the changes in its net assets for the year then ended and for the period from
inception, June 14, 1993, to December 31, 1993, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 15, 1995
32
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS & LIABILITIES
- ------------------------------------------------------------------------------------------------------------------------------
December 31, 1994 Voyager Global Growth Global Asset High Yield
Fund Growth and Income Allocation Fund
Sub-Account Fund Fund Fund Sub-Account
Sub-Account Sub-Account Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments:
PCM VOYAGER FUND
Shares 14,507,312
Cost 313,463,183
- ------------------------------------------------------------------------------------------------------------------------------
Market Value $ 322,062,317 $ 0 $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM GLOBAL GROWTH FUND
Shares 19,751,665
Cost 263,077,836
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 266,252,450 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM GROWTH AND INCOME FUND
Shares 32,894,870
Cost 555,021,250
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 0 540,791,658 0 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM GLOBAL ASSET ALLOCATION FUND
Shares 10,740,289
Cost 147,881,742
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 0 0 141,664,407 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM HIGH YIELD FUND
Shares 10,908,327
Cost 131,191,559
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 0 0 0 125,009,430
- ------------------------------------------------------------------------------------------------------------------------------
PCM U.S. GOVERNMENT AND
HIGH QUALITY FUND
Shares 9,647,788
Cost 129,464,353
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM NEW OPPORTUNITIES FUND
Shares 2,673,709
Cost 27,792,380
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM MONEY MARKET FUND
Shares 51,440,543
Cost 51,440,543
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM UTILITIES GROWTH & INCOME FUND
Shares 12,093,833
Cost 142,905,815
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM DIVERSIFIED INCOME FUND
Shares 8,504,192
Cost 85,661,958
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
Due from ITT Hartford
Life and Annuity
Insurance Company 266,105 278,834 54,499 22,828 35,079
- ------------------------------------------------------------------------------------------------------------------------------
Receivable from fund
shares sold 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $322,328,422 $266,531,284 $540,846,157 $141,687,235 $125,044,509
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to ITT Hartford Life and
Annuity Insurance Company 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
Payable for fund shares
purchased 264,011 278,803 56,667 22,927 35,153
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 264,011 278,803 56,667 22,927 35,153
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE
ANNUITY CONTRACT
LIABILITIES) $322,064,411 $266,252,481 $540,789,490 $141,664,308 $125,009,356
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
December 31, 1994 U.S. New Money Utilities Diversified
Government Opportunities Market Growth and Income Fund
and High Fund Fund Income Fund Sub-Account
Quality Sub-Account Sub-Account Sub-Account
Bond Fund
Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments:
PCM VOYAGER FUND
Shares 14,507,312
Cost 313,463,183
- ------------------------------------------------------------------------------------------------------------------------------
Market Value $ 0 $ 0 $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM GLOBAL GROWTH FUND
Shares 19,751,665
Cost 263,077,836
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM GROWTH AND INCOME FUND
Shares 32,894,870
Cost 555,021,250
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM GLOBAL ASSET ALLOCATION FUND
Shares 10,740,289
Cost 147,881,742
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM HIGH YIELD FUND
Shares 10,908,327
Cost 131,191,559
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM U.S. GOVERNMENT AND HIGH QUALITY FUND
Shares 9,647,788
Cost 129,464,353
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 117,895,973 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM NEW OPPORTUNITIES FUND
Shares 2,673,709
Cost 27,792,380
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 28,929,535 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM MONEY MARKET FUND
Shares 51,440,543
Cost 51,440,543
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 0 51,440,543 0 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM UTILITIES GROWTH & INCOME FUND
Shares 12,093,833
Cost 142,905,815
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 0 0 129,162,137 0
- ------------------------------------------------------------------------------------------------------------------------------
PCM DIVERSIFIED INCOME FUND
Shares 8,504,192
Cost 85,661,958
- ------------------------------------------------------------------------------------------------------------------------------
Market Value 0 0 0 0 82,830,830
- ------------------------------------------------------------------------------------------------------------------------------
Due from ITT Hartford
Life and Annuity
Insurance Company 31,339 81,931 1,127,309 0 56,054
- ------------------------------------------------------------------------------------------------------------------------------
Receivable from fund
shares sold 0 0 0 56,143 0
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $117,927,312 $29,011,466 $52,567,852 $129,218,280 $82,886,884
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to ITT Hartford
Life and Annuity
Insurance Company 0 0 0 58,080 0
- ------------------------------------------------------------------------------------------------------------------------------
Payable for fund shares
purchased 31,312 82,026 1,127,352 0 56,023
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 31,312 82,026 1,127,352 58,080 56,023
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE
ANNUITY CONTRACT
LIABILITIES) $117,896,000 $28,929,440 $51,440,500 $129,160,200 $82,830,861
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
33
<PAGE>
<CAPTION>
STATEMENT OF ASSETS & LIABILITIES (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1994 Units Unit Contract
Owned by Price Liability
Participants
- -----------------------------------------------------------------------------------------------------------------------------------
Deferred annuity contracts in the accumulation period:
Individual Sub-Accounts:
- -----------------------------------------------------------------------------------------------------------------------------------
Voyager Fund Sub-Account 13,732,090 23.444549 $ 321,942,647
- -----------------------------------------------------------------------------------------------------------------------------------
Global Growth Fund Sub-Account 20,284,996 13.118640 266,111,563
- -----------------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund Sub-Account 26,789,912 20.177784 540,561,050
- -----------------------------------------------------------------------------------------------------------------------------------
Global Asset Allocation Fund Sub-Account 8,664,584 16.334545 141,532,030
- -----------------------------------------------------------------------------------------------------------------------------------
High Yield Fund Sub-Account 7,152,340 17.476456 124,997,560
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Government and High Quality Bond Fund Sub-Account 7,585,196 15.532869 117,819,857
- -----------------------------------------------------------------------------------------------------------------------------------
New Opportunities Fund Sub-Account 2,699,033 10.718448 28,929,440
- -----------------------------------------------------------------------------------------------------------------------------------
Money Market Fund Sub-Account 38,819,386 1.325124 51,440,500
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities Growth and Income Sub-Account 11,858,993 10.889305 129,136,194
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified Income Fund Sub-Account 8,608,855 9.621589 82,830,861
- -----------------------------------------------------------------------------------------------------------------------------------
Total Accumulation Period: $1,805,301,702
- -----------------------------------------------------------------------------------------------------------------------------------
Annuity contracts in the annuity period:
Individual Sub-Accounts
- -----------------------------------------------------------------------------------------------------------------------------------
Voyager Fund Sub-Account 5,194 23.444549 121,764
- -----------------------------------------------------------------------------------------------------------------------------------
Global Growth Fund Sub-Account 10,742 13.118640 140,918
- -----------------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund Sub-Account 11,321 20.177784 228,440
- -----------------------------------------------------------------------------------------------------------------------------------
Global Asset Allocation Fund Sub-Account 8,098 16.334545 132,278
- -----------------------------------------------------------------------------------------------------------------------------------
High Yield Fund Sub-Account 675 17.476456 11,796
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Government and High Quality Bond Fund Sub-Account 4,902 15.532869 76,143
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities Growth and Income Sub-Account 2,205 10.889305 24,006
- -----------------------------------------------------------------------------------------------------------------------------------
Total Annuity Period $ 735,345
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
GRAND TOTAL: $1,806,037,047
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
34
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
For the Year Ended Voyager Global Growth Global Asset High Yield
December 31, 1994 Fund Growth and Income Allocation Fund
Sub-Account Fund Fund Fund Sub-Account
Sub-Account Sub-Account Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment
income:
Dividends $ 3,631,806 $ 840,433 $ 21,057,094 $ 5,472,834 $ 8,017,927
- ------------------------------------------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------------------------------------------
Mortality and
expense
undertakings (3,259,378) (2,852,397) (6,090,892) (1,647,209) (1,590,573)
- ------------------------------------------------------------------------------------------------------------------------------
Net investment
income (loss) 372,428 (2,011,964) 14,966,202 3,825,625 6,427,354
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on
investments:
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain
(loss) on security
transactions (191,228) (18,513) (10,345) (6,505) (97,959)
- ------------------------------------------------------------------------------------------------------------------------------
Net unrealized
appreciation
(depreciation) of
investments
during the period 3,078,450 (4,229,598) (20,548,899) (8,352,436) (9,120,235)
- ------------------------------------------------------------------------------------------------------------------------------
Net gains (losses)
on investments 2,887,222 (4,248,111) (20,559,244) (8,358,941) (9,218,194)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
resulting from
operations: $ 3,259,650 $(6,260,075) $(5,593,042) $(4,533,316) $(2,790,840)
- ------------------------------------------------------------------------------------------------------------------------------
*From Inception, May 2, 1994 to December 31, 1994
<CAPTION>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
For the Year Ended U.S. Government New Money Utilities Diversified
December 31, 1994 and High Opportunities Market Growth and Income Fund
Quality Fund Fund Income Fund Sub-Account
Bond Fund Sub-Account Sub-Account Sub-Account
Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment
income:
Dividends $ 8,020,188 $ 0 $1,639,892 $ 5,381,111 $ 368,605
- ------------------------------------------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------------------------------------------
Mortality and
expense
undertakings (1,654,223) (97,733) (583,258) (1,811,695) (990,825)
- ------------------------------------------------------------------------------------------------------------------------------
Net investment
income (loss) 6,365,965 (97,733) 1,056,634 3,569,416 (622,220)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on
investments:
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain
(loss) on security
transactions (72,020) (14,613) 0 (92,356) (2,731)
- ------------------------------------------------------------------------------------------------------------------------------
Net unrealized
appreciation
(depreciation) of
investments
during the period (11,964,074) 1,137,155 0 (14,771,976) (3,325,550)
- ------------------------------------------------------------------------------------------------------------------------------
Net gains (losses)
on investments (12,036,094) 1,122,542 0 (14,864,332) (3,328,281)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
resulting from
operations: $ (5,670,129) $1,024,809 $1,056,634 $(11,294,916) $(3,950,501)
- ------------------------------------------------------------------------------------------------------------------------------
*From Inception, May 2, 1994 to December 31, 1994
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
35
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
For the Year Voyager Global Growth Global Asset High Yield
Ended Fund Growth and Income Allocation Fund
December 31, Sub-Account Fund Fund Fund Sub-Account
1994 Sub-Account Sub-Account Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations:
Net
investment
income
(loss) $ 372,428 $ (2,011,964) $ 14,966,202 $ 3,825,625 $ 6,427,354
- ------------------------------------------------------------------------------------------------------------------------------
Net realized
gain (loss)
on security
transactions (191,228) (18,513) (10,345) (6,505) (97,959)
- ------------------------------------------------------------------------------------------------------------------------------
Net
unrealized
appreciation
(depreciation)
of
investments
during the
period 3,078,450 (4,229,598) (20,548,899) (8,352,436) (9,120,235)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease)
in net assets
resulting
from
operations 3,259,650 (6,260,075) (5,593,042) (4,533,316) (2,790,840)
- ------------------------------------------------------------------------------------------------------------------------------
Unit
transactions:
Purchases 132,782,780 122,326,486 205,817,932 60,974,360 52,225,263
- ------------------------------------------------------------------------------------------------------------------------------
Net transfers 39,108,109 44,716,940 46,569,749 13,009,830 (8,933,259)
- ------------------------------------------------------------------------------------------------------------------------------
Surrenders (6,359,020) (6,322,979) (16,638,317) (4,218,504) (6,124,706)
- ------------------------------------------------------------------------------------------------------------------------------
Net annuity
transactions 83,164 96,555 88,430 94,422 12,744
- ------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease)
in net assets
resulting
from unit
transactions 165,615,033 160,817,002 235,837,794 69,860,108 37,180,042
- ------------------------------------------------------------------------------------------------------------------------------
Total increase
(decrease)
in net assets 168,874,683 154,556,927 230,244,752 65,326,792 34,389,202
- ------------------------------------------------------------------------------------------------------------------------------
Net assets:
beginning of
period 153,189,728 111,695,554 310,544,738 76,337,516 90,620,154
- ------------------------------------------------------------------------------------------------------------------------------
End of
period $322,064,411 $266,252,481 $540,789,490 $141,664,308 $125,009,356
- ------------------------------------------------------------------------------------------------------------------------------
*From Inception, May 2, 1994 to December 31, 1994
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
For the Year Ended U.S. Government New Money Utilities Diversified
Ended and High Opportunities Market Growth and Income Fund
December 31, Quality Fund Fund Income Fund Sub-Account
1994 Bond Fund Sub- Sub-Account Sub-Account
Sub-Account Account
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations:
Net
investment
income
(loss) $ 6,365,965 $ (97,733) $ 1,056,634 $ 3,569,416 $ (622,220)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized
gain (loss)
on security
transactions (72,020) (14,613) 0 (92,356) (2,731)
- ------------------------------------------------------------------------------------------------------------------------------
Net
unrealized
appreciation
(depreciation)
of
investments
during the
period (11,964,074) 1,137,155 0 (14,771,976) (3,325,550)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease)
in net assets
resulting
from
operations (5,670,129) 1,024,809 1,056,634 (11,294,916) (3,950,501)
- ------------------------------------------------------------------------------------------------------------------------------
Unit
transactions:
Purchases 36,900,682 16,321,767 52,564,931 33,210,440 58,617,588
- ------------------------------------------------------------------------------------------------------------------------------
Net transfers (24,394,027) 11,838,985 (15,645,418) (18,170,247) (4,473,953)
- ------------------------------------------------------------------------------------------------------------------------------
Surrenders (7,087,988) (256,121) (3,250,665) (5,278,183) (2,449,556)
- ------------------------------------------------------------------------------------------------------------------------------
Net annuity
transactions 77,551 0 0 5,696 0
- ------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease)
in net assets
resulting
from unit
transactions 5,496,218 27,904,631 33,668,848 9,767,706 51,694,079
- ------------------------------------------------------------------------------------------------------------------------------
Total increase
(decrease)
in net assets (173,911) 28,929,440 34,725,482 (1,527,210) 47,743,578
- ------------------------------------------------------------------------------------------------------------------------------
Net assets:
beginning of
period 118,069,911 0 16,715,018 130,687,410 35,087,283
- ------------------------------------------------------------------------------------------------------------------------------
End of
period $117,896,000 $28,929,440 $51,440,500 $129,160,200 $82,830,861
- ------------------------------------------------------------------------------------------------------------------------------
*From Inception, May 2, 1994 to December 31, 1994
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
36
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
From Inception Voyager Global Growth Global Asset High Yield
June 14, 1993 Fund Growth and Income Allocation Fund
to December 31, 1993 Sub-Account Fund Fund Fund Sub-Account
Sub-Account Sub-Account Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations:
Net investment
income (loss) $ (361,729) $ (252,158) $ (843,350) $ (198,886) $ (235,460)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain
(loss) on security
transactions (602) (22) (245) 7 1,313
- ------------------------------------------------------------------------------------------------------------------------------
Net unrealized
appreciation
(depreciation) of
investments during
the period 5,520,684 7,404,213 6,319,307 2,135,101 2,938,106
- ------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting
from operations 5,158,353 7,152,033 5,475,712 1,936,222 2,703,959
- ------------------------------------------------------------------------------------------------------------------------------
Unit transactions
- ------------------------------------------------------------------------------------------------------------------------------
Purchases 61,991,152 59,964,514 135,656,137 43,405,984 40,946,109
- ------------------------------------------------------------------------------------------------------------------------------
Net transfers 87,386,944 45,256,252 171,770,259 31,565,974 47,345,671
- ------------------------------------------------------------------------------------------------------------------------------
Surrenders (1,380,229) (719,729) (2,496,019) (610,415) (375,585)
- ------------------------------------------------------------------------------------------------------------------------------
Net annuity
transactions 33,508 42,484 138,649 39,751 0
- ------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting
from unit
transactions 148,031,375 104,543,521 305,069,026 74,401,294 87,916,195
- ------------------------------------------------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets 153,189,728 111,695,554 310,544,738 76,337,516 90,620,154
- ------------------------------------------------------------------------------------------------------------------------------
Net assets:
- ------------------------------------------------------------------------------------------------------------------------------
Beginning of period 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
End of period $153,189,728 $111,695,554 $310,544,738 $76,337,516 $90,620,154
- ------------------------------------------------------------------------------------------------------------------------------
*From Inception, September 15, 1993 to December 31, 1993
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
From Inception U.S. Government Money Utilities Diversified
June 14, 1993 and High Market Growth and Income Fund
to December 31, 1993 Quality Fund Income Fund Sub-
Bond Fund Sub-Account Sub-Account Account
Sub-Accounts
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment
income (loss) $ (336,296) $ 63,903 $ (360,325) $ (57,266)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain
(loss) on security
transactions (219) 0 442 104
- ------------------------------------------------------------------------------------------------------------------------------
Net unrealized
appreciation
(depreciation) of
investments during
the period 395,693 0 1,028,297 494,420
- ------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting
from operations 59,178 63,903 668,414 437,258
- ------------------------------------------------------------------------------------------------------------------------------
Unit transactions
- ------------------------------------------------------------------------------------------------------------------------------
Purchases 55,083,327 22,515,440 61,172,539 28,920,146
- ------------------------------------------------------------------------------------------------------------------------------
Net transfers 63,623,524 (5,492,469) 70,363,758 5,793,146
- ------------------------------------------------------------------------------------------------------------------------------
Surrenders (696,118) (371,856) (1,538,293) (63,267)
- ------------------------------------------------------------------------------------------------------------------------------
Net annuity
transactions 0 0 20,992 0
- ------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting
from unit
transactions 118,010,733 16,651,115 130,018,996 34,650,025
- ------------------------------------------------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets 118,069,911 16,715,018 130,687,410 35,087,283
- ------------------------------------------------------------------------------------------------------------------------------
Net assets:
- ------------------------------------------------------------------------------------------------------------------------------
Beginning of period 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
End of period $118,069,911 $16,715,018 $130,687,410 $35,087,283
- ------------------------------------------------------------------------------------------------------------------------------
*From Inception, September 15, 1993 to December 31, 1993
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
37
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO--HARTFORD LIFE & ANNUITY
INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
1. ORGANIZATION:
Putnam Capital Manager Trust Separate Account Two (the Account) is a separate
investment account within ITT 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. The Account commenced
operations on June 14, 1993.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
A) SECURITY TRANSACTIONS Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and
capital gains income are accrued as of the ex-dividend date.
B) SECURITY VALUATION The investment in shares of the Funds
are valued at the closing net asset value per share as determined by the
appropriate Fund as of December 31, 1994.
C) FEDERAL INCOME TAXES The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current
law, no federal income taxes are payable with respect to the operations
of the Account.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
A) MORTALITY AND EXPENSE UNDERTAKINGS The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives a maximum annual fee of 1.25% of
the Account's average daily net assets. The Company also provides administrative
services and receives an annual fee of 0.15% of hte Account's average daily net
assets.
B) DEDUCTION OF ANNUAL MAINTENANCE FEE Annual maintenance fees are
deducted through termination of units of interest from applicable
contract owners' accounts, in accordance with the terms of the
contracts.
38
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY-BASIS FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994 AND 1993
TOGETHER WITH
AUDITORS' REPORT
<PAGE>
[ARTHUR ANDERSEN LLP LETTERHEAD]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
ITT Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory-basis balance sheets of ITT Hartford
Life and Annuity Insurance Company (Wisconsin corporation and wholly-owned
subsidiary of Hartford Life Insurance Company) (the Company) as of December 31,
1994 and 1993, and the related statutory-basis statements of income, changes in
capital and surplus and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
statutory-basis financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 1. When statutory-basis financial
statements are presented for purposes other than for filing with a regulatory
agency, generally accepted auditing standards require that an auditor's report
on them state whether they are presented in conformity with generally accepted
accounting principles. The accounting practices used by the Company vary from
generally accepted accounting principles as explained and quantified in Note 1.
In our opinion, because the differences in accounting practices as described in
Note 1 are material, the statutory-basis financial statements referred to above
do not present fairly, in accordance with generally accepted accounting
principles, the financial position of the Company as of December 31, 1994 and
1993, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1994.
<PAGE>
-2-
However, in our opinion, the statutory-basis financial statements referred to
above present fairly, in all material respects, the financial position of the
Company as of December 31, 1994 and 1993, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 1994
in conformity with statutory accounting practices as described in Note 1.
Hartford, Connecticut
January 30, 1995
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY BALANCE SHEETS
($000)
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1994 1993
---------- ----------
<S> <C> <C>
ASSETS
Bonds $ 798,501 $ 294,338
Common Stocks 2,275 1,599
Policy Loans 20,145 1,859
Cash & Short-Term Investments 84,312 33,232
Other Invested Assets 2,519 458
---------- ----------
Total Cash & Invested Assets 907,752 331,486
---------- ----------
Investment Income Due & Accrued 12,757 4,426
Premium Balances Receivable 467 46
Receivables from Affiliates 2,861 4,320
Other Assets 13,749 17,254
Separate Account Assets 3,588,077 2,053,775
---------- ----------
Total Assets $ 4,525,663 $ 2,411,307
---------- ----------
---------- ----------
LIABILITIES
Aggregate Reserves for Future Benefits $ 447,284 $ 41,195
Policy & Contract Claims 9,902 740
Liability for Premium & Other Deposit Funds 479,202 284,159
Asset Valuation Reserve 2,422 1,066
Payable to Affiliates 7,840 13,618
Other Liabilities (100,349) (71,939)
Separate Account Liabilities 3,588,077 2,053,775
---------- ----------
Total Liabilities 4,434,378 2,322,614
---------- ----------
---------- ----------
CAPITAL AND SURPLUS
Common Stock 2,500 2,500
Gross Paid-In & Contributed Surplus 114,109 114,109
Unassigned Funds (25,324) (27,916)
---------- ----------
Total Capital and Surplus 91,285 88,693
---------- ----------
TOTAL LIABILITIES AND CAPITAL AND SURPLUS $ 4,525,663 $ 2,411,307
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF INCOME
($000)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Premiums & Annuity Considerations $ 442,173 $ 14,281 $ 9,974
Annuity & Other Fund Deposits 608,685 1,986,140 1,292
Net Investment Income 29,012 7,970 5,666
Commissions & Expense Allowances on Reinsurance Ceded 154,527 60,700 50,209
Reserve Adjustment on Reinsurance Ceded 1,266,926 0 0
Other Revenues 41,857 369,598 (231)
---------- ---------- ----------
Total Revenues 2,543,180 2,438,689 66,910
---------- ---------- ----------
BENEFITS AND EXPENSES
Death and Annuity Benefits 7,948 3,192 2,822
Surrenders and Other Benefit Payments 181,749 4,955 1,836
Commissions and Other Expenses 186,303 132,169 57,360
Increase in Reserves for Future Benefits 416,748 5,120 3,765
Increase in Liability for Premium
and Other Deposit Funds 182,934 281,024 887
Net transfers to Separate Accounts 1,541,419 2,013,183 0
---------- ---------- ----------
Total Benefits and Expenses 2,517,101 2,439,643 66,670
---------- ---------- ----------
NET GAIN (LOSS) FROM OPERATIONS
BEFORE FEDERAL INCOME TAXES 26,079 (954) 240
Federal Income Taxes 24,038 11,270 1,561
---------- ---------- ----------
NET GAIN (LOSS) FROM OPERATIONS 2,041 (12,224) (1,321)
Net Realized Capital Gains (2) 877 120
---------- ---------- ----------
NET INCOME (LOSS) $ 2,039 $ (11,347) $ (1,201)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
($000)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
CAPITAL & SURPLUS - BEGINNING OF YEAR $ 88,693 $ 30,027 $ 41,227
--------- --------- ---------
Net Income (Loss) 2,039 (11,347) (1,201)
Net Unrealized Gains (Losses) on Investments (133) (1,198) 527
Change in Asset Valuation Reserve (1,356) 135 (655)
Change in Non-Admitted Assets (8,599) 1,076 (7,671)
Change in Reserve (valuation basis) 10,659 0 0
Aggregate write-ins for surplus (18) 0 0
Dividends to Stockholder 0 0 (2,200)
Paid In Capital 0 70,000 0
--------- --------- ---------
Change in Capital and Surplus 2,592 58,666 (11,200)
--------- --------- ---------
CAPITAL & SURPLUS - END OF YEAR $ 91,285 $ 88,693 $ 30,027
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF CASH FLOW
($000)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
OPERATIONS
Premiums, Annuity Considerations & Fund Deposits $ 1,050,493 $ 2,000,492 $ 11,262
Investment Income 24,519 5,594 5,578
Other Income 1,515,700 434,851 53,635
--------- ---------- ----------
Total Income 2,590,712 2,440,937 70,475
--------- ---------- ----------
Benefits Paid 181,205 8,215 4,789
Federal Income Taxes Paid on Operations 20,634 9,666 44
Other Expenses 1,832,905 2,231,477 57,383
--------- ---------- ----------
Total Benefits & Expenses 2,034,744 2,249,358 62,216
--------- ---------- ----------
NET CASH FROM OPERATIONS 555,968 191,579 8,259
--------- ---------- ----------
PROCEEDS FROM INVESTMENTS
Bonds 87,747 88,334 71,668
Common Stocks 0 0 102
Other 40 23,638 88
--------- ---------- ----------
NET INVESTMENT PROCEEDS 87,787 111,972 71,858
--------- ---------- ----------
Tax on Capital Gains (96) 376 (119)
Paid In Surplus 0 70,000 0
Other Cash Provided 30,554 0 6,028
--------- ---------- ----------
TOTAL PROCEEDS 674,405 373,175 86,264
--------- ---------- ----------
COST OF INVESTMENTS ACQUIRED
Bonds 595,181 314,933 80,174
Common Stocks 808 567 625
Miscellaneous Applications 2,523 0 0
--------- ---------- ----------
TOTAL INVESTMENTS ACQUIRED 598,512 315,500 80,799
--------- ---------- ----------
OTHER CASH APPLIED
Dividends Paid to Stockholder 0 0 2,200
Other 24,813 24,626 13,725
--------- ---------- ----------
TOTAL OTHER CASH APPLIED 24,813 24,626 15,925
--------- ---------- ----------
TOTAL APPLICATIONS 623,325 340,126 96,724
--------- ---------- ----------
NET CHANGE IN CASH & SHORT-TERM INVESTMENTS 51,080 33,049 (10,460)
CASH & SHORT-TERM INVESTMENTS, BEGINNING OF YEAR 33,232 183 10,643
--------- ---------- ----------
CASH & SHORT-TERM INVESTMENTS, END OF YEAR $ 84,312 $ 33,232 $ 183
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
ITT Hartford Life and Annuity Insurance Company (ILA or the Company),
formerly known as ITT Life Insurance Corporation, is a wholly owned
subsidiary of Hartford Life Insurance Company (HLIC), which is an
indirect subsidiary of the ITT Hartford Insurance Group, Inc. (ITT
Hartford), a wholly owned subsidiary of ITT Corporation (ITT).
ILA offers a complete line of ordinary and universal life insurance,
individual annuities and certain supplemental accident and health benefit
coverages.
BASIS OF PRESENTATION
The accompanying ILA statutory basis financial statements were prepared in
conformity with statutory accounting practices prescribed or permitted by
the National Association of Insurance Commissioners (NAIC) and the
Insurance Department of the State of Wisconsin.
Statutory accounting practices and generally accepted accounting principles
(GAAP) differ in certain significant respects. These differences
principally involve:
(1) treatment of policy acquisition costs (commissions, underwriting
and selling expenses, premium taxes, etc.) which are charged to
expense when incurred for statutory purposes rather than on a pro-rata
basis over the expected life of the policy;
(2) recognition of premium revenues, which for statutory purposes are
generally recorded as collected or when due during the premium paying
period of the contract. For GAAP purposes, revenues for universal life
policies and investment products consist of policy charges for the
cost of insurance, policy administration and surrender charges
assessed to policy account balances. Premiums for traditional life
insurance policies are recognized as revenues when they are due from
policyholders. The retrospective deposit method is used in accounting
for universal life and other types of contracts where the payment
pattern is irregular or surrender charges are a significant source of
profit. The prospective deposit method is used where investment
margins are the primary source of profit;
(3) development of liabilities for future policy benefits, which for
statutory purposes predominantly use interest rate and mortality
assumptions prescribed by the National Association of Insurance
Commissioners (NAIC) which may vary considerably from interest and
mortality used for GAAP financial reporting;
(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 statement and tax reporting purposes;
(5) excluding certain assets designated as non-admitted assets (past
due agent's balances, furniture and equipment, etc.) from the balance
sheet for statutory purposes by directly charging surplus;
(6) establishing accruals for post-retirement and post-employment
health care benefits on an optional basis, immediate recognition or a
twenty year phase-in approach, whereas GAAP liabilities were
established at date of adoption. For statutory reporting purposes the
Company established accruals utilizing the twenty year phase-in
approach;
<PAGE>
-2-
(7) establishing a formula reserve for realized and unrealized losses
due to default and equity risk associated with certain invested assets
(Asset Valuation Reserve); as well as the deferral and amortization of
realized gains and losses, resulting from changes in interest rates
during the period the asset is held, into income over the remaining
life of the asset sold (Interest Maintenance Reserve); whereas on a
GAAP basis, no such formula reserve is required and realized gains and
losses are recognized in the period the asset is sold;
(8) the reporting of reserves and benefits net of reinsurance ceded,
where risk transfer has taken place. 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, where 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 effect those intentions. The Company's fixed maturities
were classified on a GAAP basis as "available-for-sale" and
accordingly, these investments were reflected at fair value with the
corresponding impact included as a component of Stockholder's Equity
designated as "Unrealized Loss on Securities, Net of Tax"
As of December 31, 1994, 1993 and 1992, the significant differences between
statutory and GAAP basis net income and capital and surplus for the Company are
summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
GAAP Net Income: $ 23,295 $ 6,071 $ 7,034
Deferred acquisition costs (117,863) (147,700) (17,434)
Benefit reserve adjustment 30,912 14,059 (1,833)
Deferred taxes (9,267) (7,123) 769
Separate accounts 75,941 110,547 0
Coinsurance 3,472 11,578 8,005
Other, net (4,451) 1,221 2,258
--------- --------- ---------
Statutory Net Income (Loss) $ 2,039 $ (11,347) $ (1,201)
--------- --------- ---------
--------- --------- ---------
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
GAAP Capital and Surplus $ 199,785 $ 198,408 $ 122,504
Deferred acquisition costs (422,201) (304,338) (156,638)
Benefit reserve adjustment 85,191 43,621 29,562
Deferred taxes 13,257 13,706 20,829
Separate accounts 18,488 110,547 0
Asset valuation reserve (2,422) (1,066) (1,201)
Coinsurance 0 22,642 9,442
Unrealized (Gain) Loss on Bonds 21,918 0 0
Other, net 9,269 5,173 5,529
-------- -------- --------
Statutory Capital and Surplus $ 91,285 $ 88,693 $ 30,027
-------- -------- --------
-------- -------- --------
</TABLE>
<PAGE>
-3-
AGGREGATE RESERVES AND LIABILITIES FOR PREMIUM AND OTHER DEPOSIT FUNDS:
Aggregate reserves for payment of future life, health and annuity benefits
were computed in accordance with presently accepted actuarial standards.
Reserves for life insurance policies are generally based on the 1958 and
1980 Commissioner's Standard Ordinary Mortality Tables at various rates
ranging from 2.5% to 5.5%. Accumulation and on-benefit annuity reserves are
based principally on Individual Annuity tables at various rates ranging from
2.5% to 8.75% and using the Commissioner's Annuity Reserve Valuation Method
(CARVM). Accident and health reserves are established using a two year
preliminary term method and morbidity tables based on company experience.
ILA has established separate accounts to segregate the assets and
liabilities of certain annuity contracts that must be segregated from the
Company's general assets under the terms of the contracts. The assets
consist primarily of marketable securities reported at market value.
Premiums, benefits and expenses of these contracts are reported in the
Statutory Statement of Income.
During 1994, the Company changed the valuation method on life policies and
contracts resulting in a $10.9 million increase in surplus. The new
valuation method is in accordance with presently accepted actuarial
standards.
INVESTMENTS:
Investments in bonds are carried at amortized cost. Bonds which are deemed
ineligible to be held at amortized cost by the National Association of
Insurance Commissioners (NAIC) Securities Valuation Office (SVO) are carried
at the appropriate SVO published value. When apermanent reduction in the
value of publicly traded securities occurs, the decrease is reported as a
realized loss and the carrying value is adjusted accordingly. Common stocks
are carried at market value with the difference from cost reflected in
surplus. Other invested assets are generally recorded at fair value.
Changes in unrealized capital gains and losses on common stock are reported
as additions to or reductions of surplus. The Asset Valuation Reserve,
which replaced the Mandatory Securities Valuation Reserve used in 1991, is
designed to provide a standardized reserve process for realized and
unrealized losses due to the default and equity risks associated with
invested assets. The reserve increased by $1,356 in 1994, decreased by $135
in 1993 and increased by $655 in 1992. Additionally, the Interest
Maintenance Reserve (IMR) captures net realized capital gains and losses,
net of applicable income taxes, resulting from changes in interest rates and
amortizes these gains or losses into income over the remaining life of the
mortgage loan or bond sold. Realized capital gains and losses not included
in IMR are reported in the Statement of Income net of taxes. Realized
investment gains and losses are determined on a specific identification
basis. The amount of net capital losses reclassified from the IMR was $67
and $264 in 1994 and 1993, respectively and the amount of the net capital
gains transferred to the IMR was $348 in 1992. The amount of income
amortized was $114 in 1994, $178 in 1993 and $114 in 1992.
OTHER LIABILITIES:
The amount reflected in other liabilities includes a receivable from the
separate accounts of $186.5 million and $98.2 million in 1994 and 1993,
respectively. The balances are classified in accordance with NAIC
accounting practices.
2. INVESTMENTS
(a) COMPONENTS OF NET INVESTMENT INCOME:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Interest income from fixed maturity securities $ 29,493 $ 7,975 $ 5,985
Interest income from policy loans 454 124 115
Interest and dividends from other investments (89) 47 31
--------- --------- ---------
Gross investment income 29,858 8,146 6,131
Less: investment expenses 846 176 465
--------- --------- ---------
Net investment income $ 29,012 $ 7,970 $ 5,666
--------- --------- ---------
--------- --------- ---------
</TABLE>
<PAGE>
-4-
(b) UNREALIZED GAINS (LOSSES) ON STOCK:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Gross unrealized gains $ 75 $ 148 $ 93
Gross unrealized losses (60) 0 0
-------- -------- --------
Net unrealized gains 15 148 93
Balance at beginning of year 148 93 111
-------- -------- --------
Change in net unrealized gains on common stock $ (133) $ 55 $ (18)
-------- -------- --------
-------- -------- --------
</TABLE>
(c) UNREALIZED GAINS (LOSSES) ON BONDS AND SHORT-TERM INVESTMENTS:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Gross unrealized gains $ 986 $ 5,916 $ 2,430
Gross unrealized losses (34,718) (684) (143)
------- ------- -------
Net unrealized (losses) gains after tax (33,732) 5,232 2,287
Balance at beginning of year 5,232 2,287 2,760
------- ------- -------
Change in net unrealized (losses) gains on
bonds and short-term investments $ (38,964) $ 2,945 $ (473)
------- ------- -------
------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
(d) COMPONENTS OF NET REALIZED GAINS:
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Bonds $ (101) $ (316) $ 665
Stocks 0 0 4
Real estate and other 34 1,316 88
------- ------- -------
Realized (losses) gains (67) 1,000 757
Capital gains taxes 2 386 289
------- ------- -------
Net realized gains (69) 614 468
Less: IMR Capital Gains (Losses) (67) (263) 348
------- ------- -------
Capital Gains Net of IMR $ (2) $ 877 $ 120
------- ------- -------
------- ------- -------
</TABLE>
<PAGE>
-5-
(e) OFF-BALANCE SHEET INVESTMENTS
The Company had no significant financial instruments with off-balance sheet
risk as of December 31, 1994, 1993 and 1992.
(f) CONCENTRATION OF CREDIT RISK:
Excluding U.S. government and government agency investments, the Company is
not exposed to any significant concentration of credit risk.
(g) BONDS, SHORT-TERM AND UNAFFILIATED STOCK INVESTMENTS:
<TABLE>
<CAPTION>
1994
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- ----------
U.S. government and government agencies and
authorities:
<S> <C> <C> <C> <C>
- guaranteed and sponsored $175,925 $0 $(12,059) $163,866
- guaranteed and sponsored - asset backed 142,318 382 (4,911) 137,789
States, municipalities and political subdivisions 10,409 0 (603) 9,806
International governments 2,248 0 (69) 2,179
Public utilities 29,509 31 (1,271) 28,269
All other corporate 257,301 246 (9,452) 248,095
All other corporate - asset backed 112,390 327 (4,066) 108,651
Short-term investments 56,365 0 0 56,365
Certificates of deposit 68,401 0 (2,287) 66,114
--------- -------- --------- ----------
Total $854,866 $986 $(34,718) $821,134
--------- -------- --------- ----------
--------- -------- --------- ----------
<CAPTION>
1994
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Common Stock $2,260 $75 $(60) $2,275
--------- -------- --------- ----------
--------- -------- --------- ----------
</TABLE>
<PAGE>
-6-
(G) BONDS, SHORT-TERM AND UNAFFILIATED STOCK INVESTMENTS: (CONTINUED)
<TABLE>
<CAPTION>
1993
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
- guaranteed and sponsored $88,485 $157 $(290) $88,352
- guaranteed and sponsored - asset backed 103,264 4,019 (346) 106,937
States, municipalities and political subdivisions 410 0 0 410
International governments 0 0 0 0
Public utilities 7,545 201 0 7,746
All other corporate 76,397 1,504 (16) 77,885
All other corporate - asset backed 15,237 35 (20) 15,252
Short-term investments 8,176 0 0 8,176
Certificates of deposit 3,000 0 (12) 2,988
--------- -------- --------- ---------
Total $302,514 $5,916 $(684) $307,746
--------- -------- --------- ---------
--------- -------- --------- ---------
<CAPTION>
1993
------------------------------------------------
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Common Stock $1,452 $148 $0 $1,600
--------- -------- --------- ---------
--------- -------- --------- ---------
</TABLE>
The amortized cost and estimated market value of bonds and short-term
investments at December 31, 1994 by management's anticipated maturity are
shown below. Asset backed securities are distributed to maturity year
based on ILA's estimate of the rate of future prepayments of principal over
the remaining life of the securities. Expected maturities differ from
contractual maturities reflecting borrowers' rights to call or prepay their
obligations.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Maturity Cost Value
-------- --------- ---------
<S> <C> <C>
Due in one year or less $130,299 $128,300
Due after one year through five years 606,859 579,771
Due after five years through ten years 110,444 104,107
Due after ten years 7,264 8,957
--------- ---------
Total $854,866 $821,135
--------- ---------
--------- ---------
</TABLE>
<PAGE>
-7-
Proceeds from sales of investments in bonds and short-term investments
during 1994, 1993 and 1992 were $117,912, $333,023 and $219,356 resulting
in gross realized gains of $518, $937 and $968 and gross realized losses of
$624, $1,255 and $269 before transfers to IMR. The Company has no realized
gains for common stock.
(h) FAIR VALUE OF INVESTMENT-RELATED FINANCIAL INSTRUMENTS NOT DISCLOSED
ELSEWHERE:
BALANCE SHEET ITEMS: (IN MILLIONS)
<TABLE>
<CAPTION>
1994 1993
----------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Policy loans $20 $20 $2 $2
LIABILITIES
Liabilities on investment contracts $534 $526 $289 $287
</TABLE>
The carrying amounts for policy loans approximates fair value. The
liabilities are determined by forecasting future cash flows discounted at
current market rates.
3. RELATED PARTY TRANSACTIONS:
Transactions between the Company and its affiliates within ITT Hartford
relate principally to tax settlements, reinsurance, service fees, capital
contributions and payments of dividends.
For additional information, see Footnote 5,6 and 7.
4. FEDERAL INCOME TAXES:
The Company is included in the consolidated Federal income tax return of
ITT Hartford which is ultimately included in the income tax return of ITT.
Allocation of taxes is based primarily upon separate company tax return
calculations with current credit for net losses used in consolidation
except that increases resulting from consolidation are allocated in
proportion to separate return amounts. Intercompany Federal income tax
balances are generally settled quarterly with Hartford Fire. Federal income
taxes paid by the Company were $20,538, $10,042 and $(75) in 1994, 1993 and
1992, respectively.
5. CAPITAL AND SURPLUS AND SHAREHOLDER DIVIDEND RESTRICTIONS:
The maximum amount of dividends which can be paid, without prior approval,
by State of Wisconsin insurance companies to shareholders is subject to
restrictions relating to statutory surplus. Dividends are paid as
determined by the Board of Directors and are not cumulative. Dividends of
$2,200 were paid by ILA to its parent, HLIC, in 1992. There were dividends
paid by ILA to its parent, HLIC, in 1994 and 1993.
6. PENSION PLANS AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:
The Company's employees are included in ITT's non-contributory defined
benefit pension plans. These plans provide pension benefits that are based
on years of service and the employee's compensation during the last ten
years of employment. The Company's funding policy is to contribute
annually an amount between the minimum funding requirements set forth in
the Employee Retirement Income Security Act of 1974 and the maximum amount
that can be deducted for Federal income tax purposes. Generally, pension
costs are funded through the purchase of HLIC's group pension contracts.
Pension expense was $1,211, $765 and $734 in 1994, 1993 and 1992,
respectively. Liabilities for the plan are held by ITT.
The Company also participates in ITT's Investment and Savings Plan, which
includes a deferred compensation option under IRC section 401(k) and an
ESOP allocation under IRC section 404(k). The liabilities for these plans
are included in the financial statements of ITT Corporation.
<PAGE>
-8-
6. PENSION PLANS AND OTHER POST RETIREMENT BENEFITS: (CONTINUED)
The Company's employees are included in Hartford Fire's contributory
defined health care and life insurance benefit plans. These plans provide
health care and life insurance benefits for retired employees.
Substantially all employees may become eligible for those benefits if they
reach normal or early retirement age while still working for the Company.
The Company has prefunded a portion of the health care and life insurance
obligations through trust funds where such prefunding can be accomplished
on a tax effective basis. Post-retirement health care and life insurance
benefits expense (not including provisions for accrual of post-retirement
benefit obligations), allocated by Hartford Fire, was $54, $34 and $113 for
1994, 1993 and 1992, respectively.
The assumed rate of future increases in the per capita cost of health care
(the health care trend rate) was 11% for 1994, decreasing ratably to 6% in
the year 2001. Increasing the health care trend rates by one percent per
year would have an immaterial impact on the accumulated post-retirement
benefit obligation and the annual expense.
Post-employment benefits are primarily comprised of obligations to provide
medical and life insurance to employees on long term disability.
Post-employment benefits expense was not considered material in 1994, 1993
and 1992.
7. REINSURANCE
In December 1994 the Company ceded, on a modified coinsurance basis, 80% of
the variable annuity business written in 1994 to ITT Lyndon Life Insurance
Company, an affiliate. The ceded business includes both general and
separate account liabilities. As a result of the agreement ILA transferred
approximately $1,352 million in assets and liabilities to ITT Lyndon Life
Insurance Company. The financial impact of the cession was an increase of
approximately $15 million to net income and surplus.
In November 1994 the Company ceded, on a modified coinsurance basis, 30%
of the separate account variable annuity business distributed by Paine
Webber to Paine Webber Life Insurance Company (PWLIC). As a result of the
agreement ILA transferred approximately $24 million in assets and
liabilities to PWLIC. The financial impact of the cession was an increase
of approximately $765 thousand to net income and surplus.
In October 1994, the agreement, effective December 1990, which required
ILA to coinsure 90% of all existing and new business, excluding variable
annuity business. written by the Company to HLIC, was terminated. As a
result of the termination, ILA received approximately $430 million in
assets and liabilities from HLIC. The income statement impact of the
transaction was a decrease of approximately $15 million to net income and
surplus.
In November 1993, ILA acquired, through an assumption reinsurance
transaction, substantially all of the individual fixed and variable annuity
business of HLA. As a result of this transaction, the assets and
liabilities of the company increased approximately $1 billion. The impact
on consolidated net income was not significant.
8. COMMITMENTS AND CONTINGENCIES:
The Company has no material contingent liabilities, nor has the Company
committed any surplus funds for any contingent liabilities or arrangements.
The Company is involved in various legal actions which have arisen in the
course normal of its business. In the opinion of management, the
ultimate liability with respect to such lawsuits as well as other
contingencies is not considered to be material in relation to the results
of operations and financial position of the Company.
9. SUBSEQUENT EVENTS:
None.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
(b) (1) A copy of the resolution authorizing the Separate Account is
filed herewith.
(2) Not applicable. ITT Hartford maintains custody of all assets.
(3) Principal Underwriter Agreement between ITT Hartford Life and
Annuity Insurance Company and Hartford Equity Sales Company, Inc.
is filed herewith.
Form of DEALER AGREEMENT is filed herewith.
(4) A copy of the Individual Flexible Premium Variable Annuity
Contract is filed herewith.
(5) The Form of Application is filed herewith.
(6) (a) Certificate of Incorporation of ITT Hartford Life and
Annuity Insurance Company is filed with this Registration
Statement.
(b) Bylaws of ITT Hartford Life and Annuity Insurance Company is
filed herewith.
(7) Not applicable.
(8) Not applicable.
(9) Not applicable.
(10) Not applicable.
<PAGE>
-2-
Item 25. Directors and Officers of the Depositor
Joan M. Andrew Vice President
Paul J. Boldischar, Jr. Senior Vice President
Francis I. Condon, Jr. Vice President
Peter W. Cummins Vice President
Ann M. deRaismes Vice President
James R. Dooley Vice President
Bruce D. Gardner General Counsel & Secretary
Joseph H. Gareau Executive Vice President & Chief Investment
Officer
Donald J. Gillette Vice President
Lynda Godkin Assistant General Counsel & Secretary
Lois W. Grady Vice President
David A. Hall Senior Vice President & Actuary
Joseph Kanarek Vice President
LaVern L. Kohlhof Vice President & Secretary
Thomas M. Marra Senior Vice President & Actuary
James G. Masica Vice President & Chief Actuary
Steven L. Matthiesen Vice President
David T. Schrandt Vice President, Treasurer & Controller
Lowndes A. Smith President & Chief Executive Officer
Lizabeth H. Zlatkus Vice President
<PAGE>
-3-
Donald J. Znamierowski Vice President
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Exhibit 26 is filed herein with this Registration Statement.
(To be filed by amendment).
Item 27. Number of Contract Owners
As of December 31, 1994 there were no contract owners.
Item 28. Indemnification -- The directors and officers of ITT Hartford and
HESCO are covered under a directors and officers liability insurance policy
issued to ITT Corporation and its subsidiaries. Such policy will reimburse the
Registrant for any payments that it shall make to directors and officers
pursuant to law and will, subject to certain exclusions contained in the policy,
further pay any other costs, charges and expenses and settlements and judgments
arising from any proceeding involving any director or officer of the Registrant
in his past or present capacity as such, and for which he may be liable, except
as to any liabilities arising from acts that are deemed to be uninsurable.
The Registrant hereby undertakes that insofar as indemnification for liabilities
arising under the Securities Act of 1933 (the "Act") may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
<PAGE>
-4-
Item 29. Principal Underwriters
(a) HESCO acts as principal underwriter for the following investment companies:
Hartford Life Insurance Company - DC Variable Account I
Separate Account Two (DC Variable Account II)
Separate Account Two (Variable Account "A")
Separate Account Two (NQ Variable Account)
Separate Account Two (QP Variable Account)
Separate Account One
Separate Account Two (Director)
Hartford Life Insurance Company - Putnam Capital Manager Trust Separate
Account
Hartford Money Market Fund, Inc.
Hartford Life Insurance Company - Separate Account Three
ITT Hartford Life and Annuity Insurance Company - Separate Account Three
Hartford Life Insurance Company - Separate Account Five
ITT Hartford Life and Annuity Insurance Company - Separate Account Five
ITT Hartford Life and Annuity Insurance Company - Separate Account Six
Hartford Life Insurance Company Separate Account VL I
(b) Directors and Officers of HESCO
Name and Principal Positions and Offices
Business Address With Underwriter
------------------ ---------------------
Donald E. Waggaman, Jr. Treasurer
Bruce D. Gardner Secretary
<PAGE>
-5-
George R. Jay Controller
Lowndes A. Smith President
Item 30. Location of Accounts and Records
Accounts and records are maintained by:
ITT Hartford Life and Annuity
Insurance Corporation
505 N. Highway 169
Minneapolis, Minnesota 55441-0000
Item 31. Management Services
None
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that
the audited financial statements in the registration statement are never
more than 16 months old so long as payments under the variable annuity
contracts may be accepted.
(b) The Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that
an applicant can check to request a Statement of Additional Information, or
(2) a post card or similar written communication affixed to or included in
the prospectus that the applicant can remove to send for a Statement of
Additional Information.
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to be made
available under this Form promptly upon written or oral request.
The Registrant is relying on the no-action letter issued by the Division of
Investment Management to American Counsel of Life Insurance, Ref. No. IP-6-88,
November 28, 1988. The Registrant has complied with the four provisions of the
no-action letter.
6380s/0154s
(ITT-Director)
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
POWER OF ATTORNEY
Bruce D. Gardner
Joseph H. Gareau
Joseph Kanarek
Thomas M. Marra
Lowndes A. Smith
Lizabeth H. Zlatkus
Donald J. Znamierowski
do hereby jointly and severally authorize Bruce D. Gardner or Rodney J. Vessels
to sign as their agent, any Registration Statement, pre-effective amendment, and
any post-effective amendment of the ITT Hartford Life and Annuity Insurance
Company under the Securities Act of 1933 and/or the Investment Company Act of
1940.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
/s/ Bruce D. Gardner Dated:
- ---------------------------------- ---------------------------
Bruce D. Gardner
/s/ Joseph H. Gareau Dated:
- ---------------------------------- ---------------------------
Joseph H. Gareau
/s/ Joseph Kanarek Dated: 12-9-94
- ---------------------------------- ---------------------------
Joseph Kanarek
/s/ Thomas M. Marra Dated: 12-9-94
- ---------------------------------- ---------------------------
Thomas M. Marra
/s/ Lowndes A. Smith Dated:
- ---------------------------------- ---------------------------
Lowndes A. Smith
/s/ Lizabeth H. Zlatkus Dated:
- ---------------------------------- ---------------------------
Lizabeth H. Zlatkus
/s/ Donald J. Znamierowski Dated: 12/8/94
- ---------------------------------- ---------------------------
Donald J. Znamierowski
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and duly caused this Registration Statement to be
signed on its behalf, in the City of Hartford, and State of Connecticut on
this 27th day of April, 1995.
ITT HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY -- PUTNAM CAPITAL MANAGER
SEPARATE ACCOUNT TWO (Registrant)
*By: /s/ John P. Ginnetti By: /s/ Rodney J. Vessels
---------------------------------------- -------------------------
John P. Ginnetti, Senior Vice President Rodney J. Vessels
Attorney-in-Fact
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Depositor)
*By: /s/ John P. Ginnetti
--------------------------------------------
John P. Ginnetti, Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons and in the capacities and on
the dates indicated.
Bruce D. Gardner, General Counsel
Corporate Secretary, Director *
Joseph H. Gareau, Executive Vice
President and Chief Investment
Officer, Director *
Joseph Kanarek, Vice President *By: /s/ Rodney J. Vessels
Director * -------------------------
Rodney J. Vessels
Thomas M. Marra, Senior Vice Attorney-in-Fact
President, Director *
Lowndes A. Smith, President, Dated: 5/1/95
Chief Operating Officer, ------------------------
Director *
Lizabeth H. Zlatkus, Vice President
Director *
Donald J. Znamierowski, Vice President
Comptroller, Director *
PCM/ILA 33-60702
<PAGE>
ITT LIFE INSURANCE CORPORATION
CONSENT OF DIRECTORS
We, the undersigned, being all of the Directors of ITT Life Insurance
Corporation ("Company"), hereby consent to the following actions, such actions
to have the same force and effect as if taken at a meeting duly held for such
purpose.
RESOLVED, that Company is hereby authorized to establish a separate account
in accordance with state insurance laws and to issue variable annuity
insurance contracts with reserves for such contracts being segregated in
such separate account.
FURTHER RESOLVED, that the officers of the Company are hereby authorized
to:
(1) Designate or redesignate the Account as such Officers deem
appropriate;
(2) Comply with applicable state and federal laws and regulations
applicable to the establishment and operation of the Account;
(3) Establish, from time to time, the terms and conditions pursuant to
which interests in the Account will be sold; and
(4) Establish all procedures, standards and arrangements necessary or
appropriate for the operation of the Account.
/s/ Edward N. Bennett /s/ Donald R. Frahm
- -------------------------------- ---------------------------------
Edward N. Bennett Donald R. Frahm
/s/ John P. Ginnetti
- -------------------------------- ---------------------------------
James T. French John P. Ginnetti
/s/ Lowndes A. Smith
- -------------------------------- ---------------------------------
Lowndes A. Smith William E. Sweeney
/s/ Michael S. Wilder /s/ Howard A. York
- -------------------------------- ---------------------------------
Michael S. Wilder Howard A. York
/s/ Donald J. Znamierowski
-------------------------------------
Donald J. Znamierowski
<PAGE>
SALES AGREEMENT [Logo]
APPOINTMENT
1.1 The Hartford insurance company(ies) named in the Sales Agreement
Specifications Page and, with respect to SEC Registered contracts,
Hartford Equity Sales Company, Inc., as Principal Underwriter,
(hereinafter collectively referred to as "Company") hereby appoint the
named individual(s) or organization(s) as "Agent" of Company for the
solicitation and procurement of applications for insurance contracts
(hereinafter referred to as "Contracts") in the line(s) of business set
forth in the Sales Agreement Specifications Page, in all states in
which Company is authorized to do business and in which Agent is
properly licensed and appointed, without exclusive representation.
2.0 AUTHORITY
2.1 Agent has the power or authority to represent Company only to the
extent expressly granted in this Agreement and no further power or
authority is implied.
2.2 Nothing contained herein is intended to create a relationship of
employer and employee between Company and Agent. Agent and, if
applicable, any sub-agents appointed by Agent, shall be independent
contractors as to Company and free to exercise their own judgment as to
the time, place and means of performing all acts hereunder, but they
shall conform to all regulations of Company not unreasonably
interfering with freedom of action or judgment.
2.3 This Agreement terminates all previous Agency agreements, if any,
between Company and Agent. However, the execution of this Agreement
shall not affect any obligations which have already accrued under any
prior agreement.
2.4 Agent does not have the authority to collect premiums of each line of
business, other than initial premiums, unless specifically set forth in
the applicable commission schedule.
2.5 If Agent is a Class I through Class XX Agent, Agent is authorized to
procure and solicit applications for Contracts through sub-agents which
Agent may appoint with the approval of Company. No agreement between
Agent and any sub-agent shall impose any liability or obligation upon
Company unless Company is a party thereto in writing. All sub-agents
shall be duly licensed under the applicable insurance laws to sell
annuity, life and health insurance contracts by the proper authorities
in the jurisdictions in which Agent proposes to offer such Contracts.
The sub-agents shall indicate in each application for a Contract that
it has been solicited on behalf of Agent.
2.5.1 Agent shall supervise any sub-agents appointed by Agent to
solicit sales of the Contracts and Agent shall be responsible
for all acts and omissions of each sub-agent within the scope of
his agency appointment at all times. Agent shall exercise all
responsibilities required by the applicable federal and state
law and regulations. Company shall not have any responsibility
for the supervision of any sub-agents of Agent.
2.5.2 Company may, by written notice to Agent, refuse to permit any
sub-agent to solicit applications for the sale of any of the
Contracts hereunder and may, by such notice, require Agent to
cause any such sub-agent to cease any such solicitation or
sales, and Company may require Agent to cancel the appointment
of any sub-agent with Company.
-1-
<PAGE>
2.6 If Agent is assigned a different Agent Class for different Lines of
Business (i.e. Class I Agent for Variable Annuities and a Class V Agent
for individual Life, Annuity and Health Insurance), the provisions of
this Agreement, which specifically relate only to a particular Class of
Agent shall only apply to Agent in transacting that Line of Business
for which Agent is so classified, if any.
SEC REGISTERED CONTRACTS
3.1 If Agent is a Class I through Class XX Agent and an NASD registered
Broker-Dealer, Agent agrees that, with respect to SEC Registered
Contracts, Agent has full responsibility for the training and
supervision of all persons, including sub-agents of Agent, associated
with Agent who are engaged directly or indirectly in the offer or sale
of such Contracts and that all such persons shall be subject to the
control of Agent with respect to such persons' activities in connection
with the Contracts. Agent will cause the sub-agents to be trained in
the sale of the Contracts and will cause such sub-agents to be
registered representatives of Agent before such sub-agents engage in
the offer or sale of the Contracts. Agent shall cause Agent's sub-
agents' qualifications to be certified to the satisfaction of Company
and shall notify Company if any sub-agents cease to be registered
representatives of Agent.
3.1.1 Agent will fully comply with the requirements of the National
Association of Securities Dealers, Inc. and of the Securities
Exchange Act of 1934 and all other applicable federal or state
laws and will establish such rules and procedures as may be
necessary to cause diligent supervision of the securities
activities of the sub-agents. Upon request by Company, Agent
shall furnish any records necessary to establish such diligent
supervision.
3.1.2 Before a sub-agent is permitted to solicit and procure
applications for the Contracts, Agent and the sub-agent shall
have entered into an agreement pursuant to which the sub-agent
will be appointed a sub-agent and a registered representative of
Agent and in which the sub-agent will agree that his selling
activities relating to the Contracts will be under the
supervision and control of Agent, and the sub-agent's right to
continue to sell such Contracts is subject to his continued
compliance with such agreement.
3.1.3 In the event a sub-agent fails or refuses to submit to
supervision of Agent in accordance with this Agreement, or
otherwise fails to meet the rules and standards imposed by
Agent, Agent shall immediately notify such sub-agent that he is
no longer authorized to sell the Contracts, and Agent shall take
whatever additional action may be necessary to terminate the
sales activities of such sub-agent relating to the Contracts
including immediate notification of Company of such termination.
3.2 If Agent is not an NASD Registered Broker/Dealer but is a member of an
affiliated group of legal entities one of which is an NASD Registered
Broker/Dealer ("Broker/Dealer") and a party to this Agreement, Agent
agrees that, with respect to SEC Registered contracts, the sub-agents
of Agent shall be registered representatives of such Broker/Dealer.
3.2.1 As appropriate, any reference in this Agreement to Agent shall
apply equally to such Broker/Dealer.
3.2.2 Each Agent which is not a Broker/Dealer hereby directs Company
to pay any compensation due, pursuant to Paragraph 4, to the
Broker/Dealer.
3.2.3 If Agent is not a Broker/Dealer but is a member of an affiliated
group of legal entities one of which is a Broker/Dealer and a
party to this Agreement, Agent and Broker/Dealer agree that,
with respect to SEC Registered Contracts, Agent and
Broker/Dealer have responsibility for the training and
supervision of all registered representatives of Broker/Dealer
and who are sub-agents of Agent and who are engaged directly or
indirectly in the offer or sale of such SEC Registered Contracts
and that all such representatives shall be subject to the
control of Agent and Broker/Dealer with respect to their
activities in connection with the SEC Registered Contracts.
-2-
<PAGE>
3.3 If Agent is neither an NASD Registered Broker-Dealer nor a member of an
affiliated group of legal entities one of which is a Broker/Dealer,
Agent and any sub-agents shall be registered representatives of
Hartford Equity Sales Company, Inc.
3.4 All other provisions of this Agreement apply to the sale of SEC
Registered Contracts.
COMPENSATION
4.1 Company will pay Agent as full compensation hereunder, commissions
and/or service fees on premiums paid to Company on account of Contracts
issued upon applications procured pursuant to this Agreement and while
this Agreement is in effect.
4.1.1 Commission and/or service fees will be paid in the amounts and
for the periods of time as set forth in the Commission Schedules
included in this Agreement or subsequently made a part hereof,
and which are in effect at the time such Contracts are sold.
4.1.2 The Commission Schedules included in this Agreement are subject
to change by Company at any time, but only upon written notice
to Agent. No such change shall affect any Contracts issued upon
applications received by Company at Company's Home Office prior
to the effective date of such change.
4.1.3 Any Commission Schedule included in this Agreement or
subsequently made a part hereof may provide other or additional
conditions regarding compensation and if so, will be controlling
to the extent of the other or additional conditions.
4.2 Compensation will be earned by Agent only for those applications
accepted by Company, and only after receipt by Company at Company's
Home Office in Hartford, Connecticut, of the required premium and
compliance by Agent with any outstanding delivery requirements.
4.2.1 No compensation will be earned or paid on premiums (other than
premiums on health insurance contracts) waived by Company
pursuant to any "waiver of premium" provision.
4.2.2 Should Company for any reason return any premium on a policy
issued hereunder, Agent agrees to repay Company the total amount
of any compensation which may have been paid thereon within
thirty (30) business days of notice of such refund.
4.3 Any compensation otherwise payable to Agent in accordance with this
Section 4.0 shall be reduced by the amount, if any, of such
compensation paid directly, at the direction of Agent, by Company to
any person and appointed by Company and Agent or, in connection with
group policies, the amounts paid by Company to a resident licensed
agent in a state which requires the countersignature by, or the
effectuating of the insurance through, a resident licensed agent.
4.4 In the event of termination of this Agreement for one or more of the
reasons specified in Subparagraphs 7.2.2 or 7.2.3 below, no further
commissions or other compensation shall thereafter be payable.
4.5 In the event of termination in accordance with 7.1 below if in any
calendar year following such termination the aggregate commissions
payable hereunder for all life and health policies (not SEC regulated
contracts) total less than $100.00, no further commissions shall be
payable hereunder, other references to vesting to the contrary not
withstanding. This rule is not applicable to any SEC registered equity
product.
4.6 With respect to registered Contracts, if Agent is disqualified for
continued registration with the NASD, Company shall not be obligated to
pay any compensation, the payment of which would represent a violation
of NASD rules.
-3-
<PAGE>
In such event, Company shall hold any commission otherwise due on any
Contract in force in "escrow" from the date of such disqualification
until the termination of any litigation or administrative proceedings
relating to such disqualification, provided Agent commences an appeal
to the NASD within 180 days following the disqualification notice and
actively pursues such appeal. Should Agent's registration in the NASD
be reinstated, all compensation due or becoming due Agent during the
period of disqualification shall be immediately paid, provided this
does not violate any NASD rules or regulations in effect at said time.
5.0 GENERAL PROVISIONS
5.1 Agent shall cooperate with Company in the investigation and settlement
of all claims against Agent and/or Company relating to the solicitation
or sale of Contracts under this Agreement. Agent shall promptly
forward to Company any notice of claim or other relevant information
which may come into Agent's possession.
5.2 Agent shall keep full and accurate records of the business transacted
by Agent under this Agreement and shall forward to Company such reports
of said business as Company may prescribe. Company shall have the
right to examine said records at reasonable times. All rate books,
manuals, forms, supplies and any other properties furnished by Company
and in the possession of Agent shall be returned to Company on
termination of this Agreement.
5.3 Agent shall bear all of Agent's expenses incurred in the performance of
this Agreement.
5.4 Agent shall have a duty to obtain applications for Company and, where
appropriate, to conserve and renew coverage placed with Company.
5.5 All applications for the purchase of Contracts shall be subject to
acceptance by Company. Company reserves the right to prescribe
conditions, rules and regulations for the offer and acceptance of its
Contracts, which may be changed from time to time and which shall be
forwarded to Agent.
5.6 Company reserves the right to modify, change or discontinue the
offering of any form of Contract at any time.
5.7 No waiver or modification of this Agreement will be effective unless it
be in writing and signed by a duly authorized officer of Company and
Agent or a duly authorized officer of Agent.
5.8 The failure of Company to enforce any provisions of this Agreement
shall not constitute a waiver of any such provision. The past waiver
of a provision by Company shall not constitute a course of conduct or a
waiver in the future of that same provision.
5.9 In the event any legal process or notice is served on Agent in a suit
or proceeding against Company, Agent shall forward forthwith such
process or notice to Company at its Home Office in Hartford,
Connecticut, by certified mail.
5.10 Agent shall not use any advertising material, prospectus, proposal, or
representation either in general of in relation to a Contract of
Company unless furnished by Company or until the consent of Company
shall have been first secured. Agent shall not issue or recirculate
any illustration, circular, statement or memorandum of any sort,
misrepresenting the terms, benefits or advantages of any Contract
issued by Company, or make any misleading statement as to dividends or
other benefits to be received thereon, or as to the financial position
of Company.
-4-
<PAGE>
5.10.1 In regard to SEC Registered Contracts, Agent agrees not to make
written or oral representations except such as are contained in
current prospectuses and authorized supplementary sales
literature made available by Company. In respect to such
products Agent also agrees to comply with the Securities and
Exchange Commission Statement of Policy and the regulations
thereunder of the National Association of Securities Dealers,
Inc.
5.11 Agent shall indemnify and save Company harmless from any loss or
expense on account of any unauthorized act or transaction by Agent, or
persons employed or appointed by Agent, or any claim by a sub-agent of
Agent for compensation due or to become due on account of such sub-
agent's sale of Contracts.
5.11.1 Agent expressly authorizes Company to charge against all
compensation due or to become due to Agent under this Agreement
any monies paid or liabilities incurred by Company under this
Paragraph 5.11.
5.12 Agent shall not offer or pay any rebate of premium or make any offer of
any other inducement not specified in the Contracts to any person to
insure with Company. Agent shall not make any misrepresentation or
incomplete comparison for the purpose of inducing a policyholder in any
other company to lapse, forfeit or surrender its insurance therein.
5.13 No assignment of this Agreement, or commissions payable hereunder,
shall be valid unless authorized in writing by Company. Every
assignment shall be subject to any indebtedness and obligation of Agent
that may be due or become due to Company and any applicable state
insurance regulations pertaining to such assignments.
5.14 Company may at any time deduct, from any monies due under this
Agreement, every indebtedness or obligation of Agent to Company.
5.14.1 On termination of this Agreement, any outstanding indebtedness
to Company shall become immediately due and payable.
6.0 LIMITATION OF AUTHORITY
6.1 Agent is not authorized, and is expressly forbidden on behalf of
Company, to incur any indebtedness or liability, or to make, alter or
discharge agreements, or to waive forfeitures, extend the time of
payment of any premium, waive payment in cash, or to receive any money
due or to become due Company, except as specifically provided in this
Agreement.
6.2 No individual Contract providing life, health or disability insurance
coverage shall be delivered if a sub-agent or Agent has knowledge that
the health of the proposed insured has changed since the application
was taken or unless the first premium has been fully paid and delivery
made by the delivery date specified by Company or, if no delivery date
is specified, within sixty (60) days from the date said Contract is
mailed from Company's Home Office.
6.2.1 Any Contract not delivered, in accordance with this Paragraph
6.2, shall be returned to Company immediately.
7.0 TERMINATION
7.1 This entire Agreement may be terminated by either party by giving
thirty (30) days' notice in writing to the other party.
-5-
<PAGE>
7.1.1 Such notice of termination shall be mailed to the last known
address of Agent appearing on Company's records, or in the event
of termination by Agent, to the Home Office of Company at P.O.
Box 2999, Hartford, Connecticut 06104-2999.
7.1.2 Such notice shall be an effective notice of termination of this
Agreement as of the time the notice is deposited in the United
States mail or the time of actual receipt of such notice if
delivered by means other than mail.
7.2 This Agreement shall automatically terminate without notice upon the
occurrence of any of the events set forth below:
7.2.1 Upon the bankruptcy or dissolution of Agent provided, however,
that if there is more than one Agent, the Agreement shall
automatically terminate only with respect to the bankrupt or
dissolved Agent.
7.2.2 When and if Agent commits fraud or gross negligence in the
performance of any duties imposed upon Agent by this Agreement
or wrongfully withholds or misappropriates, for Agent's own use,
funds of Company, its policyholders or applicants.
7.2.3 When and if Agent materially breaches this Agreement or
materially violates the insurance or Federal or State securities
laws of a state in which Agent transacts business.
7.2.4 When and if Agent fails to obtain renewal of a necessary license
in any jurisdiction, but only as to that jurisdiction.
7.2.5 When and if Agent is disqualified for continued membership with
the NASD or registration with the Securities and Exchange
Commission, but only as to SEC registered Contracts.
7.3 The provisions of Sections 4.0 and 6.0 shall survive the termination of
this Agreement, as appropriate.
-6-
<PAGE>
PRINCIPAL UNDERWRITER AGREEMENT SPECIMEN
THIS AGREEMENT, dated as of the day of , 1992, made by and between ITT
LIFE INSURANCE CORPORATION ("ITT" or the "Sponsor"), a corporation organized and
existing under the laws of the State of Connecticut, and HARTFORD EQUITY SALES
COMPANY, INC. ("HESCO"), a corporation organized and existing under the laws of
the State of Connecticut.
WITNESSETH:
WHEREAS, the Board of Directors of ITT Life has made provision for the
establishment of a separate account within ITT Life in accordance with the
laws of the State of Connecticut, which separate account was organized and
is established and registered as a unit trust type investment company with
the Securities and Exchange Commission under the Investment Company Act of
1940, as amended, and which is designated ITT Life Insurance Corporation
Separate Account Two (referred to as the "Unit Trust"); and
WHEREAS, HESCO offers to the public a certain Individual Flexible Premium
Annuity Insurance Contracts contract (the "Contract") issued by ITT Life
with respect to the Unit Trust and units of interest thereunder which are
registered under the Securities Act of 1933, as amended; and
WHEREAS, HESCO has previously agreed to act as distributor in connection
with offers and sales of the Contract under the terms and conditions set
forth in this Distribution Agreement.
NOW THEREFORE, in consideration of the mutual agreements made herein, the
Sponsor and HESCO agree as follows:
I.
HESCO'S DUTIES
1. HESCO, as principal underwriter for the Contract, will use its best efforts
to effect offers and sales of the Contract through broker-dealers that are
members of the National Association of Securities Dealers, Inc. and whose
registered representatives are duly licensed as insurance agents of ITT
Life. HESCO is responsible for compliance with all applicable requirements
of the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, and the Investment Company Act of 1940, as amended, and
the rules and regulations thereunder, and all other applicable laws, rules
and regulations relating to the sales and distribution of the Contract, the
need for which arises out of its duties as principal underwriter of said
Contract and relating to the creation of the Unit Trust.
<PAGE>
-2-
2. HESCO agrees that it will not use any prospectus, sales literature, or any
other printed matter or material or offer for sale or sell the Contract if
any of the foregoing in any way represent the duties, obligations, or
liabilities of ITT Life as being greater than, or different from, such
duties, obligations and liabilities as are set forth in this Agreement, as
it may be amended from time to time.
3. HESCO agrees that it will utilize the then currently effective prospectus
relating to the Unit Trust's Contracts in connection with its selling
efforts.
As to the other types of sales materials, HESCO agrees that it will use only
sales materials which conform to the requirements of federal and state
insurance laws and regulations and which have been filed, where necessary,
with the appropriate regulatory authorities.
4. HESCO agrees that it or its duly designated agent shall maintain records of
the name and address of, and the securities issued by the Unit Trust and
held by, every holder of any security issued pursuant to this Agreement, as
required by the Section 26(a)(4) of the Investment Company Act of 1940, as
amended.
5. HESCO's services pursuant to this Agreement shall not be deemed to be
exclusive, and it may render similar services and act as an underwriter,
distributor, or dealer for other investment companies in the offering of
their shares.
6. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations and duties hereunder on the part of
HESCO, HESCO shall not be subject to liability to the Unit Trust or to any
Contract Owner or party in interest under a Contract for any act or omission
in the course, or connected with, rendering services hereunder.
II.
1. The Unit Trust reserves the right at any time to suspend or limit the public
offering of the Contracts upon thirty days' written notice to HESCO, except
where the notice period may be shortened because of legal action taken by
any regulatory agency.
2. The Unit Trust agrees to advise HESCO immediately:
a. Of any request by the Securities and Exchange Commission for amendment
of its Securities Act registration statement or for additional
information:
b. Of the issuance by the Securities and Exchange Commission of any stop
order suspending the effeciveness of the Securities Act
<PAGE>
-3-
registration statement relating to units of interest issued with
respect to the Unit Trust or of the initiation of any proceedings for
that purpose:
c. Of the happening of any material event, if known, which makes untrue
any statement in said Securities Act registration statement or which
requires change therein in order to make any statement therein not
misleading.
HLIC will furnish to HESCO such information with respect to the Unit Trust
and the Contracts in such form and signed by such of its officers and
directors as HESCO may reasonably request and will warrant that the
statements therein contained when so signed will be true and correct. ITT
Life will also furnish, from time to time, such additional information
regarding the Unit Trust's financial condition as HESCO may reasonably
request.
III.
COMPENSATION
For providing the principal underwriting functions on behalf of the Unit Trust,
HESCO shall be entitled to receive compensation as agreed upon from time to time
by ITT Life and HESCO.
IV.
RESIGNATION AND REMOVAL OF
PRINCIPAL UNDERWRITER
HESCO may resign as Principal Underwriter hereunder, upon 120 days' prior
written notice to ITT Life. However, such resignation shall not become
effective until either the Unit Trust has been completely liquidated and the
proceeds of the liquidation distributed through ITT Life to the Contract Owners
or a successor Principal Underwriter has been designated and has accepted its
duties.
V.
MISCELLANEOUS
1. This Agreement may not be assigned by any of the parties hereto without the
written consent of the other party.
2. All notices and other communications provided for hereunder shall be in
writing and shall be delivered by hand or mailed first class, postage
prepaid, addressed as follows:
<PAGE>
-4-
a. If to ITT Life - ITT Life Insurance Corporation, 505 Highway 169 North,
Minneapolis, Minnesota 55441
b. If to HESCO - Hartford Equity Sales Company, Inc., Hartford Plaza,
Hartford, Connecticut 06115 or to such other address as HESCO or the
Sponsor shall designate by written notice to the other.
3. This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of which shall be deemed one instrument,
and an executed copy of this Agreement and all amendments hereto shall be
kept on file by the Sponsor and shall be open to inspection at any time
during the business hours of the Sponsor.
4. This Agreement shall inure to the benefit of and be binding upon the
successor of the parties hereto.
5. This Agreement shall be construed and governed by and according to the laws
of the State of Connecticut.
6. This Agreement may be amended from time to time by the mutual agreement and
consent of the parties hereto.
7. a. This Agreement shall become effective on , 1992, and shall continue
in effect for a period of two years from that date and, unless sooner
terminated in accordance with 7(b) below, shall continue in effect from
year to year thereafter provided that its continuance is specifically
approved at least annually by a majority of the members of the Board of
Directors of ITT Life.
b. This Agreement (1) may be terminated at any time, without the payment of
any penalty, either by a vote of a majority of the members of the Board
of Directors of ITT Life on sixty days prior written notice to HESCO;
(2) shall immediately terminate in the event of its assignment and (3)
may be terminated by HESCO on sixty days prior written notice to ITT
Life, but such termination will not be effective until ITT Life shall
have contracted with one or more persons to act as principal underwriter
of the Contracts. HESCO hereby agrees that it will continue to act as
principal underwriter until its successor or successors assume such
undertaking.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
(SEAL) ITT LIFE INSURANCE CORPORATION
Attest:
By
- ----------------------------------- --------------------------------
(SEAL) HARTFORD EQUITY SALES COMPANY, INC.
Attest:
By
- ----------------------------------- --------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
CONTRACT SPECIFICATIONS 3
DEFINITION OF CERTAIN TERMS 4
PREMIUM PAYMENTS PROVISION 5
CONTRACT CONTROL PROVISIONS 6
GENERAL PROVISIONS 7
VALUATION PROVISIONS 9
TERMINATION PROVISIONS 10
SETTLEMENT PROVISIONS 12
ANNUITY TABLES 15
<PAGE>
CONTRACT SPECIFICATIONS
CONTRACT NUMBER SPECIMEN CONTRACT DATE FEBRUARY 8, 1992
NAME OF ANNUITANT JAMES SCOTT DATE OF ISSUE FEBRUARY 8, 1992
AGE OF ANNUITANT 35 ANNUITY COMMENCEMENT DATE JANUARY 1, 2022
SEX OF ANNUITANT MALE INITIAL PREMIUM PAYMENT $20,000
MINIMUM SUBSEQUENT PAYMENT 500
MINIMUM FIXED ACCOUNT INTEREST RATE 3%
CONTINGENT ANNUITANT PAUL SCOTT
DESIGNATED
BENEFICIARY ANN SCOTT CONTRACT OWNER
(IF OTHER THAN ANNUITANT) SAME
- --------------------------------------------------------------------------------
DESCRIPTION OF BENEFITS
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE ANNUITY CONTRACT
THE INITIAL PREMIUM PAYMENT WILL BE ALLOCATED AS SPECIFIED IN YOUR APPLICATION.
THE SAME ALLOCATIONS WILL BE MADE FOR SUBSEQUENT PREMIUM PAYMENTS UNLESS YOU
CHANGE THE ALLOCATION OR, AT THE TIME OF A PREMIUM PAYMENT, YOU INSTRUCT US TO
ALLOCATE THAT PAYMENT DIFFERENTLY.
SEPARATE ACCOUNT: PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT ONE
SUB-ACCOUNT BASED ON:
PCM MULTI-STRATEGY FUND PCM MULTI-STRATEGY FUND
PCM GROWTH & INCOME FUND PCM GROWTH & INCOME FUND
PCM VOYAGER FUND PCM VOYAGER FUND
PCM U.S. GOVERNMENT & HIGH GRADE PCM U.S. GOVERNMENT & HIGH GRADE
BOND FUND BOND FUND
PCM HIGH YIELD FUND PCM HIGH YIELD FUND
PCM MONEY MARKET FUND PCM MONEY MARKET FUND
PCM GLOBAL GROWTH FUND PCM GLOBAL GROWTH FUND
PCM UTILITIES FUND PCM UTILITIES FUND
OR OTHER FUNDS AS MAY BE MADE AVAILABLE FROM TIME TO TIME.
PAGE 3
<PAGE>
CONTRACT SPECIFICATIONS (continued)
CONTRACT OWNER SPECIMEN DATE OF ISSUE FEBRUARY 8, 1992
NAME OF ANNUITANT JAMES SCOTT ANNUITY COMMENCEMENT JANUARY 1, 2022
- --------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGES:
SUBJECT TO THE WITHDRAWAL PRIVILEGE, CONTINGENT DEFERRED SALES CHARGES ON
CONTRACTS WILL BE ASSESSED AGAINST CONTRACT VALUES WHEN SURRENDERED. THE LENGTH
OF TIME FROM RECEIPT OF THE PREMIUM PAYMENT TO THE TIME OF SURRENDER DETERMINES
THE CHARGE. FOR THIS PURPOSE, PREMIUM PAYMENTS WILL BE DEEMED TO BE SURRENDERED
IN THE ORDER IN WHICH THEY WERE RECEIVED AND ALL SURRENDERS WILL BE FIRST FROM
PREMIUM PAYMENTS AND THEN FROM OTHER CONTRACT VALUES. THIS CHARGE IS A
PERCENTAGE OF THE AMOUNT WITHDRAWN (NOT TO EXCEED THE AGGREGATE AMOUNT OF THE
PREMIUM PAYMENTS MADE) AND EQUALS:
LENGTH OF TIME FROM PURCHASE PAYMENT
CHARGE (NUMBER OF YEARS)
7% 1
6% 2
5% 3
4% 4
3% 5
2% 6
1% 7
0% 8 AND THEREAFTER
NO CONTINGENT DEFERRED SALES CHARGES WILL BE ASSESSED IN THE EVENT OF DEATH OF
THE ANNUITANT OR CONTRACT OWNER (AS APPLICABLE), OR IF CONTRACT VALUES ARE
APPLIED TO AN ANNUITY OPTION PROVIDED FOR UNDER THIS CONTRACT (PROVIDED HOWEVER,
ANY SURRENDER OUT OF OPTION 4 WILL BE SUBJECT TO CONTINGENT DEFERRED SALES
CHARGES, IF APPLICABLE) OR UPON THE EXERCISE OF THE WITHDRAWAL PRIVILEGE.
ANNUAL WITHDRAWAL PRIVILEGE AMOUNT: 10% OF PREMIUM PAYMENTS
ANNUAL CONTRACT MAINTENANCE FEE: $25
MORTALITY AND EXPENSE RISK CHARGE: 1.25% PER ANNUM OF THE AVERAGE DAILY CONTRACT
VALUE IN THE SUB-ACCOUNTS.
ADMINISTRATION CHARGE: .15% PER ANNUM OF THE AVERAGE DAILY CONTRACT VALUE.
SPECIFIED CONTRACT ANNIVERSARIES: EVERY 7TH ANNIVERSARY (i.e., THE 7TH, 14TH,
21ST, ETC. CONTRACT ANNIVERSARIES).
PAGE 3 (CONTINUED)
<PAGE>
DEFINITION OF ACCOUNT - Any of the Sub-Accounts or the Fixed Account.
CERTAIN TERMS
ACCUMULATION UNIT - An accounting unit of measure used to
calculate the value of a Sub-Account of this contract before
annuity payments begin.
ADMINISTRATIVE OFFICE OF THE COMPANY - Currently located at
200 Hopmeadow St., Simsbury, Ct. All correspondence
concerning this contract should be sent to our mailing
address at P.O. Box 2999, Attn: Individual Annuity
Operations, Hartford, CT 06104-2999.
ANNUITANT - The person on whose life this contract is
issued.
ANNUITY COMMENCEMENT DATE - The date on which annuity
payments are to begin as described under Settlement
Provisions in this contract.
ANNUITY UNIT - An accounting unit of measure used to
calculate the amount of annuity payments under the variable
annuity option.
BENEFICIARY - The person entitled to receive benefits as per
the terms of the contract in case of the death of the
Contract Owner or Annuitant, as applicable.
COMPANY - The ITT Life Insurance Corporation.
CONTINGENT ANNUITANT - The person so designated by the
Contract Owner who, upon the Annuitant's death, prior to the
Annuity Commencement Date, becomes the Annuitant.
CONTRACT ANNIVERSARY - An anniversary of the Contract Date.
Similarly, Contract Years are measured from the Contract
Date. The Contract Date is shown on Page 3.
CONTRACT MAINTENANCE FEE - An amount which is deducted from
the value of the contract at the end of the Contract Year
or on the date of surrender of this contract, if earlier.
CONTRACT OWNER - The owner(s) of the contract.
CONTRACT VALUE - The value of the Sub-Accounts plus the
value of the Fixed Account on any day.
DATE OF ISSUE - The date on which an Account is established
for the Contract Owner by the Company.
DOLLAR COST AVERAGING - Contract Owner initiated systematic
transfers from one or more Accounts to any other available
Sub-Accounts.
DUE PROOF OF DEATH - A certified copy of the death
certificate, an order of a court of competent jurisdiction,
a statement from a physician who attended the deceased, or
any other proof acceptable to the Company.
FIXED ACCOUNT - Part of the Company's General Account to
which all or a portion of the Contract Value may be
allocated.
FUND(S) - Currently the Funds specified on Page 3.
Page 4
<PAGE>
CONTRACT SPECIFICATIONS (continued)
CONTRACT OWNER SPECIMEN DATE OF ISSUE FEBRUARY 8, 1992
NAME OF ANNUITANT JAMES SCOTT ANNUITY COMMENCEMENT JANUARY 1, 2022
- --------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGES:
SUBJECT TO THE WITHDRAWAL PRIVILEGE, CONTINGENT DEFERRED SALES CHARGES ON
CONTRACTS WILL BE ASSESSED AGAINST CONTRACT VALUES WHEN SURRENDERED. THE LENGTH
OF TIME FROM RECEIPT OF THE PREMIUM PAYMENT TO THE TIME OF SURRENDER DETERMINES
THE CHARGE. FOR THIS PURPOSE, PREMIUM PAYMENTS WILL BE DEEMED TO BE SURRENDERED
IN THE ORDER IN WHICH THEY WERE RECEIVED AND ALL SURRENDERS WILL BE FIRST FROM
PREMIUM PAYMENTS AND THEN FROM OTHER CONTRACT VALUES. THIS CHARGE IS A
PERCENTAGE OF THE AMOUNT WITHDRAWN (NOT TO EXCEED THE AGGREGATE AMOUNT OF THE
PREMIUM PAYMENTS MADE) AND EQUALS:
LENGTH OF TIME FROM PURCHASE PAYMENT
CHARGE (NUMBER OF YEARS)
7% 1
6% 2
5% 3
4% 4
3% 5
2% 6
1% 7
0% 8 AND THEREAFTER
NO CONTINGENT DEFERRED SALES CHARGES WILL BE ASSESSED IN THE EVENT OF DEATH OF
THE ANNUITANT OR CONTRACT OWNER (AS APPLICABLE), OR IF CONTRACT VALUES ARE
APPLIED TO AN ANNUITY OPTION PROVIDED FOR UNDER THIS CONTRACT (PROVIDED HOWEVER,
ANY SURRENDER OUT OF OPTION 4 WILL BE SUBJECT TO CONTINGENT DEFERRED SALES
CHARGES, IF APPLICABLE) OR UPON THE EXERCISE OF THE WITHDRAWAL PRIVILEGE.
ANNUAL WITHDRAWAL PRIVILEGE AMOUNT: 10% OF PREMIUM PAYMENTS
ANNUAL CONTRACT MAINTENANCE FEE: $25
MORTALITY AND EXPENSE RISK CHARGE: 1.25% PER ANNUM OF THE AVERAGE DAILY CONTRACT
VALUE IN THE SUB-ACCOUNTS.
ADMINISTRATION CHARGE: 0% PER ANNUM OF THE AVERAGE DAILY CONTRACT VALUE.
SPECIFIED CONTRACT ANNIVERSARIES: EVERY 7TH ANNIVERSARY (i.e., THE 7TH, 14TH,
21ST, ETC. CONTRACT ANNIVERSARIES).
PAGE 3 (CONTINUED)
<PAGE>
DEFINITION OF GENERAL ACCOUNT - All assets of the Company other than those
CERTAIN TERMS allocated to the Separate Accounts of the Company.
(CONTINUED)
MINIMUM DEATH BENEFIT - The minimum amount payable upon the
death of an Annuitant or Contract Owner, as applicable,
prior to age 85 and before annuity payments have commenced.
PREMIUM TAX - The amount of tax, if any, charged by a state
or municipality on premium payments or Contract Values.
SEPARATE ACCOUNT - An Account established by the Company to
separate the assets funding the variable benefits for the
class of contracts to which this contract belongs from the
other assets of the Company. The Separate Account and the
Funds, which are the underlying securities of the Separate
Account, are listed on the Contract Specifications on Page
3 of this contract.
SPECIFIED CONTRACT ANNIVERSARIES - The Contract
Anniversaries shown on Page 3.
SUB-ACCOUNT - The subdivisions of the Separate Account
which are used to determine how the Contract Owner's Account
is allocated between the Funds.
TERMINATION VALUE - The value of the contract upon
termination, as described in the section of the contract
captioned "Termination Provisions."
VALUATION DAY - Every day the New York Stock Exchange is
open for trading.
PREMIUM PREMIUM PAYMENTS
PAYMENTS
Premium payments are payable at the Administrative Office of
the Company. Payments may be made by check payable to ITT
Life Insurance Corporation or by any other method which the
Company deems acceptable.
The Initial Premium Payment is shown on Page 3. This is a
flexible premium annuity. Additional payments may be
accepted by the Company. The additional payments must be at
least equal to the minimum subsequent premium payment shown
on Page 3.
ALLOCATION OF PREMIUM PAYMENTS
The Contract Owner shall specify that portion of any premium
payment to be allocated to each Account, provided, however,
that the minimum allocation to any Account may not be less
than the Company's minimum amount then in effect.
The Contract Owner may transfer Contract Values held in the
Accounts into other Accounts; however, the Company reserves
the right to limit the number of transfers to no more
frequently than 12 per Contract Year with no two transfers
being made on consecutive Valuation Days. Subject to the
following two paragraphs, any such limitations will apply to
all Contract Owners.
<PAGE>
PREMIUM The right to reallocate Contract Values between the Accounts
PAYMENTS is subject to modification if the Company determines, in its
(CONTNUED) sole opinion, that the exercise of that right by one or more
Contract Owners is, or would be, to the disadvantage of
other Contract Owners. Any modification could be applied to
transfers to or from some or all of the Accounts and could
include, but not be limited to, the requirement of a minimum
time period between each transfer, not accepting transfer
requests of an agent acting under a power of attorney on
behalf of more than one Contract Owner, or limiting the
dollar amount that may be transferred between the Accounts
by a Contract Owner at any one time. Such restrictions may
be applied in any manner reasonably designed to prevent any
use of the transfer right which is considered by the Company
to be to the disadvantage of other Contract Owners.
The maximum amount transferable from the Fixed Account
during any Contract Year is the greater of 30% of the Fixed
Account balance as of the last Contract Anniversary or the
greatest of any prior transfer from the Fixed Account. This
limitation does not apply to Dollar Cost Averaging.
However, if any interest rate is renewed at a rate at least
one percentage point less than the previous rate, the
Contract Owner may elect to transfer up to 100% of the Funds
receiving that reduced rate within 60 days of notification
of the interest rate decrease. Transfers may not be made
from the Sub-Accounts into the Fixed Account for the six-
month period following any transfer from the Fixed Account
into the other Sub-Accounts. The Company reserves the right
to defer transfers from the Fixed Account for up to six
months from the date of request.
CONTRACT ANNUITANT, CONTINGENT ANNUITANT, CONTRACT OWNER
CONTROL
PROVISIONS The Annuitant may not be changed.
The designations of Contract Owner and Contingent Annuitant
will remain in effect until changed by the Contract Owner.
Changes in the designation of the Contract Owner may be made
during the lifetime of the Annuitant by written notice to
the Company. Changes in the designation of Contingent
Annuitant may be made at any time prior to the Annuity
Commencement Date by written notice to the Company.
Notwithstanding the foregoing, if no Contingent Annuitant
has been named and the Contract Owner/Annuitant's spouse is
the Beneficiary, it will be assumed that the Contract
Owner/Annuitant's spouse is the Contingent Annuitant.
The Contract Owner has the sole power to exercise all the
rights, options and privileges granted by this contract or
permitted by the Company and to agree with the Company to
any change in or amendment to the contract. The rights of
the Contract Owner shall be subject to the rights of any
assignee of record with the Company and of any irrevocably
designated Beneficiary. In the case of joint Contract
Owners, each Contract Owner alone may exercise all rights,
options and privileges, except with respect to the
Termination and Partial Surrender/Withdrawal Privilege
Provisions.
<PAGE>
CONTRACT BENEFICIARY
CONTROL
PROVISIONS The Designated Beneficiary will remain in effect until
(CONTINUED) changed by the Contract Owner. Changes in the Designated
Beneficiary may be made during the lifetime of the Annuitant
by written notice to the Administrative Office of the
Company. If the Designated Beneficiary has been designated
irrevocably, however, such designation cannot be changed or
revoked without such Beneficiary's written consent. Upon
receipt of such notice and written consent, if required, at
the Administrative Office of the Company, the new
designation will take effect as of the date the notice is
signed, whether or not the Annuitant or Contract Owner is
alive at the time of receipt of such notice. The change
will be subject to any payments made or other action taken
by the Company before the receipt of the notice.
In the event of the death of the Annuitant when there is no
surviving Contingent Annuitant, the Beneficiary will be as
follows. If the Annuitant is a joint Contract Owner and the
death of the Annuitant occurs prior to the Annuity
Commencement Date, the Beneficiary shall be the surviving
Contract Owner, notwithstanding that the Designated
Beneficiary may be different. Otherwise, the Beneficiary
will be the Designated Beneficiary then in effect. If there
is no Designated Beneficiary in effect or if the Designated
Beneficiary is no longer living, the Contract Owner will be
the Beneficiary. If the Annuitant is the sole Contract
Owner and there is no Designated Beneficiary in effect, the
Annuitant's estate will be the Beneficiary.
In the event of the death of a Contract Owner prior to the
Annuity Commencement Date, the Beneficiary will be as
follows. If the owner was the sole Contract Owner, the
Beneficiary shall be the Designated Beneficiary then in
effect. If no Beneficiary designation is in effect or if
the Designated Beneficiary has predeceased the Contract
Owner, the Contract Owner's estate shall be the
Beneficiary. At the first death of a joint Contract Owner
prior to the Annuity Commencement Date, the Beneficiary
shall be the surviving Contract Owner notwithstanding that
the Designated Beneficiary may be different.
GENERAL THE CONTRACT
PROVISIONS
This contract constitutes the entire contract.
MODIFICATION
No modification of this contract shall be made except over
the signature of the President, a Vice President, a
Secretary, or an Assistant Secretary of the Company.
The Company reserves the right to modify the contract, but
only if such modification: (i) is necessary to make the
contract or the Separate Account comply with any law or
regulation issued by a governmental agency to which the
Company is subject; (ii) is necessary to assure continued
qualification of the contract under the Internal Revenue
Code or other federal or state laws relating to retirement
annuities or annuity contracts; (iii) is necessary to
reflect a change in the operation of the Separate Account
or the Sub-Account(s); (iv) provides additional Account
options; or (v) withdraws Account options. In the event of
any such modification, the Company will provide notice to
the Contract Owner, or to the payee(s) during the annuity
period. The Company may also make appropriate endorsement
in the Contract to reflect such modification.
Page 7
<PAGE>
GENERAL MINIMUM VALUE STATEMENT
PROVISIONS
(CONTINUED) Any Termination Values, death benefits or settlement
provisions available under this contract equal or exceed
those required by the state in which the contract is
delivered.
NON-PARTICIPATION
This contract does not share in the surplus earnings of the
Company. That portion of the assets of the Separate Account
equal to the reserves and other contract liabilities of the
Separate Account shall not be chargeable with liabilities
arising out of any other business the Company may conduct.
MISSTATEMENT OF AGE AND SEX
If the age or sex of the Annuitant has been misstated, the
amount of the annuity payable by the Company shall be that
provided by that portion of the amounts allocated to effect
such annuity on the basis of the corrected information
without changing the date of the first payment of such
annuity. Any underpayments by the Company shall be made up
immediately and any overpayments shall be charged against
future amounts becoming payable.
If the age of the Annuitant or Contract Owner has been
misstated, the amount of any death benefit payable shall be
determined based upon the correct age of the Annuitant or
Contract Owner.
INCONTESTABILITY
We cannot contest this Contract.
REPORTS TO THE CONTRACT OWNER
There shall be furnished to each Contract Owner copies of
any shareholder reports of the Funds and of any other
notices, reports or documents required by law to be
delivered to Contract Owners. Annually, a statement of the
Contract Value is sent to the Contract Owner.
VOTING RIGHTS
The Company shall notify the Contract Owner of any Fund
shareholder's meetings at which the shares held for the
Contract Owner's Account may be voted and shall also send
proxy materials and a form of instruction by means of which
the Contract Owner can instruct the Company with respect to
the voting of the shares held for the Contract Owner's
Account. In connection with the voting of Fund shares held
by it, the Company shall arrange for the handling and
tallying of proxies received from Contract Owners. The
Company as such, shall have no right, except as hereinafter
provided, to vote any Fund shares held by it hereunder which
may be registered in its name or the names of its nominees.
The Company will, however, vote the Fund shares held by it
in accordance with the instructions received from the
Contract Owners for whose Accounts the Fund shares are held.
If a Contract Owner desires to attend any meeting which
shares held for the Contract Owner's benefit may be voted,
the Contract Owner may request the Company to furnish a
proxy or otherwise arrange for the exercise of voting rights
with respect to the Fund shares held for such Contract
Owner's Account.
<PAGE>
GENERAL In the event that the Contract Owner gives no instructions
PROVISIONS or leaves the manner of voting discretionary, the Company
(CONTINUED) will vote such shares of the appropriate Fund in the same
proportion as shares of that Fund for which instructions
have been received. Also, the Company will vote the Fund
Shares in this proportionate manner which are held by the
Company for its own Account. During the annuity period
under a contract the number of votes will decrease as the
assets held to fund annuity benefits decrease.
SUBSTITUTION
The Company reserves the right, subject to compliance with
the law, to substitute the shares of any other registered
investment company for the shares of any Fund held by the
Separate Account. Substitution may occur only if shares of
Fund(s) become unavailable or due to changes in applicable
law or interpretations of law. Current law requires
notification to you of any such substitution and approval of
the Securities and Exchange Commission.
PROOF OF SURVIVAL
The payment of any annuity benefit will be subject to
evidence that the Annuitant is alive on the date such
payment is otherwise due.
VALUATION
PROVISIONS NET PREMIUM PAYMENTS
The net premium payment is equal to the premium payment
minus any applicable Premium Taxes. The net premium payment
is applied to provide Fixed Account values or Sub-Account
Accumulation Units with respect to the Sub-Account(s)
selected by the Contract Owner.
The number of Accumulation Units credited to each Sub-
Account is determined by dividing the net premium payment
allocated to a Sub-Account by the dollar value of one
Accumulation Unit for such Sub-Account, next computed after
the receipt of a premium payment by the Company. The number
of Accumulation Units so determined will not be affected by
any subsequent change in the value of such Accumulation
Units. The Accumulation Unit value in any Sub-Account may
increase or decrease from day to day as described below.
The Company will determine the value of the Fixed Account by
crediting interest to amounts allocated to the Fixed
Account. The minimum Fixed Account interest rate is the
rate shown on Page 3, compounded annually. The Company, at
its discretion, may credit interest rates greater than the
minimum Fixed Account interest rate.
NET INVESTMENT FACTOR
The net investment factor for each of the Sub-Accounts is
equal to the net asset value per share of the corresponding
Fund at the end of the valuation period (plus the per share
amount of any unpaid dividends or capital gains by that
Fund) divided by the net asset value per share of the
corresponding Fund at the beginning of the valuation period
and subtracting from that amount the mortality and expense
risk charge and the administration charge shown on Page 3.
The General Account net investment factor is guaranteed to
be equal to the Minimum Fixed Account Interest Rate shown on
Page 3.
<PAGE>
ACCUMULATION UNIT VALUE
VALUATION The Accumulation Unit Value for each Sub-Account will vary
PROVISIONS to reflect the investment experience of the applicable Fund
(CONTINUED) and will be determined on each Valuation Day by multiplying
the Accumulation Unit Value of the particular Sub-Account on
the preceding Valuation Day by the net investment factor for
that Sub-Account for the valuation period then ended. The
value of the Sub-Account on each Valuation Day is then
determined by multiplying the number of Accumulation Units
in that Sub-Account by the Accumulation Unit Value on that
Valuation Day.
ANNUITY UNIT VALUE
The value of an Annuity Unit for each Sub-Account of the
Separate Account was fixed at $1.00 on the date Fund shares
were originally purchased for the Sub-Accounts of the
Separate Account, and for any day thereafter is determined
by multiplying the value of the Annuity Unit for that Sub-
Account on the preceding day by the product of (a) the net
investment factor for that Sub-Account for the day for which
the Annuity Unit value is being calculated, and (b)
0.999892.
CONTRACT MAINTENANCE FEE
During each year that this contract is in force prior to the
Annuity Commencement Date, a fee will be deducted from the
contract at the end of the Contract Year or on the date of
surrender of this contract, if earlier. The fee will be
charged against the Contract Value by reducing the Fixed
Account value and, with respect to the Sub-Accounts, the
number of Accumulation Units held on that date on a pro-rata
basis with respect to each active Account.
The number of Accumulation Units deducted from the Sub-
Account is determined by dividing the pro-rata portion of
the Contract Maintenance Fee applicable to that Sub-Account,
by the value of an Accumulation unit for the Sub-Account at
the end of the Contract Year, or on the date of surrender,
as applicable.
TERMINATION TERMINATION PRIOR TO THE ANNUITY COMMENCEMENT DATE
PROVISIONS
FULL SURRENDER
At any time prior to the Annuity Commencement Date, the
Contract Owner has the right to terminate the contract by
submitting a written request to the Administrative Office of
the Company. In such event, the Termination Value of the
contract may be taken in the form of a cash settlement.
The Termination Value of the contract is equal to the
Contract Value less:
(a) any applicable Premium Taxes not previously deducted;
(b) the Contract Maintenance Fee as specified on Page 3;
and
(c) any applicable contingent deferred sales charges as
specified on Page 3.
The Termination Value provided by the contract is not less
than the minimum values required by the insurance laws of
the state in which this contract is issued.
<PAGE>
TERMINATION PARTIAL SURRENDERS/WITHDRAWAL PRIVILEGE
PROVISIONS
(CONTINUED) The Contract Owner may request, in writing, a partial
surrender of Contract Values at any time prior to the
Annuity Commencement Date provided the Contract Value
remaining after the surrender is at least equal to the
Company's minimum amount rules then in effect. If the
remaining Contract Value following such surrender is less
than the Company's minimum amount rules, the Company will
terminate the contract and pay the Termination Value.
The contingent deferred sales charge will be assessed
against any Contract Values surrendered as described on Page
3. However, on a noncumulative basis, the Contract Owner
may make partial surrenders during any Contract Year, up to
the Annual Withdrawal Privilege Amount shown on Page 3 and
the contingent deferred sales charge will not be assessed
against such amounts.
Any withdrawal privilege amount surrenders will be deemed to
be from Contract Values other than premium payments.
Surrender of Contract Values in excess of the withdrawal
privilege amount and additional surrenders made in any
Contract Year will be subject to the contingent deferred
sales charge, as described on Page 3, if applicable.
TERMINATION AFTER THE ANNUITY COMMENCEMENT DATE
This contract may not be surrendered for its Termination
Value after the commencement of annuity payments, except
with respect to Option Four.
PAYMENT ON SURRENDER - DEFERRAL OF PAYMENT
Payment on any request for surrender will be made as soon as
possible and, with respect to the Contract Values in the
Sub-Accounts, no later than seven days after the written
request is received by the Company. However, such payment
may be subject to postponement:
(a) for any period during which the New York Stock Exchange
is closed or during which trading on the New York Stock
Exchange is restricted;
(b) for any period during which an emergency exists as a
result of which (i) disposal of the securities held in
the Sub-Accounts is not reasonably practicable, or (ii)
it is not reasonably practicable for the value of the
net assets of the Separate Account to be fairly
determined; and
(c) for such other periods as the Securities and Exchange
Commission may, by order, permit for the protection of
the Contract Owners. The conditions under which
trading shall be deemed to be restricted or any
emergency shall be deemed to exist shall be determined
by rules and regulations of the Securities and Exchange
Commission.
The Company may defer payment of any amounts from the Fixed
Account for up to six months from the date of the request to
surrender. If the Company defers payment for more than 30
days, the Company will pay interest of at least 4% per annum
on the amount deferred.
<PAGE>
TERMINATION DEATH BENEFIT
PROVISIONS
(CONTINUED) If the Annuitant dies before the Annuity Commencement Date
and there is no designated Contingent Annuitant surviving,
or if the Contract Owner dies before the Annuity
Commencement Date, the Death Benefit will be payable to the
Beneficiary as determined under the Contract Control
Provisions. With regard to Joint Contract Owners, at the
first death of a joint Contract Owner prior to the Annuity
Commencement Date, the Beneficiary will be the surviving
Contract Owner, notwithstanding that the Designated
Beneficiary may be different. The Death Benefit is
calculated as of the date the Company receives written
notification of Due Proof of Death at the Administrative
Office of the Company.
If the deceased (the Annuitant or Contract Owner, as
applicable) had not yet attained age 85, the Death Benefit
will be the greatest of the following amounts:
(a) The Contract Value on the date of receipt of Due Proof
of Death at the Administrative Office of the Company;
(b) The Contract Value on the Specified Contract
Anniversary immediately preceding the date of death,
increased by the dollar amount of any premium payments
made and reduced by the dollar amount of any partial
terminations since the immediately preceding Specified
Contract Anniversary; or
(c) 100% of all premium payments made under the Contract,
reduced by the dollar amount of any partial
terminations since the Date of Issue.
If the deceased (the Annuitant or Contract Owner, as
applicable) had attained age 85, then the Death Benefit will
equal the Contract Value.
The death benefit may be taken in one sum or under any of
the settlement options then being offered by the Company
provided, however, that, in the event of a Contract Owner's
death, any settlement option must provide that any amount
payable as a death benefit will commence upon notification
of Due Proof of Death and be completed within five years of
the date of death or, if the benefit is payable over a
period not extending beyond the life expectancy of the
Beneficiary or over the life of the Beneficiary, such
distribution must commence within one year of the date of
death. Notwithstanding the foregoing, in the event of the
Contract Owner's death where the sole Beneficiary is the
spouse of the Contract Owner and the Annuitant or Contingent
Annuitant is living, such spouse may elect, in lieu of
receiving the death benefit, to be treated as the Contract
Owner.
When payment is taken in one sum, payment will be made
within 7 days after the date Due Proof of Death is received,
except when the Company is permitted to defer such payment
under the Investment Company Act of 1940.
SETTLEMENT ANNUITY COMMENCEMENT DATE
PROVISIONS
The Annuity Commencement Date is shown on Page 3. This date
may be changed by the Contract Owner with 30 days advance
written notification, and may be the fifteenth day of any
month before or including the month of the Annuitant's 90th
birthday. In the event the Contingent Annuitant becomes the
Annuitant and in the absence of a written election to the
contrary, the Annuity Commencement Date will be the
fifteenth day of the month coincident with or next following
the Annuitant's 90th birthday.
<PAGE>
SETTLEMENT ELECTION OF ANNUITY OPTION
PROVISIONS
(CONTINUED) The Contract Owner may elect to have the Termination Value,
without deduction for any contingent deferred sales charge,
applied on the Annuity Commencement Date under any one of
the annuity options described below or under any of the
settlement options then being offered by the Company. The
Termination Value is determined on the basis of the
Accumulation Unit value of each Sub-Account and the value of
the Fixed Account no later than the fifth Valuation Day
preceding the date annuity payments are to commence.
DATE OF PAYMENT
The first payment under any option shall be made on the
fifteenth day of the month immediately following approval of
claim for settlement. Subsequent payments shall be made on
the fifteenth day of each subsequent month in accordance
with the manner of payment selected.
DEATH OF THE ANNUITANT
In the event of the death of the Annuitant while receiving
annuity payments, the present value of any remaining
payments will be paid in one sum to the Beneficiary unless
other provisions shall have been made and approved by the
Company. If the Annuitant was also the Contract Owner, any
method of distribution must provide that any amount payable
as a death benefit will be distributed at least as rapidly
as under the method of distribution in effect at the
Contract Owner's death. In the case of the Separate Account
calculations, for such present value of the remaining
payments the Company will assume a net investment rate of 4%
per annum. The Annuity Unit value on the date of receipt of
Due Proof of Death shall be used for the purpose of
determining such present value. In the case of the General
Account the net investment rate assumed will be the rate
used by the Company to determine the amount of each certain
payment.
ALLOCATION OF ANNUITY
The person electing an annuity option may further elect to
have the value of the contract applied to provide a variable
annuity, a fixed dollar annuity or a combination of both.
Once every 3 months, following the commencement of annuity
payments, the Contract Owner may elect, in writing, to
transfer among any Sub-Account(s) on which variable annuity
payments are based. No transfers may be made between the
Sub-Accounts and the General Account.
If no election is made to the contrary, the value of each
Sub-Account shall be applied to provide a variable annuity
based thereon, and the value of the Fixed Account shall be
applied to provide a fixed dollar annuity.
VARIABLE ANNUITY AND FIXED DOLLAR ANNUITY
Variable Annuity - A variable is an annuity with payments
increasing or decreasing in amount in accordance with the
net investment results of the Sub-Account(s) of the Separate
Account (as described in the Valuation Provisions). After
the first monthly payment for a variable annuity has been
determined in accordance with the provisions of this
contract, a number of Sub-Account Annuity Units is
determined by dividing that first monthly payment by the
appropriate Sub-Account Annuity Unit value on the effective
date of the annuity payments.
<PAGE>
SETTLEMENT Once variable annuity payments have begun, the number of
PROVISIONS Annuity Units remains fixed with respect to a particular
(CONTINUED) Sub-Account. If the Contract Owner elects that continuing
annuity payments be based on a different Sub-Account, the
number will change effective with that election but will
remain fixed in number following such election. The method
of calculating the unit value is described under Valuation
Provisions.
The dollar amount of the second and subsequent variable
annuity payments is not predetermined and may increase or
decrease from month to month. The actual amount of each
variable annuity payment after the first is determined by
multiplying the number of Sub-Account Annuity Units by the
Sub-Account Annuity Unit value as described in the Valuation
Provisions. The Sub-Account Annuity Unit value will be
determined no earlier than the fifth Valuation Day preceding
the date the annuity payment is due.
The Company guarantees that the dollar amount of variable
annuity payments will not be adversely affected by
variations in the expense results and in the actual
mortality experience of payees from the mortality
assumptions, including any age adjustment, used in
determining the first monthly payment.
Fixed Dollar Annuity - A fixed dollar annuity is an annuity
with payments which remain fixed as to dollar amount
throughout the payment period.
ANNUITY OPTIONS
FIRST OPTION - Life Annuity - An annuity payable monthly
during the lifetime of the payee, ceasing with the last
payment due prior to the death of the payee.
SECOND OPTION - Life Annuity with 120, 180 or 240 Monthly
Payments Certain - An annuity providing monthly income to
the payee for a fixed period of 120 months, 180 months, or
240 months (as selected), and for as long thereafter as the
payee shall live.
THIRD OPTION - Joint and Last Survivor Life Annuity - An
annuity payable monthly during the joint lifetime of the
payee and a secondary payee, and thereafter during the
remaining lifetime of the survivor, ceasing with the last
payment prior to the death of the survivor.
FOURTH OPTION - Payment for a Designated Period - An amount
payable monthly for the number of years selected which may
be from 5 to 30 years. The remaining balance of proceeds in
the General Account or the Separate Account for any day is
equal to the balance on the previous day decreased by the
amount of any installment paid on that day and the remainder
multiplied by the applicable net investment factor for the
day as described in the valuation provisions. Any surrender
out of this option will be subject to contingent deferred
sales charges, as described on Page 3.
If this contract is issued to qualify under Section 401,
403, or 408 of the Internal Revenue Code of 1954 as amended,
the fourth option shall be available only if the guaranteed
payment period is less than the life expectancy of the
Annuitant at the time the option becomes effective. Such
life expectancy will be computed under the mortality table
then in use by the Company.
<PAGE>
SETTLEMENT FIFTH OPTION - Death Benefit Remaining with the Company -
PROVISIONS Proceeds from the Death Benefit left with the Company for a
(CONTINUED) period not to exceed five years from the date of the
Contract Owner's death prior to the Annuity Commencement
Date. The proceeds will remain in the Sub-Account(s) to
which they were allocated at the time of death unless the
Beneficiary elects to reallocate them. Full or partial
withdrawals may be made at any time. In the event of
withdrawals, the remaining value will equal the Contract
Value of the proceeds left with the Company, minus any
withdrawals. Contingent Deferred Sales Charges, if
applicable, will also be applied to all withdrawals. For
purposes of determining this charge, the original Contract
Date of this Contract will be used.
In the absence of an election by the Contract Owner, the
Termination Value, without deduction for any contingent
deferred sales charge, will be applied on the Annuity
Commencement Date under the second option to provide a life
annuity with 120 monthly payments certain.
ANNUITY TABLES The attached tables show the minimum dollar amount of the
first monthly payments for each $1,000 applied under the
options. Under the First or Second Options, the amount of
each payment will depend upon the age and sex of the payee
at the time the first payment is due. Under the Third
Option, the amount of each payment will depend upon the sex
of both payees and their ages at the time the first payment
is due.
MINIMUM PAYMENT - No election of any options or combination
of options may be made under this contract unless the first
payment for each affected Account would be at least equal to
the minimum payment amount according to Company rules then
in effect. If at any time, payments to be made to any payee
from each Account are or become less than the minimum
payment amount, the Company shall have the right to change
the frequency of payment to such intervals as will result in
a payment at least equal to the minimum. If any amount due
would be less than the minimum payment amount per annum, the
Company may make such other settlement as may be equitable
to the payee.
DESCRIPTION OF TABLES - The tables of the First, Second and
Third Options are based on the 1983a. Individual Annuity
Mortality Table with ages set back one year and an interest
rate of 4% per annum. The table for the Fourth Option is
based on an interest rate of 4% per annum.
For purposes of electing fixed annuity payments, the
Contract Owner may elect any of the tables established and
offered by the Company; provided, however, that no such
election may be changed with respect to any Annuitant
following the commencement of annuity payments.
<PAGE>
AMOUNT OF FIRST MONTHLY PAYMENT
FOR EACH $1,000 APPLIED
Second and subsequent annuity payments, when based on the investment experience
of a Separate Account, are variable and are not guaranteed as to fixed dollar
amount.
FIRST AND SECOND OPTIONS -- SINGLE LIFE ANNUITIES WITH:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Age Male Payee Female Payee
----------------------------------------------------------------------------------------------------------------
Monthly Payments Guaranteed Monthly Payments Guaranteed
----------------------------------------------------- --------------------------------------------------
None 120 180 240 None 120 180 240
<S> <C> <C> <C> <C> <C> <C> <C> <C>
35 $ 4.03 $4.02 $4.01 $3.99 $3.86 $3.86 $3.85 $3.84
40 4.22 4.21 4.19 4.16 4.01 4.00 3.99 3.98
45 4.47 4.44 4.41 4.36 4.19 4.18 4.17 4.15
50 4.79 4.74 4.68 4.60 4.44 4.42 4.39 4.36
51 4.86 4.81 4.74 4.65 4.50 4.47 4.45 4.40
52 4.94 4.88 4.80 4.71 4.56 4.53 4.50 4.45
53 5.02 4.95 4.87 4.76 4.62 4.59 4.56 4.50
54 5.10 5.03 4.94 4.82 4.69 4.66 4.62 4.56
55 5.19 5.11 5.01 4.88 4.76 4.72 4.68 4.61
56 5.29 5.20 5.09 4.94 4.84 4.80 4.74 4.67
57 5.39 5.29 5.17 5.00 4.92 4.87 4.81 4.73
58 5.49 5.38 5.25 5.06 5.00 4.95 4.88 4.79
59 5.61 5.48 5.33 5.12 5.09 5.03 4.96 4.85
60 5.73 5.59 5.42 5.18 5.19 5.12 5.04 4.91
61 5.86 5.70 5.51 5.24 5.29 5.22 5.12 4.98
62 6.00 5.82 5.60 5.31 5.40 5.32 5.21 5.05
63 6.16 5.95 5.69 5.37 5.52 5.42 5.30 5.11
64 6.32 6.08 5.79 5.43 5.85 5.53 5.39 5.18
65 6.49 6.21 5.89 5.48 5.78 5.65 5.49 5.25
66 6.68 6.35 5.98 5.54 5.92 5.77 5.58 5.32
67 6.88 6.50 6.08 5.59 6.08 5.90 5.69 5.39
68 7.09 6.65 6.18 5.64 6.24 6.04 5.79 5.45
69 7.31 6.81 6.28 5.69 6.42 6.19 5.90 5.51
70 7.56 6.97 6.37 5.73 6.61 6.34 6.01 5.58
75 9.05 7.83 6.80 5.89 7.83 7.21 6.54 5.82
80 11.16 8.66 7.10 5.97 9.65 8.19 6.97 5.94
</TABLE>
THIRD OPTION -- JOINT AND LAST SURVIVOR ANNUITY
<TABLE>
<CAPTION>
AGE OF AGE OF FEMALE PAYEE
MALE PAYEE 35 40 45 50 55 60 65 70 75 80
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
35 $3.62 $3.68 $3.73 $3.77 $3.81 $3.84 $3.87 $3.89 $3.90 $3.91
40 3.65 3.73 3.80 3.86 3.92 3.97 4.01 4.04 4.07 4.09
45 3.68 3.77 3.86 3.95 4.04 4.12 4.18 4.23 4.27 4.30
50 3.70 3.80 3.92 4.04 4.16 4.27 4.37 4.45 4.52 4.57
55 3.72 3.83 3.96 4.11 4.27 4.43 4.58 4.71 4.81 4.89
60 3.73 3.85 4.00 4.17 4.36 4.57 4.79 4.99 5.17 5.30
65 3.74 3.87 4.03 4.21 4.44 4.70 4.99 5.29 5.57 5.80
70 3.75 3.88 4.05 4.25 4.50 4.81 5.17 5.57 5.99 6.38
75 3.76 3.89 4.06 4.27 4.54 4.88 5.31 5.82 6.40 7.00
80 3.76 3.90 4.07 4.29 4.57 4.94 5.41 6.01 6.75 7.58
</TABLE>
FOURTH OPTION -- PAYMENTS FOR A DESIGNATED PERIOD
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
NO. OF NO. OF NO. OF NO. OF NO. OF NO. OF
OF MONTHLY OF MONTHLY OF MONTHLY OF MONTHLY OF MONTHLY OF MONTHLY
YEARS PAYMENTS YEARS PAYMENTS YEARS PAYMENTS YEARS PAYMENTS YEARS PAYMENTS YEARS PAYMENTS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 $18.32 10 $10.06 15 $7.34 20 $6.00 25 $5.22 30 $4.72
6 15.56 11 9.31 16 7.00 21 5.81 26 5.10
7 13.59 12 8.69 17 6.71 22 5.64 27 5.00
8 12.12 13 8.17 18 6.44 23 5.49 28 4.90
9 10.97 14 7.72 19 6.21 24 5.35 29 4.80
</TABLE>
The monthly payment for any ages not shown will be quoted upon request
<PAGE>
Application for
Variable Annuity Contract
ITT Life Insurance Corporation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
1. Contract Owner SS#/TIN
---------------------------------------------------------
If no Annuitant Name Date of Birth
is specified in section 3,
the Contract Owner will --------------------------------------------------------- month day year
be the Annuitant. Street Address
--------------------------------------------------------- / / Male / / Female / / Trustee
City State Zip
- ------------------------------------------------------------------------------------------------------------------------------------
2. Joint Contract SS#/TIN
Owner (if any) ---------------------------------------------------------
Name Date of Birth
--------------------------------- / / Male / / Female month day year
Relationship to Contract Owner
- ------------------------------------------------------------------------------------------------------------------------------------
3. Annuitant SS#
---------------------------------------------------------
Complete only if different Name Date of Birth
from the contract owner
in Section 1. --------------------------------------------------------- month day year
Street Address
--------------------------------------------------------- / / Male / / Female
City State Zip
- ------------------------------------------------------------------------------------------------------------------------------------
4. Contingent
Annuitant ---------------------------------------------------------------------------------------------------
Name Relationship to Owner
- ------------------------------------------------------------------------------------------------------------------------------------
5. Beneficiary (ies) Relationship to
Name(s): Contract Owner: Percentage:
Designated ---------------------------------------------------------------------------------------------------
Relationship to
Contingent Name(s): Contract Owner: Percentage:
- ------------------------------------------------------------------------------------------------------------------------------------
6. Tax Qualified A. / / Initial / / Transfer / / Rollover
Plans B. / / IRA / / 403(b) / / 401(k) / / 401(a) / /SEP-IRA / / Other
Check the appropriate C. / / Individual Accounts / / Unallocated Plan Account -------------------
box(es) in A, B, and C. Tax Year for which initial contribution is being made:
---------------
- ------------------------------------------------------------------------------------------------------------------------------------
7. Fund Selection Please check selected fund(s) and note whole percentage allocations.
The initial premium will be
allocated as selected here. / / Advisers Fund % / / Index Fund %
-------- -------
If Dollar Cost Averaging, / / Stock Fund % / / GNMA / Mortgage Securities Fund %
-------- -------
Fixed or Money Market / / Aggressive Growth Fund % / / Bond / Debt Securities Fund %
-------- -------
must be selected here and / / International Opportunities Fund % / / Money Market Fund %
-------- -------
in the DCA enrollment / / Fixed Account % / / Other %
-------- --------------------- -------
section on the reverse side. Make checks payable to: ITT Life Insurance Corporation Initial $ Total 100%
------------
- ------------------------------------------------------------------------------------------------------------------------------------
8. Special Remarks
- ------------------------------------------------------------------------------------------------------------------------------------
Will the annuity applied for replace one or more existing annuity or life insurance contracts? / / Yes / / No (If yes, explain in
Have you purchased another Hartford Annuity during the previous 12 months? / / Yes / / No Special Remarks)
I hereby represent my answers to the above questions to be true and correct to the best of my knowledge and belief. I UNDERSTAND
THAT ANNUITY PAYMENTS OR SURRENDER VALUES, WHEN BASED UPON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND NOT
GUARANTEED AS TO A FIXED DOLLAR AMOUNT.
/ / RECEIPT OF A VARIABLE ANNUITY AND FUND PROSPECTUS IS HEREBY ACKNOWLEDGED. If not checked, the appropriate prospectus will be
mailed to you.
SIGNED AT ON
------------------------------------ ---------------- --------------------------------------------------------------
City, State Date (Contract Owner's signature)
Do you, as Agent, have reason to believe the contract applied for
will replace existing annuities or insurance? / / Yes / / No
--------------------------------------------------------------
(Joint Contract Owner's signature)
Broker/Dealer
-------------------------------------------------
LICENSED
AGENT Address
------------------------------------------------ ---------
</TABLE>
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM
VARIABLE ANNUITY CONTRACT
<PAGE>
BYLAWS
OF
ITT LIFE INSURANCE CORPORATION
EFFECTIVE JANUARY 8, 1980
<PAGE>
ARTICLE I
Name - Home Office
Section 1. This company shall be named ITT Life Insurance Corporation.
Section 2. The Company may have such principal and other business offices,
either within or without the State of Wisconsin, as the Board of Directors may
designate or as the business of the Company may require.
Section 3. The registered office of the Company required by law to be
maintained in the State of Wisconsin may be, but need not be, identical with the
principal office in the State of Wisconsin.
ARTICLE II
Stockholders' Meetings - Notice - Quorum - Right to Vote
Section 1. All meetings of the stockholders shall be held at the principal
business office of the Company unless the Board of Directors shall otherwise
provide and direct.
Section 2. The annual meeting of the stockholders shall be held on such day and
at such hour as the Board of Directors may decide. For cause the Board of
Directors may postpone or adjourn such annual meeting to any other time during
the year.
Section 3. Special meetings of the stockholders may be called by the Board of
Directors, the Executive Committee, the Chairman or Vice Chairman of the Board,
the President or any Vice President.
Section 4. Notice of stockholders' meetings shall be delivered to each
stockholder, either personally or by mail at his address as it appears on the
records of the Company, at least seven days prior to the meeting. The notice
shall state the place, date and time of the meeting and shall specify all
matters proposed to be acted upon at the meeting.
Section 5. At each annual meeting the stockholders shall choose Directors as
hereinafter provided.
Section 6. Each stockholder shall be entitled to one vote at all meetings of
the Company for each share of stock held by such stockholder. Proxies may be
authorized by written power of attorney.
<PAGE>
- 2 -
Section 7. A majority of the total number of shares entitled to vote,
represented in person or by proxy, shall constitute a quorum.
Section 8. Each stockholder shall be entitled to a certificate of stock which
shall be signed by the President or a Vice President, and either the Treasurer
or an Assistant Treasurer of the Company, and shall bear the seal of the
Company, but such signatures and seal may be facsimile.
ARTICLE III
Directors - Meetings - Quorum
Section 1. The property, business and affairs of the Company shall be managed
by a board of not less than three nor more than twenty Directors, who shall be
chosen by the stockholders at each annual meeting. Vacancies occurring between
annual meetings may be filled by the affirmative vote of a majority of the
Directors then in office. Each Director shall hold office until the next annual
meeting of stockholders and until his successor is chosen and qualified.
Section 2. Meetings of the Board of Directors may be called by the direction of
the Chairman of the Board, the President, or any three Directors.
Section 3. Three days' notice of meetings of the Board of Directors shall be
given to each Director, either personally or by mail or telegraph, at his
residence or usual place of business, but notice may be waived, at any time, in
writing, and attendance of a director at a meeting shall constitute a waiver of
notice of such meeting except where a director attends a meeting and objects
thereat to the transaction of any business on grounds that the meeting was not
lawfully called or convened.
Section 4. A majority of the number of existing directorships, but not less than
two Directors, shall constitute a quorum.
ARTICLE IV
Election of Officers - Duties of Board of
Directors and Executive Committee
Section 1. The Board of Directors shall annually elect a President, a Secretary
and a Treasurer. It may elect a Chairman of the Board, a Vice Chairman of the
Board and such Vice Presidents, other Secretaries, Assistant Secretaries,
Assistant Treasurers and other officers as it may determine. All officers of
the Company shall hold office during the pleasure of the Board of Directors.
<PAGE>
-3-
Section 2. The Directors may fill any vacancy among the officers by election
for the unexpired term.
Section 3. The Board of Directors may appoint from its own number an
Executive Committee of not less than five Directors. The Executive Committee may
exercise all powers vested in and conferred upon the Board of Directors at any
time when the Board is not in session. A majority of the members of said
committee shall constitute a quorum. Meetings of the committee shall be called
whenever the Chairman of the Board, the President or a majority of its members
shall request.
Section 4. The Board of Directors may annually appoint from its own number a
Finance Committee of not less than three Directors, whose duties shall be as
hereinafter provided.
Section 5. The Board of Directors may, at any time, appoint such other
committees, not necessarily from its own number, as it may deem necessary for
the proper conduct of the business of the Company, which committees shall have
only such powers and duties as are specifically assigned to them by the Board of
Directors or the Executive Committee.
For all meetings, forty-eight hours' notice shall be given but notice may be
waived, at any time, in writing, and attendance of a director at a meeting shall
constitute a waiver of notice of such meeting except where a director attends a
meeting and objects thereat to the transaction of any business on grounds that
the meeting was not lawfully called or convened.
Section 6. The Board of Directors may authorize corporate contributions, in such
amounts as it determines to be reasonable, for public welfare or for charitable,
scientific or educational purposes, subject to the limits and restrictions
imposed by law and to such rules and regulations consistent with law as it
makes.
ARTICLE V
Officers
Chairman of the Board
and
Vice Chairman of the Board
Section 1. The Chairman of the Board shall preside at the meetings of the
Board of Directors and the Executive Committee and, in the absence of the
Chairman of the Finance Committee, at the meetings of
<PAGE>
-4-
the Finance Committee. In the absence or inability of the Chairman of the Board
to so preside, the Vice Chairman shall preside in his place if there be one,
otherwise the President shall preside.
Section 2. The Vice Chairman of the Board shall, in the absence of the Chairman
of the Board, exercise the powers and perform the duties of the Chairman of the
Board. He shall perform such other duties and have such other powers as may be
assigned to him by the Board of Directors.
President
Section 3. The President, unless the Board of Directors shall otherwise order
pursuant to Section 7 below, shall be the chief executive officer of the Company
and, subject to the control of the Board of Directors, shall in general
supervise and control all of the business and affairs of the Company. Unless
the Board of Directors shall provide otherwise, he shall, when present, preside
at all meetings of the shareholders and shall preside at all meetings of the
Board of Directors unless the Board shall have elected a Chairman of the Board
of Directors. He shall have authority, subject to such rules as may be
prescribed by the Board of Directors, to appoint such agents and employees of
the Company as he shall deem necessary, to prescribe their powers, duties and
compensation, and to delegate authority to them. Such agents and employees
shall hold office at the discretion of the President. Except as otherwise
provided in these Bylaws or by resolution of the Board of Directors, the
President shall have authority to sign, execute and acknowledge, on behalf of
the Company all contracts, reports and other documents or instruments necessary
or proper to be executed in the course of the Company's regular business, or
which shall be authorized by resolution of the Board of Directors; and except as
otherwise provided by law or the Board of Directors, he may authorize any Vice
President or other officer or agent of the Company to sign, execute and
acknowledge such documents or instruments in his place and stead. In general,
he shall perform all duties incident to the office of the chief executive
officer and such other duties as may be prescribed by the Board of Directors
from time to time.
If the President is not the chief executive officer, he shall have such duties
and authority as prescribed by the Board of Directors or the chief executive
officer.
<PAGE>
-5-
Section 4. In the absence or inability of the President to perform his duties,
the Board or the Chairman thereof may designate a Vice President to exercise the
powers and perform the duties of the President during such absence or inability.
Secretary
Section 5. The Secretary shall keep a record of all the meetings of the
Company, of the Board of Directors and of the Executive Committee, and he shall
discharge all other duties specifically required of the Secretary by law.
The other Secretaries and the Assistant Secretaries shall perform such duties as
may be assigned to them by the Board of Directors or by their senior officers
and any Secretary or Assistant Secretary may affix the seal of the Company and
attest it and the signature of any officer to any and all instruments.
Treasurer
Section 6. The Treasurer shall keep, or cause to be kept, full and accurate
accounts of the Company. He shall see that the funds of the Company are
disbursed as may be ordered by the Board of Directors, the Finance Committee or
a duly authorized individual. He shall have charge of all moneys paid to the
Company and shall deposit such to the credit of the Company or in any other
properly authorized name, in such banks or depositories as may be designated in
a manner provided by these bylaws. He shall also discharge all other duties
that may be required of him by law.
Other Officers
Section 7. The other officers shall perform such duties as may be assigned to
them by the President or the Board of Directors. The Board of Directors may
designate the Chairman of the Board or the Vice Chairman as the chief executive
officer of the Company. In such event that person shall assume all authority,
power, duties and responsibilities otherwise appointed to the President pursuant
to Section 3 above, and all references to the President in these bylaws shall
be regarded as references to the Chairman of the Board or Vice Chairman, as the
case may be, as such chief executive officer, except where a contrary meaning is
clearly required, and provided that in no case shall that person be empowered in
place of the President to sign the certificates for shares of stock of the
Company.
<PAGE>
-6-
ARTICLE VI
Finance Committee
Section 1. If a Finance Committee is established it shall be the duty of that
committee to supervise the investment of the funds of the Company in securities
in which insurance companies are permitted by law to invest, and all other
matters connected with the management of investments. If no Finance Committee
is established, this duty shall be performed by the Board of Directors.
Section 2. All loans or purchases for the investment and reinvestment of the
funds of the Company shall be submitted for approval to the Finance Committee,
if not specifically approved by the Board of Directors.
Section 3. Sale or transfer of any stocks or bonds shall be made upon
authorization of the Finance Committee unless specifically authorized by the
Board of Directors.
Section 4. Transfers of stock and registered bonds, deeds, leases, releases,
sales, mortgages chattel or real, assignments or partial releases of mortgages
chattel or real, and in general all instruments of defeasance of property and
all agreements or contracts affecting the same, except discharges of mortgages
and entries to foreclose the same as hereinafter provided, shall be authorized
by the Finance Committee or the Board of Directors, and be executed jointly for
the Company by two persons, to wit: the Chairman of the Board, the Vice
Chairman, the President or a Vice President, and a Secretary, the Treasurer or
an Assistant Treasurer, but may be acknowledged and delivered by either one of
those executing the instrument; provided, however, that either a Secretary, the
Treasurer, or an Assistant Treasurer alone, when authorized as aforesaid, or any
person specially authorized by the Finance Committee as attorney for the
Company, may make entry to foreclose any mortgage, and a Secretary, the
Treasurer or an Assistant Treasurer alone is authorized, without the necessity
of further authority, to discharge by deed or otherwise any mortgage on payment
to the Company of the principal, interest and all charges due.
Section 5. The Finance Committee may fix times and places for regular
meetings. No notice of regular meetings shall be necessary. Reasonable notice
shall be given of special meetings but the action of a majority of the Finance
Committee at any meeting shall be valid notwithstanding any defect in the notice
of such meeting.
<PAGE>
-7-
Section 6. In the absence of specific authorization from the Board of
Directors or the Finance Committee, the Chairman of the Board, the President, a
Vice President or the Treasurer shall have the power to vote or execute proxies
for voting any shares held by the Company.
ARTICLE VII
Funds
Section 1. All monies belonging to the Company shall be deposited to the
credit of the Company, or in such other name as the Finance Committee, the
Chairman of the Finance Committee or such executive officers as are designated
by the Board of Directors shall direct, in such bank or banks as may be
designated from time to time by the Finance Committee, the Chairman of the
Finance Committee or by such executive officers as are designated by the Board
of Directors. Such monies shall be drawn only on checks or drafts signed by any
two executive officers of the Company, provided that the Board of Directors may
authorize the withdrawal of such monies by check or draft signed with the
facsimile signature of any one or more executive officers, and provided further,
that the Finance Committee may authorize such alternative methods of withdrawal
as it deems proper.
The Board of Directors, the President, the Chairman of the Finance Committee, a
Vice President, or such executive officers as are designated by the Board of
Directors may authorize withdrawal of funds by checks or drafts drawn at offices
of the Company to bc signed by Managers, General Agents or employees of the
Company, provided that all such checks or drafts shall be signed by two such
authorized persons, except checks or drafts used for the payment of claims or
losses which need be signed by only one such authorized person, and provided
further that the Board of Directors of the Company or executive officers
designated by the Board of Directors may impose such limitations or restrictions
upon the withdrawal of such funds as it deems proper.
ARTICLE VIII
Liability and Indemnity
Section 1. No person shall liable to the Company for any loss or damage
suffered by it on account of any action taken or omitted to be taken by him as a
director or officer of the Company, or of any other company, partnership, joint
venture, trust or other enterprise for which he serves as a director, officer
or employee at the
<PAGE>
-8-
request of the Company, in good faith, if such person (a) exercised and used the
same degree of care and skill as a prudent man would have exercised or used
under the circumstances in the conduct of his own affairs, or (b) took or
omitted to take such action in reliance upon advice of counsel for the Company
or upon statements made or information furnished by officers or employees of the
Company which he had reasonable grounds to believe to be true. The foregoing
shall not be exclusive of other rights and defenses to which he may be entitled
as a matter of law.
Section 2. The Company shall indemnify any person who was or is a party or
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, (other than one by or in the right of the Company) by
reason of the fact that he is or was a director, officer or employee of the
Company, or is or was serving at the request of the Company as a director,
officer or employee of another company, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding had reasonable
cause to believe that his conduct was unlawful.
Section 3. The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, by or in the right of the Company to procure a judgement in
its favor by reason of the fact that he is or was a director, officer or
employee of the Company, or is or was serving at the request of the Company as a
director, officer or employee of another company, partnership, joint venture,
trust or other enterprise against expenses, including attorneys' fees, actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company, except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Company unless and only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability and in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as such court shall deem proper.
<PAGE>
-9-
Section 4. Expenses, including attorneys' fees, incurred in defending a civil
or criminal action, suit or proceeding may be paid by the Company in advance of
the final disposition of such action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or employee to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Company as authorized hereby.
Section 5. The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any statute, bylaw, agreement, vote of shareholders or of disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer or employee and
shall inure to the benefit of the heirs, executors and administrators
of such a person.
ARTICLE IX
Amendment of Bylaws
Section 1. The Directors shall have power to adopt, amend and repeal such
bylaws as may be deemed necessary or appropriate for the management of the
property and affairs of the Company.
Section 2. The stockholders at any annual or special meeting may amend or
repeal these bylaws or adopt new ones if the notice of such meeting contains a
statement of the proposed alteration, amendment, repeal or adoption of the
substance thereof. Bylaws amended or adopted by the stockholders may be amended
or repealed by the Directors.
State of )
) ss.
County of ) 19
This is to certify that the foregoing is a true copy of the Bylaws of ITT Life
Insurance Corporation in full force and effect on this date.
Attest:
--------------------------------
Secretary
<PAGE>
ITT LIFE INSURANCE CORPORATION
POWER OF ATTORNEY
LaVern L. Kolhof
James G. Masica
David T. Schrandt
Lowndes A. Smith
William E. Sweeney
do hereby jointly and severally authorize Daniel G. Walseth to sign as their
agent, any Registration Statement, pre-effective amendment, and any
post-effective amendment of the ITT Life Insurance Corporation under the
Securities Act of 1933 and/or the Investment Company Act of 1940.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
/s/ LaVern L. Kolhof (Seal) Dated 12/16/92
- --------------------------- --------------------
LaVern L. Kolhof
/s/ James G. Masica (Seal) Dated 12/16/92
- --------------------------- --------------------
James G. Masica
/s/ David T. Schrandt (Seal) Dated 12/16/92
- --------------------------- --------------------
David T. Schrandt
/s/ Lowndes A. Smith (Seal) Dated 12/16/92
- -------------------------- --------------------
Lowndes A. Smith
/s/ William E. Sweeney (Seal) Dated 12/16/92
- -------------------------- --------------------
William E. Sweeney
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