<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: 1-800-521-0538
This Prospectus describes the Putnam Capital Manager Plan, a tax deferred
variable annuity issued by ITT Hartford Life and Annuity Insurance Company
("Hartford"). (On January 1, 1998, Hartford's name will change to Hartford
Life and Annuity Insurance Company). Payments for the Contract will be held in
a series of ITT Hartford Life and Annuity Insurance Company - Putnam Capital
Manager Trust Separate Account Two (the "Separate Account"). Allocations to and
transfers to and from the Fixed Account are not permitted in certain states.
There are currently sixteen (16) Sub-Accounts available under the Contract.
The underlying investment portfolios ("Funds") of Putnam Variable Trust for
the Sub-Accounts are Putnam VT Asia Pacific Growth Fund, Putnam VT
Diversified Income Fund, Putnam VT Global Asset Allocation Fund, Putnam VT
Global Growth Fund, Putnam VT Growth and Income Fund, Putnam VT High Yield
Fund, Putnam VT International Growth Fund, Putnam VT International Growth and
Income Fund, Putnam VT International New Opportunities Fund, Putnam VT Money
Market Fund, Putnam VT New Opportunities Fund, Putnam VT New Value Fund, Putnam
VT U.S. Government and High Quality Bond Fund, Putnam VT Utilities Growth and
Income Fund, Putnam VT Vista Fund, and Putnam VT 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: Annuity Marketing Services, P. O. Box 5085,
Hartford, CT06102-5085, or call the telephone number shown above. 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 THE FUNDS AND IS
VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE FUNDS.
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED
BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
Prospectus Dated: May 1, 1997
Statement of Additional Information Dated: May 1, 1997
<PAGE>
2
TABLE OF CONTENTS
SECTION PAGE
- ------- -----
GLOSSARY OF SPECIAL TERMS. . . . . . . . . . . . . .
FEE TABLE . . . . . . . . . . . . . . . . . . .
ACCUMULATION UNIT VALUES . . . . . . . . . . . . . .
SUMMARY. . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . .
<PAGE>
3
SECTION PAGE
- ------- -----
DEATH BENEFIT. . . . . . . . . . . . . . . . . .
CHARGES UNDER THE CONTRACT . . . . . . . . . . . . .
Contingent Deferred Sales Charges . . . . . . . . . .
During the First Seven Contract Years . . . . . . . . .
After the Seventh Contract Year . . . . . . . . . . .
Mortality and Expense Risk Charge . . . . . . . . . .
Administration and Maintenance Fees . . . . . . . . .
Premium Taxes . . . . . . . . . . . . . . . . .
ANNUITY BENEFITS . . . . . . . . . . . . . . . .
Annuity Options . . . . . . . . . . . . . . . .
The Annuity Unit and Valuation . . . . . . . . . . .
Determination of Payment Amount . . . . . . . . . . .
FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . .
Taxation of Hartford and the Separate Account . . . . . .
Taxation of Annuities -- General Provisions Affecting. . . .
Purchasers Other Than Qualified Retirement Plans . . . . .
Federal Income Tax Withholding . . . . . . . . . . .
General Provisions Affecting Qualified Retirement Plans . . .
Annuity Purchases by Nonresident Aliens and Foreign
Corporations . . . . . . . . . . . . . . . .
GENERAL MATTERS . . . . . . . . . . . . . . . . .
Assignment . . . . . . . . . . . . . . . . . .
Modification . . . . . . . . . . . . . . . . .
<PAGE>
4
SECTION PAGE
- ------- -----
Delay of Payments . . . . . . . . . . . . . . .
Voting Rights . . . . . . . . . . . . . . . . .
Distribution of the Contracts. . . . . . . . . . . .
Other Contracts Offered. . . . . . . . . . . . . .
Custodian of Separate Account Assets . . . . . . . . .
Legal Proceedings. . . . . . . . . . . . . . . .
Legal Counsel . . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . .
Additional Information . . . . . . . . . . . . . .
APPENDIX I. . . . . . . . . . . . . . . . . . .
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION . . .
<PAGE>
5
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT: An accounting unit of measure used to calculate values
before Annuity payments begin.
ANNUAL WITHDRAWAL AMOUNT: The amount which can be withdrawn in any Contract
Year prior to incurring surrender charges.
ANNUITANT: The person or Participant upon whose life the Contract is issued.
ANNUITY: A series of payments for life, or for life with a minimum number of
payments or a determinable sum guaranteed, or for a joint lifetime and
thereafter during the lifetime of the survivor, or for a designated period.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to
commence. Under a group unallocated Contract, the date for each Participant
is determined by the Contract Owner in accordance with the terms of the Plan.
ANNUITY UNIT: An accounting unit of measure used to calculate the value of
Annuity payments.
BENEFICIARY: The person(s) who receive Contract Values in the event of the
Annuitant's or Contract Owner's death under certain conditions. Under a group
unallocated Contract, the person named 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.
<PAGE>
6
DEATH BENEFIT: The amount payable upon the death of a Contract Owner,
Annuitant, or Participant in the case of group Contracts before annuity
payments have started.
FIXED ACCOUNT: Part of the General Account of Hartford to which a Contract
Owner may allocate all or a portion of his Premium Payment or Contract Value.
FIXED ANNUITY: An Annuity providing for guaranteed payments which remain
fixed in amount throughout the payment period and which do not vary with the
investment experience of a separate account.
FUNDS: Currently, the portfolios of Putnam Variable Trust described on page
of this Prospectus.
GENERAL ACCOUNT: The General Account of Hartford which consists of all assets
of Hartford Life and Annuity Insurance Company other than those allocated to
the separate accounts of 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
Services.
Hartford: ITT Hartford Life and Annuity Insurance Company. On January 1,
1998, ITT Hartford Life and Annuity Insurance Company will change its name to
Hartford Life and Annuity Insurance Company.
MAXIMUM ANNIVERSARY VALUE: A value used in determining the death benefit. It
is based on a series of calculations of Contract Values on Contract
Anniversaries, premium payments and partial surrenders, as described on
page __.
NON-QUALIFIED CONTRACT: A Contract which is not classified as a tax-qualified
retirement plan using pre-tax dollars under the Internal Revenue Code.
PARTICIPANT: (For Group Unallocated Contracts Only). Any eligible employee of
an Employer/Contract Owner participating in the Plan.
PLAN: A voluntary Plan of an Employer which qualifies for special tax
treatment under a section of the Internal Revenue Code.
PREMIUM PAYMENT: A payment made to Hartford pursuant to the terms of the
Contract.
PREMIUM TAX: A tax charged by a state or municipality on Premium Payments or
Contract Values.
<PAGE>
7
QUALIFIED CONTRACT: A Contract which qualifies as a tax-qualified retirement
plan using pre-tax dollars under the Internal Revenue Code, such as an
employer-sponsored Section 401(k) or an Individual Retirement Annuity (IRA).
SEPARATE ACCOUNT: The Hartford separate account entitled "ITT Hartford Life
and Annuity Insurance Company - Putnam Capital Manager Trust Separate Account
Two".
SUB-ACCOUNT: Accounts established within the Separate Account with respect to
a Fund.
TERMINATION VALUE: The Contract Value upon termination of the Contract prior
to the Annuity Commencement Date, less any applicable Premium Taxes, the
Annual Maintenance Fee and any applicable contingent deferred sales charges.
TRUST: Putnam Variable 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 theinvestment experience of the assets of the Separate
Account.
<PAGE>
8
FEE TABLE
SUMMARY
CONTRACT OWNER TRANSACTION EXPENSES
(ALL SUB-ACCOUNTS)
Sales Load Imposed on Purchases (as a percentage of premium payments). . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . $0
Deferred Sales Load (as a percentage of amounts withdrawn)
First Year (1) . . . . . . . . . . . . . . . . . . . 6%
Second Year . . . . . . . . . . . . . . . . . . . . 6%
Third Year . . . . . . . . . . . . . . . . . . . . 5%
Fourth Year . . . . . . . . . . . . . . . . . . . . 5%
Fifth Year . . . . . . . . . . . . . . . . . . . . 4%
Sixth Year . . . . . . . . . . . . . . . . . . . . 3%
Seventh Year . . . . . . . . . . . . . . . . . . . . 2%
Eighth Year . . . . . . . . . . . . . . . . . . . . 0%
Annual Maintenance Fee (2) . . . . . . . . . . . . . . . . $30
Annual Expenses-Separate Account
(as percentage of average account value)
Mortality and Expense Risk . . . . . . . . . . . . . . . 1.250%
Administration Fees. . . . . . . . . . . . . . . . . . 0.150%
Total . . . . . . . . . . . . . . . . . . . . . . 1.400%
- --------------------
(1) Length of time from premium payment.
(2) The Annual Maintenance Fee is a single $30 charge on a Contract. It is
deducted proportionally from the investment options in use at the time of the
charge. Pursuant to requirements of the 1940 Act, the Annual Maintenance Fee
has been reflected in the Examples by a method intended to show the "average"
impact of the Annual Maintenance Fee on an investment in the Separate
Account. The Annual Maintenance Fee is deducted only when the accumulated
value is less than $50,000. In the Example, the Annual Maintenance Fee is
approximated as a 0.05% annual asset charge based on the experience of the
Contracts.
<PAGE>
9
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
<TABLE>
<CAPTION>
Total Fund
Management Other Operating
Fees Expenses Expenses
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Putnam VT Asia Pacific Growth Fund 0.80% 0.43% 1.23%
Putnam VT Diversifed Income Fund 0.70% 0.13% 0.83%
Putnam VT Global Asset Allocation Fund 0.68% 0.15% 0.83%
Putnam VT Global Growth Fund 0.60% 0.16% 0.76%
Putnam VT Growth and Income Fund 0.49% 0.05% 0.54%
Putnam VT High Yield Fund 0.68% 0.08% 0.76%
Putnam VT International Growth Fund 0.80% 0.18% 0.98%
Putnam VT International Growth and Income Fund 0.80% 0.17% 0.97%
Putnam VT International New Opportunities Fund 1.20% 0.19% 1.39%
Putnam VT Money Market Fund(1) 0.45% 0.10% 0.55%
Putnam VT New Opportunities Fund 0.63% 0.09% 0.72%
Putnam VT New Value Fund 0.70% 0.13% 0.83%
Putnam VT U.S. Government and High Quality Bond Fund 0.62% 0.07% 0.69%
Putnam VT Utilities Growth and Income Fund(2) 0.69% 0.09% 0.78%
Putnam VT Vista Fund 0.65% 0.16% 0.81%
Putnam VT Voyager Fund 0.57% 0.06% 0.63%
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Other expenses for Putnam VT Money Market Fund have been restated to
reflect the cost of certain insurance purchased by the Fund. See "Putnam
VT Money Market Fund -- Insurance" in the Fund's prospectus. Actual other
expenses and total Fund operating expenses were 0. 08% and 0. 53%,
respectively.
(2) On July 11, 1996, shareholders approved an increase in the fees payable to
Putnam Investment Management, Inc. ("Putnam Management") under the
Management Contract for Putnam VT Utilities Growth and Income Fund. The
management fees and total expenses shown in the table have been restated
to reflect the increase. Actual management fees and total expenses were
0.64% and 0.73%, respectively.
<PAGE>
10
EXAMPLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
If you surrender your Contract If you annuitize your Contract
at the end of the applicable at the end of the applicable If you do not surrender your
time period, you would pay time period, you would pay Contract, you would pay the
the following expenses on a the following expenses on a following expenses on a
$1,000 investment, assuming $1,000 investment, assuming $1,000 investment, assuming a
a 5% annual return on assets: a 5% annual return on assets: 5% annual return on assets:
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sub-Account 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
- ----------------------------------------------------------------------------------------------------------------------------------
PCM Asia Pacific
Growth Fund 87 134 184 304 27 84 143 304 27 84 144 304
PCM Diversifed
Income Fund 83 122 163 264 23 71 123 263 23 72 123 264
PCM Global Asset
Allocation Fund 83 122 163 264 23 71 123 263 23 72 123 264
PCM Global
Growth Fund 83 120 160 257 22 69 119 256 23 70 120 257
PCM Growth and
Income Fund 80 113 148 233 20 62 108 233 20 63 108 233
PCM High
Yield Fund 83 120 160 257 22 69 119 256 23 70 120 257
PCM International
Growth Fund 85 127 171 279 24 76 130 279 25 77 131 279
PCM International
Growth and Income
Fund 85 126 170 278 24 76 130 278 25 76 130 278
PCM International
New Opportunities
Fund 89 139 192 320 29 89 151 319 29 89 152 320
PCM Money
Market Fund 80 113 148 232 20 62 107 232 20 63 108 232
PCM New
Opportunities Fund 82 119 168 252 22 68 117 252 22 69 118 252
PCM New
Value Fund 83 122 163 264 23 71 123 263 23 72 123 264
PCM U.S. Government
and High Quality
Bond Fund 82 118 156 249 21 67 115 249 22 68 116 249
PCM Utilities
Growth and
Income Fund 83 120 161 259 22 70 120 258 23 70 121 259
PCM Vista Fund 83 121 162 262 23 71 122 261 23 71 122 262
PCM Voyager Fund 81 116 153 243 21 65 112 242 21 66 113 243
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The purpose of this table is to assist the Contract Owner in understanding
various costs and expenses that a Contract Owner will bear directly or
indirectly. The table reflects expenses of the Separate Account and
underlying Funds. Premium taxes may also be applicable.
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
<PAGE>
11
ACCUMULATION UNIT VALUES
(For an accumulation unit outstanding throughout the period)
The following information has been examined by Arthur Andersen LLP,
independent public accountants, whose report thereon is included in the
Statement of Additional information, which is incorporated by reference into
this Prospectus. PCM International Growth Fund, PCM International Growth and
Income Fund, PCM International New Opportunities Fund, PCM New Value Fund,
and PCM Vista Fund are Sub-Accounts which were established on January 2,
1997. Therefore, no financial data is shown below.
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993
PCM Asia Pacific Growth Fund
Sub-Account (a)
Accumulation unit value at
beginning of period $10.135 $10.000
Accumulation unit value at
end of period $10.903 $10.135
Number of accumulation units
outstanding at end of period
(in thousands) 6,980 1,292
PCM Diversified Income Fund
Sub-Account (b)
Accumulation unit value at
beginning of period $11.302 $9.622 $10.188 $10.000
Accumulation unit value at
end of period $12.127 $11.302 $9.622 $10.188
Number of accumulation units
outstanding at end of period
(in thousands) 18,268 11,006 8,609 4,428
PCM Global Asset Allocation Fund
Sub-Acount (c)
Accumulation unit value at
beginning of period $20.087 $16.355 $16.988 $14.665
Accumulation unit value at
end of period $22.902 $20.087 $16.355 $16.988
Number of accumulation units
outstanding at end of period
(in thousands) 14,342 10,181 8,665 4,491
PCM Global Growth Fund
Sub-Account (d)
Accumulation unit value at
beginning of period $14.963 $13.119 $13.432 $10.289
Accumulation unit value at
end of period $17.294 $14.963 $13.119 $13.432
Number of accumulation units
outstanding at end of period
(in thousands) 39,498 25,154 20,285 8,312
PCM Growth and Income Fund
Sub-Account (c)
Accumulation unit value at
beginning of period $27.201 $20.178 $20.390 $18.096
Accumulation unit value at
end of period $32.703 $27.201 $20.178 $20.390
Number of accumulation units
outstanding at end of period
(in thousands) 73,133 42,420 26,790 15,223
PCM High Yield Fund
Sub-Account (c)
Accumulation unit value at
beginning of period $20.390 $17.476 $17.890 $15.173
Accumulation unit value at
end of period $22.682 $20.390 $17.476 $17.890
Number of accumulation units
outstanding at end of period
(in thousands) 17,031 10,603 7,152 5,066
<PAGE>
12
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993
PCM Money Market Fund
Sub-Account (c)
Accumulation unit value at
beginning of period $1.379 $1.325 $1.294 $1.277
Accumulation unit value at
end of period $1.429 $1.379 $1.325 $1.294
Number of accumulation units
outstanding at end of period
(in thousands) 147,638 66,283 38,819 12,916
PCM New Opportunities Fund
Sub-Account (d)
Accumulation unit value at
beginning of period $15.312 $10.718 $10.000
Accumulation unit value at
end of period $16.635 $15.312 $10.718
Number of accumulation units
outstanding at end of period
(in thousands) 50,976 16,971 2,699
PCM U.S. Government and High
Quality Bond Fund Sub-Account (c)
Accumulation unit value at
beginning of period $18.448 $15.533 $16.277 $14.833
Accumulation unit value at
end of period $18.631 $18.448 $15.533 $16.277
Number of accumulation units
outstanding at end of period
(in thousands) $11,110 8,948 7,585 7,254
PCM Utilities Growth and
Income Fund Sub-Account (c)
Accumulation unit value at
beginning of period $14.075 $10.889 $11.876 $10.618
Accumulation unit value at
end of period $16.072 $14.075 $10.889 $11.876
Number of accumulation units
outstanding at end of period
(in thousands) 17,006 14,307 11,859 11,003
PCM Voyager Fund Sub-Account (c)
Accumulation unit value at
beginning of period $32.520 $23.445 $23.530 $20.102
Accumulation unit value at
end of period $36.227 $32.520 $23.445 $23.530
Number of accumulation units
outstanding at end of period
(in thousands) 41,121 23,357 13,372 6,509
(a) Inception date May 1, 1995.
(b) Inception date September 15, 1993.
(c) Inception date June 14, 1993.
(d) Inception date June 20, 1994.
<PAGE>
13
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 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. Generally, a Contract Owner may exercise his
right to cancel the Contract within 10 days of delivery of the Contract by
returning the Contract to Hartford at its Home Office. If the Contract Owner
exercises his right to cancel, Hartford will return either the Contract Value
or the original Premium Payments to the Contract Owner. The duration of the
right to cancel period and Hartford's obligation to either return the Contract
Value or the original Premium will depend on state law (See "Right to Cancel
Period" page __.)
WHO MAY PURCHASE THE CONTRACT?
Any individual, group or trust may purchase the Contract, including any
trustee or custodian for a retirement plan which qualifies for special
Federal tax treatment under the Internal Revenue Code, including individual
retirement annuities. (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 Variable
Trust, an open-end series investment company with multiple portfolios ("the
Funds") as follows: Putnam VT Asia Pacific Growth Fund, Putnam VT Diversified
Income Fund, Putnam VT Global Asset Allocation Fund, Putnam VT Global Growth
Fund, Putnam VT Growth and Income Fund, Putnam VT High Yield Fund, Putnam VT
International Growth Fund, Putnam VT International Growth and Income
Fund, Putnam VT International New Opportunities Fund, Putnam VT Money Market
Fund, Putnam VT New Opportunities Fund, Putnam VT New Value Fund, Putnam VT
U.S. Government and High Quality Bond Fund, Putnam VT Utilities Growth and
Income Fund, Putnam VT Vista Fund, Putnam VT 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>
14
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)
6% 1
6% 2
5% 3
5% 4
4% 5
3% 6
2% 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 during the first seven Contract Years. (See
"Contingent Deferred Sales Charges" commencing on page __.) Certain plans or
programs may have different withdrawal privileges.
MORTALITY AND EXPENSE RISKS
For assuming the mortality and expense risks under the Contract, Hartford
will impose a 1.25% per annum charge against all Contract Values held in the
Sub-Accounts, (see "Mortality and Expense Risk Charge," page __).
<PAGE>
15
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 $30
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 charge.
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 accompanying this Prospectus.)
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, 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 or
Contract Owner or Joint Contract Owner 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 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
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16
that proxies are solicited by such Fund. If a Contract Owner does not
vote, Hartford shall vote such interests in the same proportion as shares of
the Fund for which instructions have been received by 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.
PCM Asia Pacific Growth Fund,PCM Diversified Income Fund, PCM Global Asset
Allocation Fund, PCM Global Growth Fund, PCM Growth and Income Fund, PCM High
Yield Fund, PCM International Growth Fund, PCM International Growth and
Income Fund, PCM International New Opportunities Fund, PCM Money Market Fund,
PCM New Opportunities Fund, PCM New Value Fund, PCM U.S. Government and
High Quality Bond Fund, PCM Utilities Growth and Income Fund, PCM Vista 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).
PCM Diversified Income Fund, PCM Growth and Income Fund, PCM International
Growth and Income Fund, PCM High Yield Fund and PCM U. S. Government and High
Quality Bond Fund Sub-Accounts may advertise yield in addition to total
return. The yield will be computed in the following manner: The net investment
income per unit earned during a recent one month period is divided by the
unit value on the last day of the period. This figure reflects the recurring
charges at the Separate Account level including the Annual Maintenance Fee.
PCM Money Market Fund Sub-Account may advertise yield and effective yield.
The yield is based upon the income earned by the Sub-Account over a seven-day
period and then annualized, i.e. the income earned in the period is assumed
to be earned every seven days over a 52-week period and stated as a
percentage of the investment. Effective yield is calculated similarly but
when annualized, the income earned by the investment is assumed to be
reinvested in Sub-Account units and thus compounded in the course of a
52-week period. Yield reflects the recurring charges at the Separate Account
level including the Annual Maintenance Fee.
Total return at the Separate Account level includes all Contract charges:
sales charges, mortality and expense risk charges, and the Annual Maintenance
Fee, and is therefore lower than total return at the Fund level, with no
comparable charges. Likewise, yield at the Separate Account
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17
level includes all recurring charges (except sales charges), and is therefore
lower than yield at the Fund level, with no comparable charges.
Hartford may provide information on various topics to Contract Owners and
prospective Contract Owners in advertising, sales literature or other
materials. These topics may include the relationship between sectors of the
economy and the economy as a whole and its effect on various securities
markets, investment strategies and techniques (such as value investing,
dollar cost averaging and asset allocation), the advantages and disadvantages
of investing in tax-advantaged and taxable instruments, customer profiles and
hypothetical purchase scenarios, financial management and tax and retirement
planning, and other investment alternatives, including comparisons between
the Contracts and the characteristics of and market for such alternatives.
INTRODUCTION
This Prospectus has been designed to provide you with the necessary
information to make a decision on purchasing a tax deferred Variable Annuity
Contract offered by Hartford and funded by the Fixed Account and/or a series
of the Separate Account. Please read the Glossary of Special Terms on pages
__ and __ 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 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
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18
prescribed by the IRS, or if none is prescribed, the mortality table then in
use by Hartford.
The Contract Owner may select an Annuity Commencement Date and an Annuity
option which may be on a fixed or variable basis, or a combination thereof.
The Annuity Commencement Date may not be deferred beyond the Annuitant's 90th
birthday except in certain states where the Annuity Commencement Date may not
be deferred beyond the Annuitant's 85th birthday.
The Annuity Commencement Date and/or the Annuity option may be changed from
time to time, but any such change must be made at least 30 days prior to the
date on which 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").
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the Contract
with an additional 5.0% of the premium payment. This additional percentage
of premium payment in no way affects present or future charges, rights,
benefits or current values of other Contract Owners. The following class of
individuals are eligible for this feature: (1) current or retired officers,
directors, trustees and employees (and their families) of the ultimate parent
and affiliates of Hartford and Putnam Management; and (2) employees and
registered representatives (and their families) of registered broker-dealers
(or financial institutions affiliated therewith) that have a sales agreement
with Hartford and its principal underwriter to sell the Contracts.
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19
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, Hartford will, without deduction for any charges normally assessed
thereunder, pay you an amount equal to the Contract Value on the date of
receipt of the request for cancellation. You bear the investment risk during
the period prior to the Company's receipt of request for cancellation.
Hartford will refund the premium paid only for individual retirement
annuities (if returned within seven days of receipt) and in those states
where required by law.
THE SEPARATE ACCOUNT
The Separate Account was established on May 20, 1991, in accordance with
authorization by the Board of Directors of Hartford. It is the Separate
Account in which Hartford sets aside and invests the assets attributable to
variable annuity Contracts, including the Contracts sold under this
Prospectus. Although the Separate Account is an integral part of Hartford, it
is registered as a unit investment trust under the Investment Company Act of
1940. This registration does not, however, involve supervision by the
Commission of the management or the investment practices or policies of the
Separate Account or Hartford. The Separate Account meets the definition of
"separate account" under federal securities law.
Under Connecticut law, the assets of the Separate Account attributable to the
Contracts offered under this Prospectus are held for the benefit of the
owners of, and the persons entitled to payments under, those Contracts.
Income, gains, and losses, whether or not realized, from assets allocated to
the Separate Account, are, in accordance with the Contracts, credited to or
charged against the Separate Account. Also, the assets in the Separate
Account are not chargeable with liabilities arising out of any other
business Hartford may conduct. So Contract Values allocated to the
Sub-Accounts will not be affected by the rate of return of Hartford's General
Account, nor by the investment performance of any of Hartford's other separate
accounts. However, the obligations arising under the Contracts are general
obligations of Hartford.
Your investment in the Separate Account is allocated to one or more
Sub-Accounts as per your specifications. Each Sub-Account is invested
exclusively in the 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.
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
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20
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.
Hartford reserves the right, subject to compliance with the law, to
substitute the shares of any other registered investment company for the
shares of any Fund held by the Separate Account. Substitution may occur only
if shares of the Fund(s) become unavailable or if there are changes in
applicable law or interpretations of law. Current law requires notification
to you of any such substitution and approval of the Commission.
The Separate Account may be subject to liabilities arising from a Series of
the Separate Account whose assets are attributable to other variable annuity
Contracts or variable life insurance policies offered by the Separate Account
which are not described in this Prospectus.
THE FIXED ACCOUNT
THAT PORTION OF THE CONTRACT RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS
THEREIN ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE
1940 ACT, AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN
REVIEWED BY THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION. THE
FOLLOWING DISCLOSURE ABOUT THE FIXED ACCOUNT MAY BE SUBJECT TO CERTAIN
GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS REGARDING THE
ACCURACY AND COMPLETENESS OF DISCLOSURE.
Premium Payments and Contract Values allocated to the Fixed Account become
a part of the general assets of Hartford. Hartford invests the assets of the
General Account in accordance with applicable laws governing investments of
Insurance Company General Accounts.
Currently, Hartford guarantees that it will credit interest at a rate of not
less than 3% per year, compounded annually, to amounts allocated to the Fixed
Account under the Contracts. However, Hartford reserves the right to change
the rate according to state insurance law. Hartford may credit interest at a
rate in excess of 3% per year; however, Hartford is not obligated to credit
any interest in excess of 3% per year. There is no specific formula for the
determination of excess interest credits. Some of the factors that the
Company may consider in determining whether to credit excess interest to
amounts allocated to the Fixed Account and amount thereof, are general
economic trends, rates of 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.
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21
THE OWNER ASSUMES THE RISK THAT INTEREST CREDITED TO FIXED ACCOUNT
ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF 3% FOR ANY GIVEN YEAR.
THE COMPANY
ITT Hartford Life and Annuity Insurance Company ("Hartford") is a stock life
insurance company engaged in the business of writing life insurance and
annuities, both individual and group, in all states of the United States and
the District of Columbia, except New York. On January 1, 1998, Hartford's
name will change to Hartford Life and Annuity Insurance Company. Hartford was
originally incorporated under the laws of Wisconsin on January 9, 1956, and
was subsequently redomiciled to Connecticut. Its offices are located in
Simsbury, Connecticut; however, its mailing address is P. O. Box 2999,
Hartford, CT06104-2999. Hartford is a subsidiary of Hartford Fire Insurance
Company, one of the largest multiple lines insurance carriers in the United
States. Hartford is ultimately owned by ITT Hartford Group, Inc., a Delaware
corporation. Subject to shareholder approval on May 2, 1997, the name of ITT
Hartford Group, Inc. will change to The Hartford Financial Services Group,
Inc.
Hartford is rated A+ (superior) by A. M. Best and Company, Inc., on the
basis of its financial soundness and operating performance. Hartford is rated
AA by Standard & Poor's and AA+ by Duff and Phelps on the basis of its claims
paying ability. These ratings do not apply to the investment performance of
the Sub-Accounts of the Separate Account. The ratings apply to Hartford's
ability to meet its insurance obligations, including those described in this
Prospectus.
THE FUNDS
The underlying investments for the Contracts are shares of Putnam Variable
Trust, an open-end series investment company with multiple portfolios
("Funds"). The underlying Funds corresponding to each Sub-Account and their
investment objectives are described below. 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.
PUTNAM VT ASIA PACIFIC GROWTH FUND
Seeks capital appreciation by investing primarily in securities of companies
located in Asia and in the Pacific Basin. The fund's investments will
normally include common stocks, preferred stocks, securities convertible into
common stocks or preferred stocks, and warrants to purchase common stocks or
preferred stocks.
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22
PUTNAM VT DIVERSIFIED INCOME FUND
Seeks high current income consistent with capital preservation by investing
in the following three sectors of the fixed income securities markets: a U.S.
Government Sector, a High Yield Sector (which invests primarily in what are
commonly known as "junk bonds"), and an International Sector. See the special
considerations for investments in high yield securities described in the Fund
prospectus.
PUTNAM VT 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.
PUTNAM VT GLOBAL GROWTH FUND
Seeks capital appreciation through a globally diversified portfolio of common
stocks.
PUTNAM VT 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.
PUTNAM VT HIGH YIELD FUND
Seeks high current income and, when consistent with this objective, a
secondary objective of capital growth, by investing primarily in
high-yielding, lower-rated fixed income securities, constituting a portfolio
which Putnam Management believes does not involve undue risk to income or
principal. See the special considerations for investments in high yield
securities described in the Fund prospectus.
PUTNAM VT INTERNATIONAL GROWTH FUND
Seeks capital appreciation by investing primarily in equity securities of
companies located in a country other than the United States.
PUTNAM VT INTERNATIONAL GROWTH AND INCOME FUND
Seeks capital growth, and a secondary objective if high current income, by
investing primarily in common stocks that offer potential for capital growth
and may, when consistent with its investment objectives, invest in common
stocks that offer potential for current income. Under normal market
conditions, the fund expects to invest substantially all of its assets in
securities principally traded on markets outside the United States.
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23
PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND
Seeks long term capital appreciation by investing in companies that have
above-average growth prospects due to the fundamental growth of their market
sector. Under normal market conditions, the fund expects to invest
substantially all of its total assets other than cash or short-term
investments held pending investment, in common stocks, preferred stocks,
convertible preferred stocks, covertible bonds and other equity securities
principally traded in securities markets outside the United States.
PUTNAM VT MONEY MARKET FUND
Seeks as high a rate of current income as Putnam Management believes is
consistent with preservation of capital and maintenance of liquidity by
investing in high-quality money market instruments.
PUTNAM VT NEW OPPORTUNITIES FUND
Seeks long-term capital appreciation by investing principally in common
stocks of companies in sectors of the economy which Putnam Management
believes possess above-average long-term growth potential.
PUTNAM VT NEW VALUE FUND
Seeks long-term capital appreciation by investing primarily in common stocks
that Putnam Management believes are undervalued at the time of purchase and
have the potential for long-term capital appreciation.
PUTNAM VT U.S. GOVERNMENT AND HIGH QUALITY BOND FUND
Seeks current income consistent with preservation of capital by investing
primarily 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 a nationally recognized securities rating
agency such as Standard & Poor's or Moody's Investor Services, Inc. or, if
not rated, determined by Putnam Management to be of comparable quality.
PUTNAM VT UTILITIES GROWTH AND INCOME FUND
Seeks capital growth and current income by concentrating its investments in
debt and equity securities issued by companies in the public utilities
industries.
PUTNAM VT VISTA FUND
Seeks capital appreciation by investing in a diversified portfolio of common
stocks which Putnam Management believes have the potential for above-average
capital appreciation.
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24
PUTNAM VT VOYAGER FUND
Seeks capital appreciation by investing primarily in common stocks of
companies that Putnam Management believes have potential for capital
appreciation that is significantly greater than that of market averages.
Putnam VT Asia Pacific Growth Fund, Putnam VT Diversified Income Fund, Putnam
VT Global Growth Fund, Putnam VT Growth and Income Fund, Putnam VT High Yield
Fund, Putnam VT International Growth Fund, Putnam VT International Growth and
Income Fund, Putnam VT International New Opportunities Fund, Putnam VT Money
Market Fund, Putnam VT New Opportunities Fund, Putnam VT New Value Fund,
Putnam VT Utilities Growth and Income Fund, Putnam VT Vista Fund, and Putnam
VT Voyager Fund are generally managed in styles similar to other open-end
investment companies which are managed by Putnam Management 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 are contained in the
accompanying Trust prospectus which should be read in conjunction with this
prospectus before investing, and in the Trust's 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 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 intends to monitor events in order to identify any material
conflicts between such Contract Owners and Policy Owners and to determine
what action, if any, should be taken in response thereto. If the Board of
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 Management, One Post Office Square, Boston, MA, 02109, serves as the
investment manager for the Funds. An affiliate, The Putnam Advisory Company,
Inc., manages domestic and foreign institutional accounts and mutual funds.
Another affiliate, Putnam Fiduciary Trust Company, provides investmentadvice
to institutional clients under its banking and fiduciary policies. Putnam
Management and its affiliates are wholly-owned subsidiaries of Marsh &
McLennan Companies, Inc., a publicly owned holding company whose principal
businesses are international insurance brokerage and employee benefit
consulting.
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25
Subject to the general oversight of the Trustees of the Trust, Putnam
Management 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
Management a quarterly fee. See the accompanying Trust prospectus for a more
complete description of Putnam Management 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 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
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 "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
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26
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
Hartford will determine the value of the Fixed Account by crediting interest
to amounts allocated to the Fixed Account. The minimum Fixed Account interest
rate is 3%, compounded annually. Hartford may credit a lower minimum interest
rate according to state law. Hartford also may credit interest at rates
greater than the minimum Fixed Account interest rate.
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. However, Hartford reserves the right
to limit the number of transfers to twelve (12) per Contract Year, with no
two (2) transfers occurring on consecutive Valuation Days. Transfers by
telephone may be made by calling (800) 521-0538. Telephone transfers may not
be permitted by some states for their residents who purchase variable
annuities.
The policy of Hartford and its agents and affiliates is that they will not be
responsible for losses resulting from acting upon telephone requests
reasonably believed to be genuine. Hartford will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine;
otherwise, Hartford may be liable for any losses due to unauthorized or
fraudulent instructions. The procedures Hartford follows for transactions
initiated by telephone include requirements that callers provide certain
information for identification purposes. All transfer instructions by
telephone are tape recorded.
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27
Hartford may permit the Contract Owner to preauthorize transfers among
Sub-Accounts and between the Sub-Accounts and the Fixed Account under certain
circumstances. Transfers between the Sub-Accounts may be made both before and
after Annuity payments commence (limited to once a quarter) provided that the
minimum allocation to any Sub-Account may not be less than $500. No minimum
balance is presently required in any Sub-Account.
The right to reallocate Contract Values between the Sub-Accounts is subject
to modification if 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 Hartford to be to the disadvantage of other Contract Owners.
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 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.
Hartford reserves the right to modify the limitations on transfers from the
Fixed Account and to defer transfers from the Fixed Account for up to six
months from the date of request.
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. 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.
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
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right to terminate the Contract. In such event, the Termination Value of the
Contract may be taken in the form of a lump sum cash settlement. The
Termination Value of the Contract is equal to the Contract Value less any
applicable Premium Taxes, the Annual Maintenance Fee, 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), Hartford may terminate the
Contract and pay the Termination Value.
Certain plans or programs may have different withdrawal privileges. 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)
SEPARATED FROM SERVICE, C) DIED, D) BECOME DISABLED OR E) EXPERIENCED
FINANCIAL HARDSHIP.
DISTRIBUTIONS DUE TO FINANCIAL HARDSHIP OR SEPARATION FROM SERVICE MAY STILL
BE SUBJECT TO A PENALTY TAX OF 10%.
HARTFORD WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A
WITHDRAWAL IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR
SITUATION; OR IN MONITORING WITHDRAWAL REQUESTS REGARDING PRE OR POST
JANUARY 1, 1989 ACCOUNT VALUES.
ANY SUCH FULL OR PARTIAL SURRENDER DESCRIBED ABOVE MAY RESULT IN ADVERSE TAX
CONSEQUENCES TO THE CONTRACT OWNER. THE CONTRACT OWNER, THEREFORE, SHOULD
CONSULT WITH HIS TAX ADVISER BEFORE UNDERTAKING ANY SUCH SURRENDER. (SEE
"FEDERAL TAX CONSIDERATIONS" 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 Hartford at its
Home Office, Attn: Individual Annuity Services, P.O. Box 5085, Hartford, CT
06102-5085. Hartford may defer payment of any amounts from the Fixed Account
for up to six months from the date of the request for surrender. If Hartford
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29
defers payment for more than 30 days, Hartford will pay interest of at least
3% per annum on the amount deferred. In requesting a partial withdrawal you
should specify the 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 the Death Benefit as determined on the date
of receipt of due proof of death by Hartford in its Home Office. With
regard to Joint Contract Owners, at the first death of a Joint Contract Owner
prior to the Annuity Commencement Date, the Beneficiary will be the surviving
Contract Owner notwithstanding that the beneficiary designation may be
different.
GUARANTEED DEATH BENEFIT - If the Annuitant dies before the Annuity
Commencement Date and there is no designated Contingent Annuitant surviving,
or if the Contract Owner dies before the Annuity Commencement Date, the
Beneficiary will receive the greatest of (a) the Contract Value determined as
of the day written proof of death of such person is received by Hartford, or
(b) 100% of the total Premium Payments made to such Contract, reduced by any
prior surrenders, or (c) the Maximum Anniversary Value immediately preceding
the date of death. The Maximum Anniversary Value is equal to the greatest
Anniversary Value attained from the following:
As of the date of receipt of due proof of death, the Company will calculate
an Anniversary Value for each Contract Anniversary prior to the deceased's
attained age 81. The Anniversary Value is equal to the Contract Value on a
Contract Anniversary, increased by the dollar amount of any premium payments
made since that anniversary and reduced by the dollar amount of any partial
surrenders since that anniversary.
If the Annuitant or Contract Owner, as applicable, dies after the Annuity
Commencement Date, then the Death Benefit will equal the present value of
any remaining payments under the elected Annuity Option.
PAYMENT OF DEATH BENEFIT - Death Benefit proceeds will remain invested in the
Separate Account in accordance with the allocation instructions given by the
Contract Owner until the proceeds are paid or Hartford receives new
instructions from the Beneficiary. The Death Benefit may be taken in one
sum, payable within 7 days after the date Due Proof of Death is received, or
under
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30
any of the settlement options then being offered by Hartford provided,
however, that: (a) in the event of the death of any Contract Owner prior to
the Annuity Commencement Date, the entire interest in the Contract will be
distributed within 5 years after the death of the Contract Owner, and (b) in
the event of the death of any Contract Owner or Annuitant which occurs on or
after the Annuity Commencement Date, any remaining interest in the Contract
will be paid at least as rapidly as under the method of distribution in
effect at the time of death, or, if the benefit is payable over a period not
extending beyond the life expectancy of the Beneficiary or over the life of
the Beneficiary, such distribution must commence within one year of the date
of death. The proceeds due on the death may be applied to provide variable
payments, fixed payments, or a combination of variable and fixed payments.
However, in the event of the Contract Owner's death where the sole
Beneficiary is the spouse of the Contract Owner and the Annuitant or
Contingent Annuitant is living, such spouse may elect, in lieu of receiving
the death benefit, to be treated as the Contract Owner. The Contract Value
and the Maximum Anniversary Value of Contract will be unaffected by treating
the spouse as the Contract Owner.
If the Contract is owned by a corporation or other non-individual, the Death
Benefit payable upon the death of the Annuitant prior to the Annuity
Commencement Date will be payable only as one sum or under the same settlement
options and in the same manner as if an individual Contract Owner died on the
date of the Annuitant's death.
There may be postponement in the payment of Death Benefits whenever (a) the
New York Stock Exchange is closed, except for holidays or weekends, or
trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission; (b) the Securities and Exchange
Commission permits postponement and so orders; or (c) the Securities and
Exchange Commission determines that an emergency exists making valuation of
the amounts or disposal of securities not reasonably practicable.
GROUP UNALLOCATED CONTRACTS - For Group Unallocated Contracts Hartford
requires that detailed accounting of cumulative purchase payments, cumulative
gross surrenders, and current Contract Value attached to each Plan
Participant be submitted on an annual basis by the Contract Owner. Failure to
submit accurate data satisfactory to Hartford will give Hartford the right to
terminate this extension of benefits.
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. Premium payments will be
deemed to be surrendered in the order in which they were received.
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31
A Contract Owner who chooses to surrender a Contract in full who has not yet
withdrawn the Annual Withdrawal Amount during the current Contract Year (as
described below) may, depending upon the amount of investment gain
experienced under the Contract, reduce the amount of any contingent deferred
sales charge paid by first withdrawing the Annual Withdrawal Amount and then
requesting a full surrender of the Contract. Currently, regardless of
whether a Contract Owner first requests a partial withdrawal of the Annual
Withdrawal Amount, upon receiving a request for a full surrender of a Contract,
Hartford assesses any applicable contingent deferred sales charge against the
surrender proceeds representing the lesser of: (1) aggregate Premium Payments
under the Contract not previously withdrawn; and (2) the Contract Value, less
the Annual Withdrawal Amount available at the time of the full surrender, less
the Annual Maintenance Fee.
DURING THE FIRST SEVEN CONTRACT YEARS
During the first seven Contract Years, all surrenders will be first from
Premium Payments and then from other Contract Values. If an amount equal to
all premium payments has been surrendered, a contingent deferred sales charge
will not be assessed against the surrender of the remaining Contract Value.
AFTER THE SEVENTH CONTRACT YEAR
After the seventh Contract Year, all surrenders will first be from earnings
and then from premium payments. A contingent deferred sales charge will not
be assessed against the surrender of earnings. If an amount equal to all
earnings has been surrendered, a contingent deferred sales charge will not be
assessed against premium payments received more than seven years prior to
surrender, but will be assessed against premium payments received less than
seven years prior to surrender.
The charge is a percentage of the amount withdrawn (not to exceed the
aggregate amount of the Premium Payments made) and equals:
LENGTH OF TIME
CHARGE FROM PREMIUM PAYMENT
------ --------------------
(Number of Years)
6% 1
6% 2
5% 3
5% 4
4% 5
3% 6
2% 7
0% 8 or more
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
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32
extent that these charges do not cover such distribution expenses, the
expenses will be borne by Hartford from its general assets, including
surplus. The surplus might include profits resulting from unused mortality
and expense risk charges.
During the first seven Contract Years, on a non-cumulative basis, a Contract
Owner may make a partial surrender of Contract Values of up to 10% of the
aggregate Premium Payments made to the Contract (as determined on the date of
the requested withdrawal) without the application of the contingent deferred
sales charge. After the seventh Contract Year, the Contract Owner may make a
partial surrender of 10% of premium payments made during the seven years
prior to the surrender and 100% of the Contract Value less the premium
payments made during the seven years prior to the surrender. The amount
which can be withdrawn in any Contract Year prior to incurring surrender
charges is the "Annual Withdrawal Amount." An Extended Withdrawal Privilege
rider allows an Annuitant who attains age 70 1/2 under a Qualified Plan to
withdraw an amount in excess of the Annual Withdrawal Amount to comply with
IRS minimum distribution rules.
The contingent deferred sales charges which cover expenses relating to the
sale and distribution of the Contracts may be reduced for certain sales of
the Contracts under circumstances which may result in savings of such sales
and distribution expenses. Therefore, the contingent deferred sales charges
may be reduced if the Contracts are sold to certain employee and professional
groups. In addition, there may be other circumstances of which Hartford is
not presently aware which could result in reduced sales or distribution
expenses. Reductions in these charges will not be unfairly discriminatory
against any Contract Owner.
Hartford may offer certain employer sponsored savings plans, in its
discretion reduced fees and charges including, but not limited to, the
contingent deferred sales charges, the mortality and expense risk charge and
the maintenance fee for certain sales under circumstances which may result in
savings of certain costs and expenses. Reductions in these fees and charges
will not be unfairly discriminatory against any Contract Owner.
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33
MORTALITY AND EXPENSE RISK CHARGE
Although Variable Annuity payments made under the Contracts will vary in
accordance with the investment performance of the underlying Fund shares held
in the Sub-Account(s), the payments will not be affected by (a) Hartford's
actual mortality experience among Annuitants before or after the Annuity
Commencement Date or (b) Hartford's actual expenses, if greater than the
deductions provided for in the Contracts because of the expense and mortality
undertakings by Hartford.
For assuming these risks under the Contracts, Hartford will make a daily
charge at the rate of 1.25% per annum against all Contract Values held in the
Sub-Accounts during the life of the Contract, including the payout period,
(estimated at .90% for mortality and .35% for expense).
The mortality undertaking provided by Hartford under the Contracts, assuming
the selection of one of the forms of life Annuities, is to make monthly
Annuity payments (determined in accordance with the 1983 a Individual Annuity
Mortality Table and other provisions contained in the Contract) to Annuitants
regardless of how long an Annuitant may live, and regardless of how long all
Annuitants as a group may live. Hartford also assumes the liability for
payment of a minimum Death Benefit under the Contract.
The mortality undertakings are based on Hartford's determination of expected
mortality rates among all Annuitants. If actual experience among Annuitants
during the Annuity payment period deviates from Hartford's actuarial
determination of expected mortality rates among Annuitants because, as a
group, their longevity is longer than anticipated, Hartford must provide
amounts from its general funds to fulfill its Contract obligations.
Hartford will bear the loss in such a situation. Also, in the event of the
death of an Annuitant or Contract Owner before the commencement of Annuity
payments, whichever is earlier, Hartford can, in periods of declining value,
experience a loss resulting from the assumption of the mortality risk
relative to the minimum death benefit.
In providing an expense undertaking, Hartford assumes the risk that the
contingent deferred sales charges and the 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.
ADMINISTRATION AND MAINTENANCE FEES
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, Hartford will deduct an Annual
Maintenance Fee of $30 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, Hartford will
deduct the
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34
Annual Maintenance Fee at the time of such surrender. For administration,
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 semi-annual 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.
Hartford will pay Premium Taxes at the time imposed under applicable law. At
its sole discretion, Hartford may deduct Premium Taxes at the time Hartford
pays such taxes to the applicable taxing authorities, at the time the
Contract is surrendered, or at the time the Contract annuitizes.
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
(85th birthday in some states, 100th birthday if sold as a Charitable
Remainder Trust). 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,
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35
the mortality table then in use by Hartford. With respect to Non-Qualified
Contracts, if you do not elect otherwise, payments in most states will
automatically begin at the Annuitant's age 90 (with the exception of states
that do not allow deferral past age 85) under Option 2 with 120 monthly
payments certain. For Qualified Contracts and Contracts issued in Texas, if
you do not elect otherwise, payments will begin automatically at the
Annuitant's age 90 under Option 1 to provide a life Annuity.
Under any of the Annuity options excluding Options 4 and 5, no surrenders are
permitted after Annuity payments commence. Only full surrenders are allowed
out of Option 4 and any such surrender will be subject to contingent deferred
sales charges, if applicable. Full or partial withdrawals may be made from
Option 5 at any time and contingent deferred sales charges will not be
applied.
Option 1: Life Annuity
A life Annuity is an Annuity payable during the lifetime of the Annuitant and
terminating with the last payment preceding the death of the Annuitant. This
option offers the largest payment amount of any of the life Annuity options
since there is no guarantee of a minimum number of payments nor a provision
for a death benefit payable to a Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity
payment, two if he died before the date of the third Annuity payment, etc.
Option 2: Life Annuity with 120, 180 or 240 Monthly Payments Certain
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that payments will be made for a minimum of 120,
180 or 240 months, as elected. If, at the death of the Annuitant, payments
have been made for less than the minimum elected number of months, then the
present value as of the date of the Annuitant's death, of any remaining
guaranteed payments will be paid in one sum to the Beneficiary or
Beneficiaries designated unless other provisions have been made and approved
by Hartford.
Option 3: Joint and Last Survivor Annuity
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
Based on the options currently offered by Hartford, the Annuitant may elect
that the payment to the survivor be less than the payment made during the
joint lifetime of the Annuitant and a designated second person.
It would be possible under this option for an Annuitant and designated second
person to receive only one payment in the event of the common or simultaneous
death of the parties prior to the due date for the second payment and so on.
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36
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 Hartford.
In the event of the Annuitant's death prior to the end of the designated
period, the present value as of the date of the Annuitant's death, of any
remaining guaranteed payments will be paid in one sum to the Beneficiary or
Beneficiaries designated unless other provisions have been made and approved
by Hartford.
Option 4 is an option that does not involve life contingencies and thus no
mortality guarantee. Charges made for the mortality undertaking under the
Contracts thus provide no real benefit to a Contract Owner.
Option 5: Death Benefit Remaining with Hartford
Proceeds from the Death Benefit may be left with Hartford for a period not to
exceed five years from the date of the Contract Owner's death prior to the
Annuity Commencement Date. These proceeds will remain in the Sub-Account(s)
to which they were allocated at the time of death unless the Beneficiary
elects to reallocate them. Full or partial withdrawals may be made at any
time. In the event of withdrawals, the remaining value will equal the
Contract Value of the proceeds left with Hartford, minus any withdrawals.
Hartford may offer other annuity options from time to time.
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 "Value 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 5.00% 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.
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37
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 3%
per annum for the Fixed Annuity and 5% per annum for the Variable Annuity.
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 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.
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
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38
AND THE TYPE OF PLAN UNDER WHICH THE CONTRACT IS PURCHASED, LEGAL AND TAX
ADVICE MAY BE NEEDED BY A PERSON, TRUSTEE, OR OTHER ENTITY CONTEMPLATING THE
PURCHASE OF A CONTRACT DESCRIBED HEREIN.
It should be understood that any detailed description of the federal income
tax consequences regarding the purchase of these Contracts cannot be made in
this Prospectus and that special tax rules may be applicable with respect to
certain purchase situations not discussed herein. In addition, no attempt is
made here to consider any applicable state or other tax laws. For detailed
information, a qualified tax adviser should always be consulted. The
discussion here and in Appendix I commencing on page __ is based on
Hartford's understanding of existing federal income tax laws as they are
currently interpreted.
B. TAXATION OF HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as
a "regulated investment company" under subchapter M of Chapter 1 of the Code.
Investment income and any realized capital gains on the assets of the
Separate Account are reinvested and are taken into account in determining the
value of the Accumulation and Annuity Units (See "Value of Accumulation
Units" commencing on page __). As a result, such investment income and
realized capital gains are automatically applied to increase reserves under
the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER
THAN QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC. Section 72 contains provisions
for Contract Owners which are non-natural persons. Non-natural persons
include corporations, trusts, and partnerships. The annual net increase
in the value of the Contract is currently includable in the gross income
of a non-natural person unless the non-natural person holds the Contract
as an agent for a natural person. There is an exception from current
inclusion for certain annuities held by structured settlement companies,
certain annuities held by an employer with respect to a terminated
qualified retirement plan, and certain immediate annuities. A non-
natural person which is a tax-exempt entity for federal tax purposes
will not be subject to income tax as a result of this provision.
If the Contract Owner is not an individual, the primary Annuitant shall
be treated as the Contract Owner for purposes of making distributions
which are required to be made upon
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39
the death of the Contract Owner. If there is a change in the primary
Annuitant, such change shall be treated as the death of the Contract
Owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS). A Contract Owner is not taxed
on increases in the value of the Contract until an amount is received or
deemed received, e.g., in the form of a lump sum payment (full or
partial value of a Contract) or as Annuity payments under the settlement
option elected.
The provisions of Section 72 of the Code concerning distributions are
summarized briefly below. Also summarized are special rules affecting
distributions from Contracts obtained in a tax-free exchange for other
annuity contracts or life insurance contracts which were purchased prior
to August 14, 1982.
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not
includable in gross income equal the "investment in the
contract" under Section 72 of the Code.
ii. To the extent that the value of the Contract (ignoring any
surrender charges except on a full surrender) exceeds the
"investment in the contract," such excess constitutes the
"income on the contract."
iii. Any amount received or deemed received prior to the Annuity
Commencement Date (e.g., upon a partial surrender) is deemed to
come first from any such "income on the contract" and then from
"investment in the contract," and for these purposes such
"income on the contract" shall be computed by reference to any
aggregation rule in subparagraph 2.c., below. As a result, any
such amount received or deemed received (1) shall be includable
in gross income to the extent that such amount does not exceed
any such "income on the contract," and (2) shall not be
includable in gross income to the extent that such amount does
exceed any such "income on the contract." If at the time that
any amount is received or deemed received there is no "income on
the contract" (e.g., because the gross value of the Contract
does not exceed the "investment in the contract" and no
aggregation rule applies), then such amount received or deemed
received will not be includable in gross income, and will simply
reduce the "investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the
assignment or pledge of any portion of the value of the Contract
shall be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b.
v. In general, the transfer of the Contract, without full and
adequate consideration, will be treated as an amount received
for purposes of this subparagraph a. and the
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40
next subparagraph b. This transfer rule does not apply, however,
to certain transfers of property between spouses or incident to
divorce.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE. Annuity payments made
periodically after the Annuity Commencement Date are includable in
gross income to the extent the payments exceed the amount determined
by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity
Commencement Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of
the exclusion ratio is equal to the investment in the contract
as of the Annuity Commencement Date, any additional payments
(including surrenders) will be entirely includable in gross
income.
ii. If the annuity payments cease by reason of the death of the
Annuitant and, as of the date of death, the amount of annuity
payments excluded from gross income by the exclusion ratio does
notexceed the investment in the contract as of the Annuity
Commencement Date, then the remaining portion of unrecovered
investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received after
the Annuity Commencement Date are not entitled to any exclusion
ratio and shall be fully includable in gross income. However,
upon a full surrender after such date, only the excess of the
amount received (after any surrender charge) over the remaining
"investment in the contract" shall be includable in gross income
(except to the extent that the aggregation rule referred to in
the next subparagraph c. may apply).
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS. Contracts issued after
October 21, 1988 by the same insurer (or affiliated insurer) to the
same Contract Owner within the same calendar year (other than certain
contracts held in connection with a tax-qualified retirement
arrangement) will be treated as one annuity Contract for the purpose
of determining the taxation of distributions prior to the Annuity
Commencement Date. An annuity contract received in a tax-free
exchange for another annuity contract or life insurance contract may
treated as a new Contract for this purpose. Hartford believes that
for any annuity subject to such aggregation, the values under the
Contracts and the investment in the contracts will be added together
to determine the taxation under subparagraph 2.a., above, of amounts
received or deemed received prior to the Annuity Commencement Date.
Withdrawals will first be treated as withdrawals of income until all
of the income from all such Contracts is withdrawn. As of the date of
this Prospectus, there are no regulations interpreting this provision.
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41
d. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract
(before or after the Annuity Commencement Date), the Code applies
a penalty tax equal to 10% of the portion of the amount
includable in gross income, unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has
attained the age of 59 1/2.
2. Distributions made on or after the death of the holder or
where the holder is not an individual, the death of the
primary annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of
substantially equal periodic payments for the life (or life
expectancy) of the recipient (or the joint lives or life
expectancies of the recipient and the recipient's Beneficiary).
5. Distributions of amounts which are allocable to the
"investment in the contract" prior to August 14, 1982 (see
next subparagraph e.).
e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED PRIOR
TO AUGUST 14, 1982. If the Contract was obtained by a tax-free
exchange of a life insurance or annuity Contract purchased prior to
August 14, 1982, then any amount received or deemed received prior to
the Annuity Commencement Date shall be deemed to come (1) first from
the amount of the "investment in the contract" prior to August 14,
1982 ("pre-8/14/82 investment") carried over from the prior Contract,
(2) then from the portion of the "income on the contract" (carried
over to, as well as accumulating in, the successor Contract) that is
attributable to such pre-8/14/82 investment, (3) then from the
remaining "income on the contract," and (4) last from the remaining
"investment in the contract." As a result, to the extent that such
amount received or deemed received does not exceed such pre-8/14/82
investment, such amount is not includable in gross income. In
addition, to the extent that such amount received or deemed received
does not exceed the sum of (a) such pre-8/14/82 investment and (b) the
"income on the contract" attributable thereto, such amount is not
subject to the 10% penalty tax. In all other respects, amounts
received or deemed received from such post-exchange Contracts are
generally subject to the rules described in this subparagraph 3.
f. REQUIRED DISTRIBUTIONS
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary
provisions in ii. or iii., below:
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42
1. If any Contract Owner dies on or after the Annuity
Commencement Date and before the entire interest in the
Contract has been distributed, the remaining portion of
such interest shall be distributed at least as rapidly as
under the method of distribution being used as of the date of
such death;
2. If any Contract Owner dies before the Annuity Commencement
Date, the entire interest in the Contract will be distributed
within five years after such death; and
3. If the Contract Owner is not an individual, then for purposes
of 1. or 2., above, the primary annuitant under the Contract
shall be treated as the Contract Owner, and any change in the
primary annuitant shall be treated as the death of the Contract
Owner. The primary annuitant is the individual, the events in
the life of whom are of primary importance in affecting the
timing or amount of the payout under the Contract.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in
i., above, is payable to or for the benefit of a designated
beneficiary, such beneficiary may elect to have the portion
distributed over a period that does not extend beyond the life
or life expectancy of the beneficiary. The election and payments
must begin within a year of the death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to
of for the benefit of his or her spouse, and the Annuitant or
Contingent Annuitant is living, such spouse shall be treated as
the Contract Owner of such portion for purposes of section i.,
above.
3. DIVERSIFICATION REQUIREMENTS. Section 817 of the Code provides that a
variable annuity contract will not be treated as an annuity contract for
any period during which the investments made by the separate account or
underlying fund are not adequately diversified in accordance with
regulations prescribed by the Treasury Department. If a Contract is not
treated as an annuity contract, the Contract Owner will be subject to
income tax on the annual increases in cash value.
The Treasury Department has issued diversification regulations which
generally require, among other things, that no more than 55% of the
value of the total assets of the segregated asset account underlying
a variable contract is represented by any one investment, no more than
70% is represented by any two investments, no more than 80% is
represented by any three investments, and no more than 90% is
represented by any four
<PAGE>
43
investments. In determining whether the diversification standards are
met, all securities of the same issuer, all interests in the same real
property project, and all interests in the same commodity are each
treated as a single investment. In addition, in the case of government
securities, each government agency or instrumentality shall be treated
as a separate issuer.
A separate account must be in compliance with the diversification
standards on the last day of each calendar quarter or within 30 days
after the quarter ends. If an insurance company inadvertently fails
to meet the diversification requirements, the company may comply within
a reasonable period and avoid the taxation of contract income on an
ongoing basis. However, either the company or the Contract Owner must
agree to pay the tax due for the period during which the diversification
requirements were not met.
Hartford monitors the diversification of investments in the separate
accounts and tests for diversification as required by the Code. Hartford
intends to administer all contracts subject to the diversification
requirements in a manner that will maintain adequate diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT. In order for a
variable annuity contract to qualify for tax deferral, assets in the
segregated asset accounts supporting the variable contract must be
considered to be owned by the insurance company and not by the variable
contract owner. The Internal Revenue Service ("IRS") has issued several
rulings which discuss investor control. The IRS has ruled that
incidents of ownership by the contract owner, such as the ability to
select and control investments in a separate account, will cause the
contract owner to be treated as the owner of the assets for tax
purposes.
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted that the temporary regulations
"do not provide guidance concerning the circumstances in which investor
control of the investments of a segregated asset account may cause the
investor, rather than the insurance company, to be treated as the owner
of the assets in the account." The explanation further indicates that
"the temporary regulations provide that in appropriate cases a segregated
asset account may include multiple sub-accounts, but do not specify the
extent to which policyholders may direct their investments to particular
sub-accounts without being treated as the owners of the underlying
assets. Guidance on this and other issues will be provided in regulations
or revenue rulings under Section 817(d), relating to the definition
of variable contract." The final regulations issued under Section 817 do
not provide guidance regarding investor control, and as of the date of
this Prospectus, no other such guidance has been issued. Further,
Hartford does not know if or in what form such guidance will be issued.
In addition, although regulations are generally issued with prospective
effect, it is possible that regulations may be issued with retroactive
effect. Due to the lack of specific guidance regarding the issue of
investor control, there is necessarily some uncertainty regarding
whether a Contract Owner could be considered the owner of the assets
for tax purposes. Hartford reserves the right to modify the contracts,
as necessary, to prevent
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44
Contract Owners from being considered the owners of the assets in the
separate accounts.
D. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will
be subject to federal income tax withholding, pursuant to Section 3405 of
the Code. The application of this provision is summarized below:
1. NON-PERIODIC DISTRIBUTIONS. The portion of a non-periodic distribution
which constitutes taxable income will be subject to federal income tax
withholding unless the recipient elects not to have taxes withheld. If
an election not to have taxes withheld is not provided, 10% of the
taxable distribution will be withheld as federal income tax. Election
forms will be provided at the time distributions are requested. If the
necessary election forms are not submitted to Hartford, Hartford
will automatically withhold 10% of the taxable distribution.
2. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN
ONE YEAR). The portion of a periodic distribution which constitutes
taxable income will be subject to federal income tax withholding as if
the recipient were married claiming three exemptions. A recipient may
elect not to have income taxes withheld or have income taxes withheld at
a different rate by providing a completed election form. Election forms
will be provided at the time distributions are requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I, commencing on page __, for information
relative to the types of plans for which it may be used and the general
explanation of the tax features of such plans.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to annuity purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will generally
be subject to U.S. federal income tax and withholding on annuity
distributions at a 30% rate, unless a lower treaty rate applies. In
addition, purchasers may be subject to state premium tax, other state and/or
municipal taxes, and taxes that may be imposed by the purchaser's country of
citizenship or residence. Prospective purchasers are advised to consult with
a qualified tax advisor regarding U.S., state, and foreign taxation with
respect to an annuity purchase.
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45
GENERAL MATTERS
ASSIGNMENT
Ownership of a Contract described herein is generally assignable. However, if
the Contracts are issued pursuant to some form of Qualified Retirement 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
Hartford reserves the right to modify the Contract, but only if such
modification: (i) is necessary to make the Contract or the Separate Account
comply with any law or regulation issued by a governmental agency to which
Hartford is subject; or (ii) is necessary to assure continued qualification
of the Contract under the Code or other federal or state laws relating to
retirement annuities or annuity Contracts; or (iii) is necessary to reflect a
change in the operation of the Separate Account or the Sub-Account(s) or (iv)
provides additional Separate Account options or (v) withdraws Separate
Account options. In the event of any such modification Hartford will
provide notice to the Contract Owner or to the payee(s) during the Annuity
period. Hartford may also make appropriate endorsement in the Contract to
reflect such modification.
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 postponement and so orders; or (c) the
Commission determines that an emergency exists making valuation or disposal
of securities not reasonably practicable.
VOTING RIGHTS
Hartford is the legal owner of all Fund shares held in the Separate Account.
As the owner, Hartford has the right to vote at the Funds' shareholder
meetings. However, to the extent required by federal securities laws or
regulations, Hartford will:
1. Vote all Fund shares attributable to a Contract according to instructions
received from the Contract Owner, and
2. Vote shares attributable to a Contract for which no voting instructions
are received in the same proportion as shares for which instructions are
received.
If any federal securities laws or regulations, or their present
interpretation change to permit Hartford to vote Fund shares in its own
right, Hartford may elect to do so.
Hartford will notify you of any Fund shareholders' meeting if the shares held
for your account may be voted at such meetings. Hartford will also send
proxy materials and a form of instruction by means of which you can instruct
Hartford with respect to the voting of the Fund shares held for your account.
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46
In connection with the voting of Fund shares held by it, Hartford will
arrange for the handling and tallying of voting instructions received from
Contract Owners. Hartford as such, shall have no right, except as
hereinafter provided, to vote any Fund shares held by it hereunder which may
be registered in its name or the names of its nominees. Hartford will,
however, vote the Fund shares held by it in accordance with the instructions
received from the Contract Owners for whose accounts the Fund shares are
held. If a Contract Owner desires to attend any meeting at which shares held
for the Contract Owner's benefit may be voted, the Contract Owner may request
Hartford to furnish a proxy or otherwise arrange for the exercise of voting
rights with respect to the Fund shares held for such Contract Owner's
account. In the event that the Contract Owner gives no instructions or
leaves the manner of voting discretionary, 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 Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account.
HSD is a wholly-owned subsidiary of Hartford Life Insurance Company. The
principal business address of HSD is the same as Hartford.
The securities will be sold by salespersons of HSD who represent Hartford as
insurance and variable annuity agents and who are registered representatives
of Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of
1934 as a Broker-Dealer and is a member of the National Association of
Securities Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 6% of Premium
Payments.
From time to time, Hartford may pay or permit other promotional incentives,
in cash or credit or other compensation.
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 Hartford under a safekeeping
arrangement.
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47
LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Separate Account
is a party.
LEGAL COUNSEL
Counsel with respect to federal laws and regulations applicable to the issue
and sale of the Contracts and with respect to Connecticut law is Lynda
Godkin, General Counsel, Hartford Life Insurance Companies, P.O. Box 2999,
Hartford, Connecticut 06104-2999.
EXPERTS
The audited financial statements included in this prospectus and elsewhere in
the registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in giving said reports. Reference is made to said report on the
statutory-basis financial statements of ITT Hartford Life and Annuity
Insurance Company which states the statutory-basis financial statements are
presented in accordance with statutory accounting practices prescribed or
permitted by the National Association of Insurance Commissioners and the
State of Connecticut Insurance Department, not presented in accordance with
generally accepted accounting principles. Reference is made to said report on
the statutory-basis financial statements of ITT Hartford Life and Annuity
Insurance Company (the Depositor), which includes an explanatory paragraph
with respect to the change in valuation method in determining aggregate
reserves for future benefits in 1994, as discussed in Note 1 of Notes to
Statutory Financial Statements. The principal business address of Arthur
Andersen LLP is One Financial Plaza, Hartford, Connecticut 06103.
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48
ADDITIONAL INFORMATION
Inquiries will be answered by calling your representative or by writing:
ITT Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Telephone: (800) 521-0538
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49
APPENDIX I
INFORMATION REGARDING TAX-QUALIFIED PLANS
The tax rules applicable to tax qualified contract owners, including
restrictions on contributions and distributions, taxation of distributions,
and tax penalties, vary according to the type of plan as well as the terms
and conditions of the plan itself. Various tax penalties may apply to
contributions in excess of specified limits, to distributions in excess of
specified limits, distributions which do not satisfy certain requirements and
certain other transactions with respect to qualified plans. Accordingly, this
summary provides only general information about the tax rules associated with
use of the Contract by a qualified plan. Contract owners, plan participants,
and beneficiaries are cautioned that the rights and benefits of any person to
benefits are controlled by the terms and conditions of the plan regardless of
the terms and conditions of the Contract. Some qualified plans are subject to
distribution and other requirements which are not incorporated into
Hartford's administrative procedures. Owners, participants and beneficiaries
are responsible for determining that contributions, distributions and other
transactions comply with applicable law. Because of the complexity of these
rules, owners, participants and beneficiaries are encouraged to consult their
own tax advisers as to specific tax consequences.
A. QUALIFIED PENSION PLANS
Provisions of the Code permit eligible employers to establish pension or
profit sharing plans (described in Section 401(a) and 401(k), if applicable,
and exempt from taxation under Section 501(a) of the Code), and Simplified
Employee Pension Plans (described in Section 408(k)). Such plans are subject
to limitations on the amount that may be contributed, the persons who may be
eligible and the time when distributions must commence. Corporate employers
intending to use these contracts in connection with such plans should seek
competent advice.
B. TAX SHELTERED ANNUITIES UNDER SECTION 403(B)
Section 403(b) of the Code permits public school employees and employees
of certain types of charitable, educational and scientific organizations
specified in Section 501(c)(3) of the Code to purchase annuity contracts,
and, subject to certain limitations, exclude such contributions from gross
income. Generally, such contributions may not exceed the lesser of $9,500
or 20% of the employees "includable compensation" for his most recent full
year of employment, subject to other adjustments. Special provisions may
allow some employees to elect a different overall limitation.
Tax-sheltered annuity programs under Section 403(b) are subject to a
PROHIBITION AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO
CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT unless such
distribution is made:
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50
(1) after the participating employee attains age 59 1/2;
(2) upon separation from service;
(3) upon death or disability; or
(4) in the case of hardship.
The above restrictions apply to distributions of employee contributions
made after December 31, 1988, earnings on those contributions, and earnings
on amounts attributable to employee contributions held as of December 31,
1988. They do not apply to distributions of any employer or other after-tax
contributions, employee contributions made on or before December 31, 1988,
and earnings credited to employee contributions before December 31, 1988.
C. DEFERRED COMPENSATION PLANS UNDER SECTION 457
Employees and independent contractors performing services for such employers
may contribute on a before tax basis to the Deferred Compensation Plan of
their employer in accordance with the employer's plan and Section 457 of
the Code. Section 457 places limitations on contributions to Deferred
Compensation Plans maintained by a State ("State" means a State, a
political sub-division of a State, and an agency or instrumentality of a
State or political sub-division of a State) or other tax-exempt
organization. Generally, the limitation is 33 1/3% of includable
compensation (typically 25% of gross compensation) or $7,500 (indexed),
whichever is less. The plan may also provide for additional "catch-up"
deferrals during the three taxable years ending before a Participant
attains normal retirement age.
An employee electing to participate in a Deferred Compensation Plan should
understand that his or her rights and benefits are governed strictly by the
terms of the plan and that the employer is the legal owner of any contract
issued with respect to the plan. The employer, as owner of the contract(s),
retains all voting and redemption rights which may accrue to the contract(s)
issued with respect to the plan. The participating employee should look to
the terms of his or her plan for any charges in regard to participating
therein other than those disclosed in this Prospectus. Participants should
also be aware that effective August 20, 1996, the Small Business Job
Protection Act of 1996 requires that all assets and income of an eligible
Deferred Compensation Plan established by a governmental employer which is a
State, a political subdivision of a State, or any agency or instrumentality
of a State or political subdivision of a State, must be held in trust (or
under certain specified annuity contracts or custodial accounts) for the
exclusive benefit of Participants and their Beneficiaries. Special
transition rules apply to such governmental Deferred Compensation Plans
already in existence on August 20, 1996, and provide that such plans need
not establish a trust before January 1, 1999. However, this requirement
does not apply to amounts under a Deferred Compensation Plan of a tax-exempt
(non-governmental) organization and such amounts will be subject to the
claims of such tax-exempt employer's general creditors.
In general, distributions from a Section 457 Deferred Compensation Plan are
prohibited unless made after the participating employee attains the age
specified in the plan, separates
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51
from service, dies, or suffers an unforeseeable financial emergency.
Present federal tax law does not allow tax-free transfers or rollovers for
amounts accumulated in a Section 457 plan except for transfers to other
Section 457 plans in limited cases.
D. INDIVIDUAL RETIREMENT ANNUITIES UNDER SECTION 408
Section 408 of the Code permits eligible individuals to establish
individual retirement programs through the purchase of Individual
Retirement Annuities ("IRAs"). IRAs are subject to limitations on the
amount that may be contributed, the contributions that may be deducted from
taxable income, the persons who may be eligible and the time when
distributions may commence. Also, distributions from certain qualified plans
may be "rolled-over" on a tax-deferred basis into an IRA.
IRAs generally may not invest in life insurance contracts. However, an
annuity that is used as an IRA may provide a death benefit that equals the
greater of the premiums paid and the annuity's cash value. The Contract
offers an enhanced Death Benefit that may exceed the greater of the Contract
Value and total Premium Payments less prior surrenders. For Contracts issued
in most states, Hartford has obtained approval from the Internal Revenue
Service to use the Contract as an IRA.
E. TAX PENALTIES
Distributions from retirement plans are generally taxed under Section 72
of the Code. Under these rules, a portion of each distribution may be
excludable from income. The excludable amount is the portion of the
distribution which bears the same ratio as the after-tax contributions
bear to the expected return.
1. PREMATURE DISTRIBUTION
Distributions from a qualified plan before the Participant attains age
59 1/2 are generally subject to an additional tax equal to 10% of the
taxable portion of the distribution. The 10% penalty does not apply to
distributions made after the employee's death, on account of disability,
for eligible medical expenses and distributions in the form of a life
annuity and, except in the case of an IRA, certain distributions after
separation from service at or after age 55. A life annuity is defined
as a scheduled series of substantially equal periodic payments for the
life or life expectancy of the Participant (or the joint lives or life
expectancies of the Participant and Beneficiary).
2. MINIMUM DISTRIBUTION TAX
If the amount distributed is less than the minimum required distribution
for the year, the Participant is subject to a 50% tax on the amount that
was not properly distributed.
An individual's interest in a retirement plan must generally be
distributed, or begin to be distributed, not later than April 1 of the
calendar year following the later of (i) the
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52
calendar year in which the individual attains age 70 1/2 or (ii)
the calendar year in which the individual retires from service with the
employer sponsoring the plan ("required beginning date"). However, the
required beginning date for an individual who is a five (5) percent
owner (as defined in the Code), or who is the owner of an IRA, is April 1
of the calendar year following the calendar year in which the individual
attains age 70 1/2. The entire interest of the Participant must be
distributed beginning no later than this required beginning date over a
period which may not extend beyond a maximum of the life expectancy of
the Participant and a designated Beneficiary. Each annual distribution
must equal or exceed a "minimum distribution amount" which is determined
by dividing the account balance by the applicable life expectancy. This
account balance is generally based upon the account value as of the close
of business on the last day of the previous calendar year. In addition,
minimum distribution incidental benefit rules may require a larger annual
distribution.
If an individual dies before reaching his or her required beginning
date, the individual's entire interest must generally be distributed
within five years of the individual's death. However, this rule will be
deemed satisfied, if distributions begin before the close of the
calendar year following the individual's death to a designated
Beneficiary (or over a period not extending beyond the life expectancy
of the beneficiary). If the Beneficiary is the individual's surviving
spouse, distributions may be delayed until the individual would have
attained age 70 1/2.
If an individual dies after reaching his or her required beginning date
or after distributions have commenced, the individual's interest must
generally be distributed at least as rapidly as under the method of
distribution in effect at the time of the individual's death.
3. EXCESS DISTRIBUTION TAX
If the aggregate distributions from all IRAs and certain other qualified
plans in a calendar year exceed the greater of (i) $150,000, or (ii)
$112,500 as indexed for inflation, a penalty tax of 15% is generally
imposed on the excess portion of the distribution.
4. WITHHOLDING
Periodic distributions from a qualified plan lasting for a period of
ten or more years are generally subject to voluntary income tax
withholding. The recipient of periodic distributions may generally
elect not to have withholding apply or to have income taxes withheld at
a different rate by providing a completed election form. Otherwise, the
amount withheld on such distributions is determined at the rate
applicable to wages as if the recipient were married claiming three
exemptions.
Nonperiodic distributions from an IRA are subject to income tax
withholding at a flat 10% rate. The recipient may elect not to have
withholding apply.
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53
Nonperiodic distributions from other qualified plans are generally
subject to mandatory income tax withholding at the flat rate of 20%
unless such distributions are:
(1) the non-taxable portion of the distribution;
(2) required minimum distributions;
(3) eligible rollover distributions.
Eligible rollover distributions are direct payments to an IRA or
to another qualified employer plan.
In general, distributions from plans described in Section 457 of the
Code are subject to regular wage withholding rules.
F. Annuity Purchases by Nonresident Aliens and Foreign Corporations
The discussion above provides general information regarding U.S. federal
income tax consequences to annuity purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will
generally be subject to U.S. federal income tax and withholding on annuity
distributions at a 30% rate, unless a lower treaty rate applies. In addition,
purchasers may be subject to state premium tax, other state and/or
municipal taxes, and taxes that may be imposed by the purchaser's country
of citizenship or residence. Prospective purchasers are advised to consult
with a qualified tax adviser regarding U.S., state, and foreign taxation
with respect to an annuity purchase.
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TABLE OF CONTENTS TO
STATEMENT OF ADDITIONAL INFORMATION
SECTION PAGE
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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 . . . . . . . . . . . . . . . . . . . . .
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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 Services
P.O. Box 5085
Hartford, CT 06102-5085
Please send a Statement of Additional Information for Putnam Capital Manager
Variable Annuity to me at the following address:
_______________________________
Name
_______________________________
Address
_______________________________
City/State Zip Code
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