<PAGE>
As filed with the Securities and Exchange Commission on April 15, 1998.
File No. 33-73572
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 17 [X]
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO
(Exact Name of Registrant)
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Name of Depositor)
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Address of Depositor's Principal Offices)
(860) 843-6733
(Depositor's Telephone Number, Including Area Code)
MARIANNE O'DOHERTY, ESQ.
HARTFORD LIFE INSURANCE COMPANIES
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
-----
X on May 1, 1998 pursuant to paragraph (b) of Rule 485
-----
60 days after filing pursuant to paragraph (a)(1) of Rule 485
-----
on May 1, 1998 pursuant to paragraph (a)(1) of Rule 485
-----
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
-----
<PAGE>
PURSUANT TO RULE 24F-2(a)(1) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 Item No. Prospectus Heading
- --------------------------------------------------------------------
1. Cover Page Cover Page
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Information Statement of Additional Information
5. General Description of Registrant, The Contract; The Separate Account;
Depositor, and Portfolio Companies The Fixed Account; Hartford Life
and Annuity Insurance Company; The
Funds; General Matters
6. Deductions Charges Under the Contract
7. General Description of Operation of the Contract Accumulation
Annuity Contracts Period; Death Benefit; The Contract;
The Separate Account; General Matters
8. Annuity Period Annuity Benefits
9. Death Benefit Death Benefit
10. Purchases and Contract Value Operation of the Contract/
Accumulation Period
11. Redemptions Operation of the Contract/
Accumulation Period
12. Taxes Federal Tax Considerations
13. Legal Proceedings General Matters - Legal Proceedings
14. Table of Contents of the Statement Table of Contents to Statement
of Additional Information of Additional Information
15. Cover Page Part B; Statement of Additional
Information
16. Table of Contents Table of Contents
<PAGE>
17. General Information and History Introduction
18. Services None
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Data Calculation of Yield and Return
22. Annuity Payments Annuity Benefits
23. Financial Statements Financial Statements
24. Financial Statements and Financial Statements and
Exhibits Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Depositor Common Control with the Depositor
or Registrant or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts and Records
31. Management Services Management Services
32. Undertakings Undertakings
<PAGE>
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 Hartford Capital Manager, a flexible
premium tax deferred variable annuity contract ("Contract") issued by Hartford
Life and Annuity Insurance Company ("Hartford"). Payments for the Contract
will be held in a series of 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 twenty (20) Sub-Accounts available under the Contract. The
following underlying investment portfolios ("Funds") of Class IA shares of
Putnam Variable Trust are available under the Contracts: Putnam VT Asia Pacific
Growth Fund, Putnam VT Diversified Income Fund, Putnam VT The George Putnam Fund
of Boston, Putnam VT Global Asset Allocation Fund, Putnam VT Global Growth Fund,
Putnam VT Growth and Income Fund, Putnam VT Health Sciences 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
Investors Fund, Putnam VT Money Market Fund, Putnam VT New Opportunities Fund,
Putnam VT New Value Fund, Putnam VT OTC & Emerging Growth 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 Hartford Life and Annuity
Insurance Company, Attn: Annuity Marketing Services, P.O. Box 5085, Hartford, CT
06102-5085, or call the telephone number shown above. The Table of Contents for
the Statement of Additional Information may be found on page 56 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.
<PAGE>
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, 1998
Statement of Additional Information Dated: May 1, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
GLOSSARY OF SPECIAL TERMS ............................................ 4
FEE TABLE ............................................................ 7
ACCUMULATION UNIT VALUES ............................................. 16
SUMMARY .............................................................. 12
PERFORMANCE RELATED INFORMATION ...................................... 14
INTRODUCTION ......................................................... 19
THE CONTRACT ......................................................... 19
RIGHT TO CANCEL PERIOD ......................................... 20
THE SEPARATE ACCOUNT ................................................. 20
THE FIXED ACCOUNT .................................................... 21
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY .......................... 23
THE FUNDS ............................................................ 23
OPERATION OF THE CONTRACT/ACCUMULATION PERIOD ........................ 27
Premium Payments ............................................... 27
Value of Accumulation Units .................................... 28
Value of the Fixed Account ..................................... 28
Value of the Contract .......................................... 28
Transfers Among Sub-Accounts ................................... 29
Transfers Between the Fixed Account and the Sub-Accounts ....... 29
Redemption/Surrender of a Contract ............................. 30
DEATH BENEFIT ........................................................ 32
CHARGES UNDER THE CONTRACT ........................................... 33
Contingent Deferred Sales Charges .............................. 33
Payments Not Subject to Sales Charges .......................... 34
Waivers of Sales Charges ....................................... 35
Mortality and Expense Risk Charge .............................. 35
Annual Maintenance Fee ......................................... 36
Administration Charge .......................................... 36
Premium Taxes .................................................. 37
Exceptions to Charges Under the Contracts ...................... 37
SETTLEMENT PROVISIONS ................................................ 37
Annuity Options ................................................ 38
Annuity Proceeds Settlement Option ............................. 39
The Annuity Unit and Valuation ................................. 39
Determination of Payment Amount ................................ 39
FEDERAL TAX CONSIDERATIONS ........................................... 41
A. General .................................................. 41
B. Taxation of Hartford and the Separate Account ............ 41
C. Taxation of Annuities - General Provisions Affecting
Purchasers Other Than Qualified Retirement Plans ......... 41
D. Federal Income Tax Withholding ........................... 47
E. General Provisions Affecting Qualified Retirement Plans .. 47
-2-
<PAGE>
F. Annuity Purchases by Nonresident Aliens and Foreign
Corporations ............................................. 47
GENERAL MATTERS ...................................................... 48
Assignment ..................................................... 48
Modification ................................................... 48
Delay of Payments .............................................. 48
Voting Rights .................................................. 48
Distribution of the Contracts .................................. 49
Other Contracts Offered ........................................ 50
Custodian of Separate Account Assets ........................... 50
Legal Proceedings .............................................. 50
Legal Counsel .................................................. 50
Experts ........................................................ 50
Additional Information ......................................... 50
APPENDIX I ........................................................... 51
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION ............. 56
-3-
<PAGE>
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT: An accounting unit of measure used to calculate values before
Annuity payments begin.
ADMINISTRATIVE OFFICE OF HARTFORD: Currently located at 200 Hopmeadow Street,
Simsbury, CT 06089. All correspondence concerning the Contract should be sent to
P.O. Box 5085, Hartford, CT 06102-5085, Attn: Individual Annuity Services,
except for overnight or express mail packages, which should be sent to: 200
Hopmeadow Street, Simsbury, CT 06089.
ANNUAL MAINTENANCE FEE: An annual $30 charge on a Contract having a Contract
Value of less than $50,000, as determined on the most recent Contract
Anniversary or upon full surrender of the Contract. The charge is deducted
proportionately from the Sub-Accounts in use at the time of such deduction.
ANNUAL WITHDRAWAL AMOUNT: The amount which can be withdrawn in any Contract Year
prior to incurring surrender charges.
ANNUITANT: The person or Participant upon whose life the Contract is issued.
ANNUITY: A contract issued by an insurance company that provides, in exchange
for Premium Payments, a series of income payments. This Prospectus describes a
deferred annuity contract in which Premium Payments accumulate tax-deferred
until a partial or full surrender is taken or until the Annuity Commencement
Date. Annuity payments under the Contract will begin as of the Annuity
Commencement Date in accordance with the Annuity payment option selected.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to commence.
Under a group unallocated Contract, the date for each Participant is determined
by the Contract Owner in accordance with the terms of the Plan.
ANNUITY UNIT: An accounting unit of measure used to calculate the value of
Annuity payments.
BENEFICIARY: The person(s) who receive Contract Values in the event of the
Annuitant's or Contract Owner's death under certain conditions. Under a group
unallocated Contract, the person named 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: For an Annuity issued to an individual, the Contract is the individual
Annuity and any endorsements or riders. For a group Annuity, the Contract is a
certificate evidencing a participatory interest in a group Annuity and any
endorsements or riders. Any reference in this Prospectus to a Contract includes
the certificate.
-4-
<PAGE>
CONTRACT ANNIVERSARY: The anniversary of the Contract Date.
CONTRACT OWNER(S): The owner(s) of the Contract, trustee or other entity,
sometimes herein referred to as "you".
CONTRACT VALUE: The aggregate value of any Sub-Account Accumulation Units held
under the Contract plus the value of the Fixed Account.
CONTRACT YEAR: A period of 12 months commencing with the Contract Date or any
anniversary thereof.
DEATH BENEFIT: The amount payable upon the death of a Contract Owner, Annuitant,
or Participant in the case of group Contracts before annuity payments have
started.
DUE PROOF OF DEATH: A certified copy of a death certificate, an order or a court
of competent jurisdiction, a statement from a physician who attended the
deceased or any other proof acceptable to Hartford.
FIXED ACCOUNT: Part of the General Account of Hartford to which a Contract Owner
may allocate all or a portion of his Premium Payment or Contract Value.
FIXED ANNUITY: An Annuity providing for guaranteed payments which remain fixed
in amount throughout the payment period and which do not vary with the
investment experience of the Separate Account.
FUNDS: Currently, the portfolios of Putnam Variable Trust described on page 24
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 Hartford Life and Annuity Insurance Company.
HARTFORD: 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 30.
NON-QUALIFIED CONTRACT: A Contract which is not part of a tax-qualified
retirement plan or arrangement which qualifies for special tax treatment under
the Code.
PARTICIPANT (FOR GROUP UNALLOCATED CONTRACTS ONLY): Any eligible employee of
an Employer/Contract Owner participating in the Plan.
PLAN: A voluntary Plan of an Employer 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.
-5-
<PAGE>
QUALIFIED CONTRACT: A Contract which is part of a tax qualified retirement plan
or arrangement which qualifies for special tax treatment under the Code, such as
an employer-sponsored 401(k) plan or an Individual Retirement Annuity (IRA).
SEPARATE ACCOUNT: The Hartford separate account entitled "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 (generally 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
VARIABLE ANNUITY: An Annuity providing for payments varying in amount in
accordance with the investment experience of the assets of the Separate Account.
-6-
<PAGE>
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 Investment
Company Act of 1940, the Annual Maintenance Fee has been reflected
in the Examples by a method intended to show the "average" impact of
the Annual Maintenance Fee on an investment in the Separate Account.
The Annual Maintenance Fee is deducted only when the accumulated
value is less than $50,000. In the Example, the Annual Maintenance
Fee is approximated as a 0.08% annual asset charge based on the
experience of the Contracts.
-7-
<PAGE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Fund
Operating
Other Expenses (after
Management Expenses (after any fee waivers
Fees (after any any expense and expense
fee waivers reimbursement) reimbursement)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Putnam VT Asia Pacific Growth Fund 0.80% 0.27% 1.07%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT Diversified Income Fund 0.69% 0.11% 0.80%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT The George Putnam Fund of Boston (1) 0.49% 0.36% 0.85%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT Global Asset Allocation Fund 0.66% 0.11% 0.77%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT Global Growth Fund 0.60% 0.15% 0.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT Growth and Income Fund 0.47% 0.04% 0.51%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT Health Sciences Fund (1) 0.56% 0.34% 0.90%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT High Yield Fund 0.66% 0.06% 0.72%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth Fund (1) 0.73% 0.47% 1.20%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth and Income Fund 0.80% 0.32% 1.12%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT International New Opportunities Fund (1) 0.92% 0.68% 1.60%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT Investors Fund (1) 0.52% 0.33% 0.85%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT Money Market Fund 0.45% 0.09% 0.54%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT New Opportunities Fund 0.58% 0.05% 0.63%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT New Value Fund 0.70% 0.15% 0.85%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT OTC & Emerging Growth Fund (1) 0.56% 0.34% 0.90%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT U.S. Government and High Quality Bond Fund 0.61% 0.08% 0.69%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income Fund 0.67% 0.07% 0.74%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund 0.65% 0.22% 0.87%
- ------------------------------------------------------------------------------------------------------------------------------------
Putnam VT Voyager Fund 0.54% 0.05% 0.59%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. The Management Fees and Other Expenses shown in the table above reflect an
expense limitation. In the absence of an expense limitation, Management
Fees, Other Expenses, and Total Fund Operating Expenses would have been:
-8-
<PAGE>
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT FEES OTHER EXPENSES OPERATING EXPENSES
<S> <C> <C> <C>
Putname VT The George 0.65 0.36 1.01
Putnam Fund of Boston*
Putnam VT Health 0.70 0.34 1.04
Sciences Fund*
Putnam VT International 0.80 0.47 1.27
Growth Fund
Putnam VT International 1.20 0.68 1.88
New Opportunities Fund
Putnam VT Investors 0.65 0.33 0.98
Fund*
Putnam VT OTC & 0.70 0.34 1.04
Emerging Growth Fund*
* Estimated Management Fees, Other Expenses, and Total Fund Operating Expenses.
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE
- ------------------------------------------------------------------------------------------------------------------------------
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 the time period, you would pay the Contract, you would pay the
following expenses on a $1,000 following expenses on a $1,000 following expenses on a $1,000
investment, assuming a 5% investment, assuming a 5% investment, assuming a 5% annual
annual return on assets: annual return on assets: return on assets:
- ------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Putnam Asia Pacific $80 $128 $176 $289 $25 $79 $135 $289 $26 $80 $136 $289
Growth Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Diversified 77 119 162 262 23 71 122 261 23 71 122 262
Income Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
The George Putnam Fund 78 121 n/a n/a 23 72 n/a n/a 24 73 n/a n/a
Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Global Asset 77 118 161 259 22 70 120 258 23 70 121 259
Allocation Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Global Growth 77 118 160 257 22 69 119 256 23 70 120 257
Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Growth and Income 80 112 147 231 20 62 106 230 20 62 107 231
Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Health Sciences 78 122 n/a n/a 24 74 n/a n/a 24 74 n/a n/a
Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam High Yield 76 117 158 253 22 68 117 253 22 69 118 253
Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International 81 132 183 302 27 83 142 302 27 84 143 302
Growth Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International 80 129 179 294 26 81 138 294 26 81 139 294
Growth and Income
Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International New 85 144 203 341 31 95 162 341 31 96 163 341
Opportunities
Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Investors 78 121 n/a n/a 23 72 n/a n/a 24 73 n/a n/a
Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Money Market 75 111 149 234 20 63 108 234 21 63 109 234
Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New Opportunities 75 114 153 244 21 65 113 243 21 66 113 244
Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New Value 78 121 165 267 23 72 124 266 24 73 125 267
Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam OTC & Emerging 78 122 n/a n/a 24 74 n/a n/a 24 74 n/a n/a
Growth Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam U.S. Government 76 116 157 250 21 67 116 249 22 68 117 250
and High Quality
Bond Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Putnam Utilities Growth 77 118 159 255 22 69 118 255 23 70 119 255
and Income Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Vista Sub-Account 78 122 166 269 23 73 125 268 24 74 126 269
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Voyager 75 113 151 240 20 64 111 239 21 65 111 240
Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------
</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.
-11-
<PAGE>
SUMMARY
WHAT IS THE CONTRACT AND HOW MAY I PURCHASE ONE?
The Contract offered is a tax deferred variable annuity. (see "Taxation of
Annuities General," page 41 ). Generally, the Contract is purchased by
completing an application or an order to purchase a Contract and submitting it,
along with the initial Premium Payment, to Hartford for its approval. The
minimum initial Premium Payment is $1,000. Certain plans may make smaller
initial and subsequent periodic premium payments. Subsequent Premium Payments,
if made, must be a minimum of $500 ($50 if you are in the InvestEase program).
Generally, a Contract Owner may exercise his right to cancel the Contract within
10 days of receipt of the Contract by returning the Contract to Hartford at its
Administrative Office. If the Contract Owner exercises his right to cancel,
Hartford will return either the Contract Value or the original Premium Payments
to the Contract Owner. The duration of the right to cancel period and Hartford's
obligation to either return the Contract Value or the original Premium will
depend on state law (See "Right to Cancel Period" page 20.)
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 41 and Appendix
I commencing on page 51.)
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 The George Putnam Fund of Boston, Putnam VT Global Asset Allocation
Fund, Putnam VT Global Growth Fund, Putnam VT Growth and Income Fund, Putnam VT
Health Sciences 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 Investors Fund, Putnam VT Money Market Fund,
Putnam VT New Opportunities Fund, Putnam VT New Value Fund, Putnam VT OTC &
Emerging Growth 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 23 and "The Fixed Account" commencing on page
21.)
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
-12-
<PAGE>
when they are surrendered. (See "Contingent Deferred Sales Charges"
commencing on page 23.)
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:
<TABLE>
<CAPTION>
Length of Time from Premium Payment
Charge (Number of Years)
<S> <C>
6% 1
6% 2
5% 3
5% 4
4% 5
3% 6
2% 7
0% 8 or more
</TABLE>
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 33.)
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 33.) 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
35).
ADMINISTRATION CHARGE AND ANNUAL MAINTENANCE FEE The Contract provides for
administration charges and an Annual Maintenance Fee. For administration, the
charge is .15% per annum against all Contract Values held in the Separate
Account. For Contract maintenance, the fee is $30 annually. (See "Administration
and Maintenance Fees," page 36.) Contracts
-13-
<PAGE>
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 37.)
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 30.)
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 32.)
WHAT ARE THE AVAILABLE ANNUITY OPTIONS UNDER THE CONTRACT?
There are four available Annuity Options and the Annuity Proceeds Settlement
Option under the Contract which are described on page 38. 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 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 48.)
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.
Putnam Asia Pacific Growth Sub-Account, Putnam Diversified Income Sub-Account,
The George Putnam Fund Sub-Account, Putnam Global Asset Allocation Sub-Account,
Putnam Global Growth Sub-Account, Putnam Growth and Income Sub-Account, Putnam
Health Sciences Sub-Account, Putnam High Yield Sub-Account, Putnam International
Growth Sub-Account, Putnam
-14-
<PAGE>
International Growth and Income Sub-Account, Putnam International New
Opportunities Sub-Account, Putnam Investors Sub-Account, Putnam Money Market
Sub-Account, Putnam New Opportunities Sub-Account, Putnam New Value Sub-Account,
Putnam OTC & Emerging Growth Sub-Account, Putnam U.S. Government and High
Quality Bond Sub-Account, Putnam Utilities Growth and Income Sub-Account, Putnam
Vista Sub-Account, and Putnam Voyager Sub-Account 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).
Putnam Diversified Income Sub-Account, Putnam Growth and Income Sub-Account,
Putnam International Growth and Income Sub-Account, Putnam High Yield
Sub-Account and Putnam U.S. Government and High Quality Bond Sub-Account 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.
Putnam Money Market 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 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.
-15-
<PAGE>
ACCUMULATION UNIT VALUES
(For an accumulation unit outstanding throughout the period)
The following information has been derived from the audited financial statements
of the separate account, which have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and should be read in conjunction with those statements which are
included in the Statement of Additional Information, which is incorporated by
reference in this Prospectus. The George Putnam Sub-Account, Putnam Health
Sciences Sub-Account, Putnam Investors Sub-Account, and Putnam OTC & Emerging
Growth Sub-Account are new Sub-Accounts and are not shown below.
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PUTNAM ASIA PACIFIC
GROWTH SUB-ACCOUNT
(Inception date May 1,
1995)
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $10.903 $ 10.135 $ 10.000 - -
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $9.176 $ 10.903 $ 10.135 - -
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 7,445 6,980 1,292 - -
- -------------------------------------------------------------------------------
PUTNAM DIVERSIFIED INCOME
SUB-ACCOUNT (Inception
date September 15, 1993)
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $12.127 $ 11.302 $ 9.622 $ 10.188 $ 10.000
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $12.841 $ 12.127 $ 11.302 $ 9.622 $ 10.188
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 21,017 18,268 11,006 8,609 4,428
- -------------------------------------------------------------------------------
PUTNAM GLOBAL ASSET
ALLOCATION SUB-ACOUNT
(Inception date February
1, 1988)
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $22.902 $ 20.087 $ 16.355 $ 16.988 $ 14.665
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $27.026 $ 22.902 $ 20.087 $ 16.355 $ 16.988
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 16,683 14,342 10,181 8,665 4,491
- -------------------------------------------------------------------------------
PUTNAM GLOBAL GROWTH
SUB-ACCOUNT (Inception
date May 1, 1990)
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $17.294 $ 14.963 $ 13.119 $ 13.432 $ 10.289
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $19.497 $ 17.294 $ 14.963 $ 13.119 $ 13.432
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 43,485 39,498 25,154 20,285 8,312
- -------------------------------------------------------------------------------
PUTNAM GROWTH AND INCOME
SUB-ACCOUNT (Inception
date February 1, 1988)
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $32.703 $ 27.201 $ 20.178 $ 20.390 $ 18.096
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $40.036 $ 32.703 $ 27.201 $ 20.178 $ 20.390
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 94,356 73,133 42,420 26,790 15,223
- -------------------------------------------------------------------------------
PUTNAM HIGH YIELD
SUB-ACCOUNT (Inception
date February 1, 1988)
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $22.682 $ 20.390 $ 17.476 $ 17.890 $ 15.173
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $25.575 $ 22.682 $ 20.390 $ 17.476 $ 17.890
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 21,602 17,031 10,603 7,152 5,066
-16-
<PAGE>
- -------------------------------------------------------------------------------
PUTNAM INTERNATIONAL
GROWTH SUB-ACCOUNT
(Inception date January 2,
1997)
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $10.000 - - - -
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $11.451 - - - -
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 6,948 - - - -
- -------------------------------------------------------------------------------
PUTNAM INTERNATIONAL
GROWTH AND INCOME
SUB-ACCOUNT (Inception
date January 2, 1997)
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $10.000 - - - -
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $11.777 - - - -
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 9,878 - - - -
- -------------------------------------------------------------------------------
PUTNAM INTERNATIONAL NEW
OPPORTUNITIES SUB-ACCOUNT
(Inception date January 2,
1997)
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $10.000 - - - -
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $9.850 - - - -
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 6,510 - - - -
- -------------------------------------------------------------------------------
PUTNAM MONEY MARKET
SUB-ACCOUNT (Inception
date February 1, 1988)
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $1.429 $ 1.379 $ 1.325 $ 1.294 $ 1.277
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $1.483 $ 1.429 $ 1.379 $ 1.325 $ 1.294
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 122,079 147,638 66,283 38,819 12,916
- -------------------------------------------------------------------------------
PUTNAM NEW OPPORTUNITIES
SUB-ACCOUNT (Inception
date May 2, 1994)
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $16.635 $ 15.312 $ 10.718 $ 10.000
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $20.223 $ 16.635 $ 15.312 $ 10.718
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 59,879 50,976 16,971 2,699
- -------------------------------------------------------------------------------
PUTNAM NEW VALUE
SUB-ACCOUNT (Inception
date January 2, 1997)
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $10.000 - - - -
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $11.597 - - - -
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 10,226 - - - -
- -------------------------------------------------------------------------------
PUTNAM U.S. GOVERNMENT AND
HIGH QUALITY BOND
SUB-ACCOUNT (Inception
date February 1, 1988)
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $18.631 $ 18.448 $ 15.533 $ 16.277 $ 14.833
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $19.959 $ 18.631 $ 18.448 $ 15.533 $ 16.277
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 11,666 $ 11,110 8,948 7,585 7,254
- -------------------------------------------------------------------------------
PUTNAM UTILITIES GROWTH
AND INCOME SUB-ACCOUNT
(Inception date May 4,
1992)
-17-
<PAGE>
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $16.072 $ 14.075 $ 10.889 $ 11.876 $ 10.618
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $20.143 $ 16.072 $ 14.075 $ 10.889 $ 11.876
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 17,569 17,006 14,307 11,859 11,003
- -------------------------------------------------------------------------------
PUTNAM VISTA SUB-ACCOUNT
(Inception date January 2,
1997)
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $10.000 - - - -
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $12.151 - - - -
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 8,062 - - - -
- -------------------------------------------------------------------------------
PUTNAM VOYAGER
SUB-ACCOUNT (Inception
date February 1, 1988)
- -------------------------------------------------------------------------------
Accumulation unit value at
beginning of period $36.227 $ 32.520 $ 23.445 $ 23.530 $ 20.102
- -------------------------------------------------------------------------------
Accumulation unit value at
end of period $45.197 $ 36.227 $ 32.520 $ 23.445 $ 23.530
- -------------------------------------------------------------------------------
Number of accumulation
units outstanding at end
of period (in thousands) 48,250 41,121 23,357 13,372 6,509
- -------------------------------------------------------------------------------
</TABLE>
-18-
<PAGE>
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 4 and 5
prior to reading this Prospectus to familiarize yourself with the terms being
used.
THE CONTRACT
The Putnam Hartford Capital Manager 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 four optional forms of Annuity and the Annuity
Proceeds Settlement Option described later in this Prospectus. Options 2, 4 and
the Annuity Proceeds Settlement Option are available with respect to Qualified
Contracts only if the guaranteed payment period is less than the life expectancy
of the Annuitant at the time the option becomes effective.
Such life expectancy shall be computed on the basis of the mortality table
prescribed by the IRS, or if none is prescribed, the mortality table then in use
by 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 Annuity Option 2 with 120 monthly
payments certain (Annuity Option 1 for Contracts issued in Texas).
-19-
<PAGE>
When an Annuity option is effected under a Contract, unless otherwise specified,
Contract Values held in the Sub-Accounts will be applied to provide a Variable
Annuity based on the pro rata amount in the various Sub-Accounts. Fixed Account
Contract Values will be applied to provide a Fixed Annuity. Variable Annuity
payments will vary in accordance with the investment performance of the
Sub-Accounts you have selected. The Contract allows the Contract Owner to change
the Sub-Accounts on which variable payments are based after payments have
commenced once every three (3) months. Any Fixed Annuity allocation may not be
changed.
The Contract offered under this Prospectus may be purchased by any individual
("Non-Qualified Contract") or by an individual, trustee or custodian for a
retirement plan qualified under Sections 401(a) or 403(a) of the Internal
Revenue Code; annuity purchase plans adopted by public school systems and
certain tax-exempt organizations according to Section 403(b) of the Internal
Revenue Code; Individual Retirement Annuities adopted according to Section 408
of the Internal Revenue Code; employee pension plans established for employees
by a state, a political subdivision of a state, or an agency or instrumentality
of either a state or a political subdivision of a state, and certain eligible
deferred compensation plans as defined in Section 457 of the Internal Revenue
Code ("Qualified Contracts").
RIGHT TO CANCEL PERIOD
If you are not satisfied with your purchase you may surrender the Contract by
returning it within ten days (or longer in some states) after you receive it. A
wren 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 Hartford's receipt of request for cancellation. Hartford will refund
the Premium Paid only for individual retirement annuities (if returned within
seven days of receipt) and in those states where required by law.
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
-20-
<PAGE>
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 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
-21-
<PAGE>
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 Hartford 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 Hartford's investments, regulatory
and tax requirements and competitive factors. ANY INTEREST CREDITED TO AMOUNTS
ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3% PER YEAR WILL BE DETERMINED IN
THE SOLE DISCRETION OF THE HARTFORD. THE CONTRACT OWNER ASSUMES THE RISK THAT
INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM
GUARANTEE OF 3% FOR ANY GIVEN YEAR.
DOLLAR COST AVERAGING PLUS PROGRAM From time to time, Hartford may credit
increased interest rates to Contract Owners under certain programs established
at the discretion of Hartford. Effective February 25, 1998, Contract Owners may
enroll in a special pre-authorized transfer program known as Hartford's Dollar
Cost Averaging Bonus Program (the "Program"). Under this Program, Contract
Owners who enroll may allocate a minimum of $5,000 of their Premium Payment into
the Program (Hartford may allow a lower minimum Premium Payment for qualified
plan transfers or rollovers, including IRAs) and pre-authorize transfers to any
of the Sub-Accounts under either the 6 Month Transfer Program or 12 Month
Transfer Program. The 6 Month Transfer Program and the 12 Month Transfer Program
will generally have different credited interest rates. Under the 6 Month
Transfer Program, the interest rate can accrue up to 6 months and all Premium
Payments and accrued interest must be transferred to the selected Sub-Accounts
in 3 to 6 months. Under the 12 Month Transfer Program, the interest rate can
accrue up to 12 months and all Premium Payments and accrued interest must be
transferred to the selected Sub-Accounts in 7 to 12 months. This will be
accomplished by monthly transfers for the period selected and a final transfer
of the entire amount remaining in the Program.
The pre-authorized transfers will begin within 15 days after the initial Program
Premium Payment and complete enrollment instructions are received by Hartford.
If complete Program enrollment instructions are not received by Hartford within
15 days of receipt of the initial Program Premium Payment, the Program will be
voided and the entire balance in the Program will be credited with the
non-Program interest rate then in effect for the Fixed Account.
-22-
<PAGE>
Any subsequent Premium Payments received by Hartford within the Program period
selected will be allocated to the Sub-Accounts over the remainder of that
Program transfer period, unless otherwise directed by the Contract Owner.
A Contract Owner may only have one dollar cost averaging program in place at one
time, this includes one standard dollar cost averaging plan or one Dollar Cost
Averaging Plus Program.
Contract Owners may elect to terminate the pre-authorized transfers by calling
or writing Hartford of their intent to cancel their enrollment in the Program.
Upon cancellation of enrollment in the Program, Contract Owners will no longer
receive the increased interest rate. Hartford reserves the right to discontinue,
modify or amend the Program or any other interest rate program established by
Hartford. Any change to the Program will not affect Contract Owners currently
enrolled in the Program. This Program may not be available in all states; please
contact Hartford to determine if it is available in your state.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States and the District of Columbia,
except New York. Effective on January 1, 1998, Hartford's name changed from ITT
Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. Hartford was originally incorporated under the laws of
Wisconsin on January 9, 1956, and was subsequently redomiciled to Connecticut.
Its offices are located in Simsbury, Connecticut; however, its mailing address
is P.O. Box 2999, Hartford, CT 06104-2999. Hartford is a subsidiary of Hartford
Fire Insurance Company, one of the largest multiple lines insurance carriers in
the United States. Hartford is ultimately controlled by The Hartford Financial
Services Group, Inc., a Delaware corporation.
HARTFORD RATINGS
- -------------------------------------------------------------------------------
EFFECTIVE
DATE
OF
RATING AGENCY RATING RATING BASIS OF RATING
- -------------------------------------------------------------------------------
Financial soundness and
A.M. Best and Company, Inc. 9/9/97 A+ operating performance.
- -------------------------------------------------------------------------------
Standard & Poor's 1/23/98 AA Claims paying ability
- -------------------------------------------------------------------------------
Duff & Phelps 1/23/98 AA+ Claims paying ability
- -------------------------------------------------------------------------------
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
-23-
<PAGE>
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.
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 and Investment Grade Sector, a High Yield Sector (which invests
primarily in securities 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 THE GEORGE PUTNAM FUND OF BOSTON
Seeks to provide a balanced investment composed of a well-diversified portfolio
of stocks and bonds which will produce both capital growth and current income.
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 HEALTH SCIENCES FUND
Seeks capital appreciation by investing at least 80% of its assets (other than
assets invested in U.S. government securities, short-term debt obligations, and
cash or money market instruments) in common stocks and other securities of
companies in the health sciences industries.
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.
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<PAGE>
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 of 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.
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 INVESTORS FUND
Seeks long-term growth of capital and any increased income that results from
this growth by investing primarily in common stocks that Putnam Management
believes afford the best opportunity for capital growth over the long term.
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 OTC & EMERGING GROWTH FUND
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Seeks capital appreciation by investing primarily in common stocks that Putnam
Management believes have potential for capital appreciation significantly
greater than that of market averages.
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.
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
The George Putnam Fund of Boston, Putnam VT Global Growth Fund, Putnam VT Growth
and Income Fund, Putnam VT Health Sciences 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 Investors Fund,
Putnam VT Money Market Fund, Putnam VT New Opportunities Fund, Putnam VT New
Value Fund, Putnam VT OTC & Emerging Growth 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 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.
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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.
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 Administrative Office. It
will be credited to the Sub-Account(s) and/or the Fixed Account in accordance
with your election. If the application or other information is incomplete when
received, the balance of 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 Administrative 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.
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The minimum initial Premium Payment is $1,000. Subsequent Premium Payments, if
made, must be a minimum of $500 ($50 if you are in the InvestEase program).
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
minus the mortality and expense risk charge and the administration charge. You
should refer to the Trust prospectus which accompanies this prospectus for a
description of how the assets of each Fund are valued since each determination
has a direct bearing on the Accumulation Unit value of the Sub-Account and
therefore the value of a Contract. The Accumulation Unit value is affected by
the performance of the underlying Fund(s), expenses and deduction of the charges
described in this Prospectus.
The shares of the Fund are valued at net asset value on each Valuation Day. A
description of the valuation methods used in valuing Fund shares may be found in
the accompanying prospectus of the Trust.
VALUE OF THE FIXED ACCOUNT
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
tRotal 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.
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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.
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.
It is the responsibility of the Contract Owner or Participant to verify the
accuracy of all confirmations of transfers and to promptly advise Hartford of
any inaccuracies within 30 days of receipt of the confirmation. Hartford will
send the Contract Owner a confirmation of transfer within 5 days from the date
of any instruction.
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.
Currently the only restriction in effect is that Hartford will not accept
instructions from agents acting under a power of attorney of multiple Contract
Owners whose accounts aggregate more than $2 million, unless the agent has
entered into a third party transfer services agreement with Hartford.
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
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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 Annuity
Options 4 or the Annuity Proceeds Settlement Option, no surrenders are permitted
after Annuity payments commence. Only full surrenders are allowed out of Annuity
Option 4 and any such surrender will be subject to contingent deferred sales
charges, if applicable. Full or partial withdrawals may be made from the Annuity
Proceeds Settlement Option at any time and contingent deferred sales charges
will not be applied.
FULL SURRENDERS. At any time prior to the Annuity Commencement Date (and after
the Annuity Commencement Date with respect to values applied to Option 4), the
Contract Owner has the right to terminate the Contract. In such event, the
Termination Value of the Contract may be taken in the form of a lump sum cash
settlement. The Termination Value of the Contract is equal to the Contract Value
less any applicable Premium Taxes, the 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.
TELEPHONE SURRENDER PRIVILEGES. Hartford permits partial surrenders by telephone
subject to dollar amount limitations in effect at the time a Contract Owner
requests the surrender. To request partial surrenders by telephone, a Contract
Owner must have completed and returned to Hartford a Telephone Redemption
Program Enrollment Form authorizing telephone surrenders. If there are joint
Contract Owners, both must authorize Hartford to accept telephone instructions
and agree that Hartford may accept telephone instructions for partial surrenders
from either Contract Owner. Partial surrender requests will not be honored until
Hartford receives all required documents in proper form.
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Telephone authorization will remain valid until (a) Hartford receives written
notice of revocation by a Contract Owner, or, in the case of joint Contract
Owners, written notice from either Contract Owner; (b) Hartford discontinues the
privilege; or (c) Hartford has reason to believe that a Contract Owner has
entered into a market timing agreement with an investment adviser and/or
broker/dealer.
Hartford may record any telephone calls to verify data concerning transactions
and may adopt other procedures to confirm that telephone instructions are
genuine. Hartford will not be liable for losses or expenses arising out of
telephone instructions reasonably believed to be genuine.
In order to obtain that day's unit values on surrender, Hartford must receive
telephone surrender instructions prior to the close of trading on the New York
Stock Exchange (generally 4:00 p.m.).
Hartford may modify, suspend, or terminate telephone transaction privileges at
any time.
THERE ARE CERTAIN RESTRICTIONS ON SECTION 403(B) TAX SHELTERED ANNUITIES. AS OF
DECEMBER 31, 1988, ALL SECTION 403(B) ANNUITIES HAVE LIMITS ON FULL AND PARTIAL
SURRENDERS. CONTRIBUTIONS TO THE CONTRACT MADE AFTER DECEMBER 31, 1988 AND ANY
INCREASES IN CASH VALUE AFTER DECEMBER 31, 1988 MAY NOT BE DISTRIBUTED UNLESS
THE CONTRACT OWNER/EMPLOYEE HAS A) ATTAINED AGE 59 1/2, B)SEPARATED FROM
SERVICE, C) DIED, D) BECOME DISABLED OR E) EXPERIENCED FINANCIAL HARDSHIP. (CASH
VALUE INCREASES MAY NOT BE DISTRIBUTED FOR HARDSHIPS).
DISTRIBUTIONS PRIOR TO AGE 59 1/2 DUE TO FINANCIAL HARDSHIP OR SEPARATION FROM
SERVICE MAY STILL BE SUBJECT TO A PENALTY TAX OF 10%.
HARTFORD WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A WITHDRAWAL
IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR SITUATION; OR IN
MONITORING WITHDRAWAL REQUESTS REGARDING PRE OR POST JANUARY 1, 1989 ACCOUNT
VALUES.
ANY SUCH FULL OR PARTIAL SURRENDER DESCRIBED ABOVE MAY 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 41.)
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
Administrative Office. Hartford may defer
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payment of any amounts from the Fixed Account for up to six months from the date
of the request for surrender. If Hartford defers payment for more than 30 days,
Hartford will pay interest of at least 3% per annum on the amount deferred. 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 33.)
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 Administrative 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 wren
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 - The calculated Death Benefit will remain invested in
the Separate Account in accordance with the allocation instructions given by the
Contract Owner until the proceeds are paid or Hartford receives new instructions
from the Beneficiary. During the time period between Hartford's receipt of
written notification of Due Proof of Death and Hartford's receipt of the
completed settlement instructions, the calculated Death Benefit will remain
invested in the Sub-Account(s) previously elected by the Contract Owner and
will be subject to market fluctuations. The Death Benefit
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may be taken in one sum, payable within 7 days after the date Due Proof of Death
is received, or under any of the settlement options then being offered by
Hartford provided, however, that: (a) in the event of the death of any Contract
Owner prior to the Annuity Commencement Date, the entire interest in the
Contract will be distributed within 5 years after the death of the Contract
Owner, and (b) in the event of the death of any Contract Owner or Annuitant
which occurs on or after the Annuity Commencement Date, any remaining interest
in the Contract will be paid at least as rapidly as under the method of
distribution in effect at the time of death, or, if the benefit is payable over
a period not extending beyond the life expectancy of the Beneficiary or over the
life of the Beneficiary, such distribution must commence within one year of the
date of death. The proceeds due on the death may be applied to provide variable
payments, fixed payments, or a combination of variable and fixed payments.
However, in the event of the Contract Owner's death where the sole Beneficiary
is the spouse of the Contract Owner and the Annuitant or Contingent Annuitant is
living, such spouse may elect, in lieu of receiving the death benefit, to be
treated as the Contract Owner. The Contract Value and the Maximum Anniversary
Value of 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
submed 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 ("SALES CHARGES"):
PURPOSE OF SALES CHARGES - Sales Charges cover expenses relating to the sale and
distribution of the Contracts, including commissions paid to distributing
organizations and its sales personnel, the cost of preparing sales literature
and other promotional activities. If these charges are not sufficient to cover
sales and distribution expenses, Hartford will pay them from its general assets,
including surplus. Surplus might include profits resulting from unused mortality
and expense risk charges.
ASSESSMENT OF SALES CHARGES - There is no deduction for sales expenses from
Premium Payments when made, however, a Sales Charge may be assessed against
Premium Payments when
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surrendered. The length of time from receipt of a Premium Payment to the time
of surrender determines the percentage of the Sales Charge. Premium payments
are deemed to be surrendered in the order in which they were received.
During the first seven years from each Premium Payment, a Sales Charge will be
assessed against the surrender of Premium Payments. During this time, all
surrenders in excess of the Annual Withdrawal Amount will be first from Premium
Payments and then from earnings. The Annual Withdrawal Amount is first from
earnings and then from Premium Payments. After the seventh Contract Year, all
surrenders will first be taken from earnings and then from Premium Payments and
a Sales Charge will not be assessed against the surrender of earnings. If an
amount equal to all earnings has been surrendered, a Sales Charge will not be
assessed against Premium Payments received more than seven years prior to
surrender, but will be assessed against Premium Payments received less than
seven years prior to surrender. For additional information, see Federal Tax
Considerations, page 41.
Upon receipt of a request for a full surrender, Hartford will assess any
applicable Sales Charge against the surrender proceeds representing the lesser
of: (1) aggregate Premium Payments not previously withdrawn or (2) the Contract
Value, less the Annual Withdrawal Amount available at the time of the full
surrender, less the Annual Maintenance Fee, if applicable. Taking the Annual
Withdrawal Amount prior to the full surrender may, depending upon the amount of
investment gain experienced, reduce the amount of any Sales Charge paid.
The Sales Charge is a percentage of the amount surrendered (not to exceed
the aggregate amount of the Premium Payments made) and equals:
<TABLE>
<CAPTION>
CHARGE LENGTH OF TIME
FROM PREMIUM
PAYMENT
(NUMBER OF YEARS)
<S> <C>
6% 1
6% 2
5% 3
5% 4
4% 5
3% 6
2% 7
0% 8 or more
</TABLE>
PAYMENTS NOT SUBJECT TO SALES CHARGES:
ANNUAL WITHDRAWAL AMOUNT - During the first seven years from each Premium
Payment, on a non-cumulative basis, a Contract Owner may make a partial
surrender of Contract Values of up to 10% of the aggregate Premium Payments, as
determined on the date of the requested surrender, without the application of
the Sales Charge. After the seventh year from each Premium Payment,
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also on a non-cumulative basis, the Contract Owner may make a partial surrender
of 10% of Premium Payments made during the seven years prior to the surrender
and 100% of the Contract Value less the Premium Payments made during the seven
years prior to the surrender.
EXTENDED WITHDRAWAL PRIVILEGE - This privilege allows Annuitants who attain age
70 1/2 with a Contract held under an Individual Retirement Account or 403(b)
plan to surrender an amount equal to the required minimum distribution for the
stated Contract without incurring a Sales Charge or not subject to a Sales
Charge.
WAIVERS OF SALES CHARGES:
CONFINEMENT IN A HOSPITAL, LONG TERM CARE FACILITY OR NURSING HOME - Hartford
will waive any Sales Charge applicable to a partial or full surrender if the
Annuitant is confined, at the recommendation of a physician for medically
necessary reasons, for at least 180 calendar days to: a hospital recognized as a
general hospital by the proper authority of the state in which it is located; or
a hospital recognized as a general hospital by the Joint Commission on the
Accreditation of Hospitals; or a facility certified as a hospital or long-term
care facility; or a nursing home licensed by the state in which it is located
and offers the services of a registered nurse 24 hours a day.
The Annuitant cannot be confined at the time the Contract was purchased in order
to receive this waiver and the Contract Owner(s) must have been the Contract
Owner(s) continuously since the Contract issue date; must provide written proof
of confinement satisfactory to Hartford; and must request the partial or full
surrender within 91 calendar days of the last day of confinement.
This waiver may not be available in all states. Please contact your registered
representative or Hartford to determine availability.
DEATH OF THE ANNUITANT OR CONTRACT OWNER OR PAYMENTS UNDER AN ANNUITY OPTION- No
Sales Charge otherwise applicable will be assessed in the event of death of the
Annuitant, death of the Contract Owner or if payments are made under an Annuity
option (other than a surrender out of Option 4) provided for under the Contract.
OTHER PLANS OR PROGRAMS - Certain plans or programs established by Hartford from
time to time may have different surrender privileges.
MORTALITY AND EXPENSE RISK CHARGE
For assuming these risks under the Contracts, Hartford will make a daily charge
at the rate of 1.25% per annum against all Contract Values held in the
Sub-Accounts during the life of the Contract (estimated at .90% for mortality
and .35% for expense). Although Variable Annuity payments made under the
Contracts will vary in accordance with the investment performance of the
underlying Fund shares held in the Sub-Account(s), the payments will not be
affected by (a) Hartford's actual mortality experience among Annuitants before
or after the Annuity Commencement Date or (b) Hartford's actual expenses, if
greater than the deductions provided for in the Contracts because of the expense
and mortality undertakings by Hartford.
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There are two types of mortality undertakings: those made during the
accumulation or deferral phase and those made during the annuity payout phase.
The mortality undertaking made by Hartford in the accumulation phase is that
Hartford may experience a loss resulting from the assumption of the mortality
risk relative to the guaranteed death benefit in event of the death of an
Annuitant or Contract Owner before commencement of Annuity payments, in periods
of declining value or in periods where the contingent deferred sales charges
would have been applicable. The mortality undertakings provided by Hartford
during the annuity payout phase are to make monthly Annuity payments (determined
in accordance with the 1983a Individual Annuity Mortality Table and other
provisions contained in the Contract) to Annuitants regardless of how long an
Annuitant may live, and regardless of how long all Annuitants as a group may
live. Hartford also assumes the liability for payment of a minimum death benefit
under the Contract. These mortality undertakings are based on Hartford's
determination of expected mortality rates among all Annuitants. If actual
experience among Annuitants during the Annuity payment period deviates from
Hartford's actuarial determination of expected mortality rates among Annuitants
because, as a group, their longevity is longer than anticipated, Hartford must
provide amounts from its general funds to fulfill its contractual obligations.
Hartford will bear the loss in such a situation.
During the accumulation phase, Hartford also provides an expense undertaking.
Hartford assumes the risk that the contingent deferred sales charges and the
Annual Maintenance Fee for maintaining the Contracts prior to the Annuity
Commencement Date may be insufficient to cover the actual cost of providing such
items.
ANNUAL MAINTENANCE FEE
Each year, on each Contract Anniversary on or before the Annuity Commencement
Date, Hartford will deduct an Annual Maintenance Fee, if applicable, from
Contract Values to reimburse it for expenses relating to the maintenance of
the Contract, the Fixed Account, and the Sub-Account(s) thereunder. If during a
Contract Year the Contract is surrendered for its full value, Hartford will
deduct the Annual Maintenance Fee at the time of such surrender. The fee is a
flat fee which will be due in the full amount regardless of the time of the
Contract Year that Contract Values are surrendered. The Annual Maintenance Fee
is $30.00 per Contract Year for Contracts with less than $50,000 Contract Value
on the Contract Anniversary. Fees will be deducted on a pro rata basis according
to the value in each Sub-Account and the Fixed Account under a Contract.
WAIVERS OF THE ANNUAL MAINTENANCE FEE
Annual Maintenance Fees are waived for Contracts with Contract Value equal to or
greater than $50,000. In addition, Hartford will waive one Annual Maintenance
Fee for Contract Owners who own one or more Contracts with a combined Contract
Value of $50,000 up to $100,000. If the Contract Owner has multiple contracts
with a combined Contract Value of $100,000 or greater, Hartford will waive the
Annual Maintenance Fee on all Contracts. However, Hartford reserves the right to
limit the number of Annual Maintenance Fee waivers to a total of six
Contracts. Hartford reserves the right to waive the Annual Maintenance Fee
under other circumstances.
ADMINISTRATION CHARGE
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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 semiannual and annual reports and mailing and
tabulation of shareholder proxy solicitations.
You should refer to the Trust prospectus for a description of deductions and
expenses paid out of the assets of the Trust's portfolios.
PREMIUM TAXES
Charges are also deducted for premium tax, if applicable, imposed by
state or other governmental entity. Certain states impose a premium tax,
currently ranging up to 3.5%. Some states assess the tax at the time purchase
payments are made; others assess the tax at the time of annuitization. Hartford
will pay Premium Taxes at the time imposed under applicable law. At its sole
discretion, Hartford may deduct Premium Taxes at the time Hartford pays such
taxes to the applicable taxing authorities, at the time the Contract is
surrendered, at the time a death benefit is paid, or at the time the Contract
annuitizes.
EXCEPTIONS TO CHARGES UNDER THE CONTRACTS
Hartford may offer, at its discretion, reduced fees and charges including, but
not limited to, the contingent deferred sales charges, the mortality and expense
risk charge and the maintenance fee for certain sales (including employer
sponsored savings plans) under circumstances which may result in savings of
certain costs and expenses. Reductions in these fees and charges will not be
unfairly discriminatory against any Contract Owner.
SETTLEMENT PROVISIONS
You select an Annuity Commencement Date and an Annuity option which may be on a
fixed or variable basis, or a combination thereof. The Annuity Commencement Date
will not be deferred beyond age 90 of the Annuitant. 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.
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ANNUITY OPTIONS
The Contract contains the four Annuity payment options and the Annuity Proceeds
Settlement Option. Annuity Options 2, 4 and the Annuity Proceeds Settlement
Option are available to Qualified Contracts only if the guaranteed payment
period is less than the life expectancy of the Annuitant at the time the option
becomes effective. Such life expectancy shall be computed on the basis of the
mortality table prescribed by the IRS, or if none is prescribed, the mortality
table then in use by Hartford. With respect to Non-Qualified Contracts, if you
do not elect otherwise, payments in most states will automatically begin at the
Annuitant's age 90 (with the exception of states that do not allow deferral past
age 85) under Annuity Option 2 with 120 monthly payments certain. For Qualified
Contracts and Contracts issued in Texas, if you do not elect otherwise, payments
will begin automatically at the Annuitant's age 90 under Annuity Option 1 to
provide a life Annuity.
Under any of the Annuity options excluding Annuity Options 4 and the Annuity
Proceeds Settlement Option, no surrenders are permitted after Annuity payments
commence. Only full surrenders are allowed out of Option 4 and any such
surrender will be subject to contingent deferred sales charges, if applicable.
Full or partial withdrawals may be made from the Annuity Proceeds Settlement
Option at any time and contingent deferred sales charges will not be applied.
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.
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It would be possible under this option for an Annuitant and designated second
person to receive only one payment in the event of the common or simultaneous
death of the parties prior to the due date for the second payment and so on.
OPTION 4: PAYMENTS FOR A DESIGNATED PERIOD
An amount payable monthly for the number of years selected which may be from 5
to 30 years. Under this option, you may, at any time, surrender the Contract and
receive, within seven days, the Termination Value of the Contract as determined
by Hartford.
In the event of the Annuitant's death prior to the end of the designated period,
the present value as of the date of the Annuitant's death, of any remaining
guaranteed payments will be paid in one sum to the Beneficiary or Beneficiaries
designated unless other provisions have been made and approved by Hartford.
Annuity Option 4 is an option that does not involve life contingencies and thus
no mortality guarantee. Charges made for the mortality undertaking under the
Contracts thus provide no real benefit to a Contract Owner.
ANNUITY PROCEEDS SETTLEMENT OPTION
Proceeds from the Death Benefit may be left with Hartford for a period not to
exceed five years from the date of the Contract Owner's death prior to the
Annuity Commencement Date. These proceeds will remain in the Sub-Account(s) to
which they were allocated at the time of death unless the Beneficiary elects to
reallocate them. Full or partial withdrawals may be made at any time. In the
event of withdrawals, the remaining value will equal the Contract Value of the
proceeds left with Hartford, minus any withdrawals.
Hartford may offer other annuity or settlement options from time to time.
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 16) 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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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.
All Annuity payments under any option will occur the same day of the month as
the Annuity Commencement Date, based on the payment frequency selected by the
Contract Owner. Available payment frequencies include monthly, quarterly,
semi-annual and annual. The payment frequency may not be changed by the Contract
Owner after payout has begun.
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FEDERAL TAX CONSIDERATIONS
What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING TO
THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED AND THE TYPE OF PLAN UNDER
WHICH THE CONTRACT IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A PERSON,
TRUSTEE OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A CONTRACT DESCRIBED
HEREIN.
It should be understood that any detailed description of the federal income tax
consequences regarding the purchase of these Contracts cannot be made in this
Prospectus and that special tax rules may be applicable with respect to certain
purchase situations not discussed herein. In addition, no attempt is made here
to consider any applicable state or other tax laws. For detailed information, a
qualified tax adviser should always be consulted. The discussion here and in
Appendix I, commencing on page 51, 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 16). 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
Rgains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER
THAN QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC. Section 72 contains provisions
for Contract Owners which are non-natural persons. Non-natural persons
include corporations, trusts, limited liability companies and
partnerships. The annual net increase in the value of the Contract is
currently includable in the gross income of a non-natural person, unless
the non-natural person holds the Contract as an agent for a natural
person. There are additional exceptions from current inclusion for (i)
certain annuities held by
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structured settlement companies, (ii) certain annuities held by an
employer with respect to a terminated qualified retirement plan and (iii)
certain immediate annuities. A non-natural person which is a tax-exempt
entity for federal tax purposes will not be subject to income tax as a
result of this provision.
If the Contract Owner is not an individual, the primary Annuitant shall be
treated as the Contract Owner for purposes of making distributions which
are required to be made upon the death of the Contract Owner. If there is
a change in the primary Annuitant, such change shall be treated as the
death of the Contract Owner.
2. OTHER 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."
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iv. The receipt of any amount as a loan under the Contract or the
assignment or pledge of any portion of the value of the Contract
shall be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of
this subparagraph a. and the next subparagraph b. This transfer rule
does not apply, however, to certain transfers of property between
spouses or incident to divorce.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE. Annuity payments made
periodically after the Annuity Commencement Date are includable in
gross income to the extent the payments exceed the amount determined by
the application of the ratio of the "investment in the contract" to the
total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the
Annuity Commencement Date, any additional payments (including
surrenders) will be entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the
Annuitant and, as of the date of death, the amount of annuity
payments excluded from gross income by the exclusion ratio does not
exceed the investment in the contract as of the Annuity Commencement
Date, then the remaining portion of unrecovered investment shall be
allowed as a deduction for the last taxable year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received after
the Annuity Commencement Date are not entitled to any exclusion
ratio and shall be fully includable in gross income. However, upon a
full surrender after such date, only the excess of the amount
received (after any surrender charge) over the remaining "investment
in the contract" shall be includable in gross income (except to the
extent that the aggregation rule referred to in the next
subparagraph c. may apply).
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS. Contracts issued after
October 21, 1988 by the same insurer (or affiliated insurer) to the
same Contract Owner within the same calendar year (other than certain
contracts held in connection with a tax-qualified retirement
arrangement) will be treated as one annuity Contract for the purpose of
determining the taxation of distributions prior to the Annuity
Commencement Date. An annuity contract received in a tax-free exchange
for another annuity contract or life insurance contract may be treated
as a new Contract for this purpose. Hartford believes that for any
annuity subject to such aggregation, the values under the Contracts and
the investment in the contracts will be added together to determine the
taxation under subparagraph 2.a., above, of amounts received or deemed
received prior to the Annuity Commencement Date. Withdrawals
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will first be treated as withdrawals of income until all of the income
from all such Contracts is withdrawn. As of the date of this
Prospectus, there are no regulations interpreting this provision.
d. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract (before
or after the Annuity Commencement Date), the Code applies a penalty
tax equal to ten percent of the portion of the amount includable
in gross income, unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has
attained the age of 59 1/2.
2. Distributions made on or after the death of the holder or where
the holder is not an individual, the death of the primary
annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of
substantially equal periodic payments for the life (or life
expectancy) of the recipient (or the joint lives or life
expectancies of the recipient and the recipient's Beneficiary).
5. Distributions of amounts which are allocable to the "investment
in the contract" prior to August 14, 1982 (see next subparagraph
e.).
e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED PRIOR
TO AUGUST 14, 1982. If the Contract was obtained by a tax-free
exchange of a life insurance or annuity Contract purchased prior to
August 14, 1982, then any amount received or deemed received prior to
the Annuity Commencement Date shall be deemed to come (1) first from
the amount of the "investment in the contract" prior to August 14, 1982
("pre-8/14/82 investment") carried over from the prior Contract, (2)
then from the portion of the "income on the contract" (carried over to,
as well as accumulating in, the successor Contract) that is
attributable to such pre-8/14/82 investment, (3) then from the
remaining "income on the contract" and (4) last from the remaining
"investment in the contract." As a result, to the extent that such
amount received or deemed received does not exceed such pre-8/14/82
investment, such amount is not includable in gross income., In
addition, to the extent that such amount received or deemed received
does not exceed the sum of (a) such pre-8/14/82 investment and (b) the
"income on the contract" attributable thereto, such amount is not
subject to the 10% penalty tax. In all other respects,
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amounts received or deemed received from such post-exchange Contracts
are generally subject to the rules described in this subparagraph 3.
f. REQUIRED DISTRIBUTIONS
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary provisions
in ii or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement
Date and before the entire interest in the Contract has been
distributed, the remaining portion of such interest shall be
distributed at least as rapidly as under the method of
distribution being used as of the date of such death;
2. If any Contract Owner dies before the Annuity Commencement Date,
the entire interest in the Contract will be distributed within
5 years after such death; and
3. If the Contract Owner is not an individual, then for purposes of
1. or 2. above, the primary annuitant under the Contract shall
be treated as the Contract Owner, and any change in the primary
annuitant shall be treated as the death of the Contract Owner.
The primary annuitant is the individual, the events in the life
of whom are of primary importance in affecting the timing or
amount of the payout under the Contract.
ii. Alternative Election to Satisfy 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 or
for the benefit of his or her spouse, and the Annuitant or
Contingent Annuitant is living, such spouse shall be treated as the
Contract Owner of such portion for purposes of section i. above.
3. DIVERSIFICATION REQUIREMENTS. Section 817 of the Code provides that a
variable annuity contract will not be treated as an annuity contract for
any period during which the investments made by the separate account or
underlying fund are not adequately diversified in accordance with
regulations prescribed by the Treasury Department. If a
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Contract is not treated as an annuity contract, the Contract Owner will be
subject to income tax on the annual increases in cash value.
The Treasury Department has issued diversification regulations which
generally require, among other things, that no more than 55% of the value
of the total assets of the segregated asset account underlying a variable
contract is represented by any one investment, no more than 70% is
represented by any two investments, no more than 80% is represented by any
three investments, and no more than 90% is represented by any four
investments. In determining whether the diversification standards are met,
all securities of the same issuer, all interests in the same real property
project, and all interests in the same commodity are each treated as a
single investment. In addition, in the case of government securities, each
government agency or instrumentality shall be treated as a separate
issuer.
A separate account must be in compliance with the diversification
standards on the last day of each calendar quarter or within 30 days after
the quarter ends. If an insurance company inadvertently fails to meet the
diversification requirements, the company may comply within a reasonable
period and avoid the taxation of contract income on an ongoing basis.
However, either the company or the Contract Owner must agree to pay the
tax due for the period during which the diversification requirements were
not met.
Hartford monitors the diversification of investments in the separate
accounts and tests for diversification as required by the Code. Hartford
intends to administer all contracts subject to the diversification
requirements in a manner that will maintain adequate diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT. In order for a variable
annuity contract to qualify for tax deferral, assets in the segregated
asset accounts supporting the variable contract must be considered to be
owned by the insurance company and not by the variable contract owner. The
Internal Revenue Service ("IRS") has issued several rulings which discuss
investor control. The IRS has ruled that certain incidents of ownership by
the contract owner, such as the ability to select and control investments
in a separate account, will cause the contract owner to be treated as the
owner of the assets for tax purposes.
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted that the temporary regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary regulations
provide that in appropriate cases a segregated asset account may include
multiple sub-accounts, but do not specify the extent to which policyholders may
direct their investments to particular sub-accounts without being treated as
the owners of the underlying assets. Guidance on this and other issues will be
provided in regulations or revenue rulings under Section 817(d), relating to the
definition of variable contract." The final regulations issued under Section 817
did not
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provide guidance regarding investor control, and as of the date of
this prospectus, no other such guidance has been issued. Further, Hartford
does not know if or in what form such guidance will be issued. In addition,
although regulations are generally issued with prospective effect, it is
possible that regulations may be issued with retroactive effect. Due to the lack
of specific guidance regarding the issue of investor control, there is
necessarily some uncertainty regarding whether a Contract Owner could be
considered the owner of the assets for tax purposes. Hartford reserves the right
to modify the contracts, as necessary, to prevent Contract Owners from being
considered the owners of the assets in the separate accounts.
D. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will be
subject to federal income tax withholding, pursuant to Section 3405 of the Code.
The application of this provision is summarized below:
1. NON-PERIODIC DISTRIBUTIONS. The portion of a non-periodic distribution
which constitutes taxable income will be subject to federal income tax
withholding unless the recipient elects not to have taxes withheld. If an
election not to have taxes withheld is not provided, 10% of the taxable
distribution will be withheld as federal income tax. Election forms will
be provided at the time distributions are requested. If the necessary
election forms are not submitted to Hartford, Hartford will automatically
withhold 10% of the taxable distribution.
2. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN
ONE YEAR). The portion of a periodic distribution which constitutes
taxable income will be subject to federal income tax withholding as if the
recipient were married claiming three exemptions. A recipient may elect
not to have income taxes withheld or have income taxes withheld at a
different rate by providing a completed election form. Election forms will
be provided at the time distributions are requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I commencing on page 51 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
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purchasers are advised to consult with a qualified tax adviser regarding U.S.,
state, and foreign taxation with respect to an annuity purchase.
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
"Provisions Affecting Purchasers Other Than Qualified Retirement Plans," page
41.)
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.
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<PAGE>
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.
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. Broker-dealers or
financial institutions are compensated according to a schedule set forth by
HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on premium payments made by
policyholders or contract owners. This compensation is usually paid from the
sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make
compensation arrangements with certain broker-dealers or financial
institutions based on total sales by the broker-dealer or financial
institution of insurance products. These payments, which may be different
for different broker-dealers or financial institutions, will be made by HSD,
its affiliates or Hartford out of their own assets and will not effect the
amounts paid by the policyholders or contract owners to purchase, hold or
surrender variable insurance products.
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the Contract with
an additional 5.0% of the Premium Payment. This additional percentage of Premium
Payment in no way affects present or future charges, rights, benefits or current
values of other Contract Owners. The following class of individuals are eligible
for this feature: (1) current or retired officers, directors, trustees and
employees (and their families) of the ultimate parent and affiliates of Hartford
and Putnam Management; and (2) employees and registered representatives (and
their families) of registered broker-dealers (or financial
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<PAGE>
institutions affiliated therewith) that have a sales agreement with Hartford and
its principal underwriter to sell the Contracts.
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.
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,
Senior Vice President, General Counsel and Corporate Secretary, Hartford Life
and Annuity Insurance Company, 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 the report on the statutory-basis
financial statements of Hartford Life and Annuity Insurance Company (formerly
ITT Hartford Life and Annuity Insurance Company) which states the
statutory-basis financial statements are presented in accordance with statutory
accounting practices prescribed or permitted by the National Association of
Insurance Commissioners and the State of Connecticut Insurance Department, and
are not presented in accordance with generally accepted accounting principles.
The principal business address of Arthur Andersen LLP is One Financial Plaza,
Hartford, Connecticut 06103.
ADDITIONAL INFORMATION
Inquiries will be answered by calling your representative or by writing:
Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Telephone: (800) 521-0538
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APPENDIX I
INFORMATION REGARDING TAX-QUALIFIED PLANS
The tax rules applicable to tax-qualified contract owners, including
restrictions on contributions and distributions, taxation of distributions and
tax penalties, vary according to the type of plan as well as the terms and
conditions of the plan itself. Various tax penalties may apply to contributions
in excess of applicable limits, distributions prior to age 59 1/2 (subject to
certain exceptions), distributions which do not conform to applicable
commencement and minimum distribution rules, and certain other transactions with
respect to tax-qualified plans. Therefore, this summary does not attempt to
provide more than general information about the tax rules associated with use of
a Contract by a tax-qualified retirement plan. Contract owners, plan
participants and beneficiaries are cautioned that the rights and benefits of any
person to benefits may be controlled by the terms and conditions of the
tax-qualified retirement plan itself, regardless of the terms and conditions of
a Contract, but that Hartford is not bound by the terms and conditions of such
plans to the extent such terms conflict with a Contract, unless Hartford
specifically consents to be bound. Additionally, some tax-qualified retirement
plans are subject to distribution and other requirements which are not
incorporated into Hartford's administrative procedures. Contract owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions comply with applicable law.
Because of the complexity of these rules, owners, participants and beneficiaries
are encouraged to consult their own tax advisors as to specific tax
consequences.
A. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS Provisions of the Code permit
eligible employers to establish tax-qualified pension or profit sharing plans
(described in Section 401(a) and 401(k), if applicable, and exempt from
taxation under Section 501(a) of the Code), and Simplified Employee Pension
Plans (described in Section 408(k)). Such plans are subject to limitations on
the amount that may be contributed, the persons who may be eligible to
participate and the time when distributions must commence. Employers
intending to use these contracts in connection with tax-qualified pension
or profit-sharing plans should seek competent tax and other legal advice.
B. TAX SHELTERED ANNUITIES UNDER SECTION 403(b) Section 403(b) of the Code
permits public school employees and employees of certain types of charitable,
educational and scientific organizations, as specified in Section 501(c)(3)
of the Code, to purchase annuity contracts, and, subject to certain
limitations, to exclude such contributions from gross income. Generally, such
contributions may not exceed the lesser of $10,000 (indexed) or 20% of an
employee's "includable compensation" for such employee's most recent full
year of employment, subject to other adjustments. Special provisions under
the Code may allow some employees to elect a different overall limitation.
Tax-sheltered annuity programs under Section 403(b) are subject to a
PROHIBITION AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO
CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT, unless such
distribution is made:
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<PAGE>
(1) after the participating employee attains age 59 1/2;
(2) upon separation from service;
(3) upon death or disability; or
(4) in the case of hardship (and in the case of hardship, any income
attributable to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions
attributable to cash values or other amounts held under a Section 403(b)
contract as of December 31, 1988.
C. DEFERRED COMPENSATION PLANS UNDER SECTION 457 Employees and independent
contractors performing services for eligible employers may have
contributions made to an Eligible Deferred Compensation Plan of their
employer in accordance with the employer's plan and Section 457 of the Code.
Section 457 places limitations on contributions to Eligible Deferred
Compensation Plans maintained by a State or other tax-exempt organization.
For these purposes, the term "State" means a State, a political sub-division
of a State, and an agency or instrumentality of a State or political
sub-division of a State. Generally, the limitation is 33 1/3% of includable
compensation (typically 25% of gross compensation) or, for 1998, $8,000
(indexed), whichever is less. Such a plan may also provide for additional
"catch-up" deferrals during the three taxable years ending before a
Participant attains normal retirement age.
An employee electing to participate in an Eligible Deferred Compensation
Plan should understand that his or her rights and benefits are governed
strictly by the terms of the plan and that the employer is the legal owner of
any contract issued with respect to the plan. The employer, as owner of the
contract(s), retains all voting and redemption rights which may accrue to the
contract(s) issued with respect to the plan. The participating employee
should look to the terms of his or her plan for any charges in regard to
participating therein other than those disclosed in this Prospectus.
Participants should also be aware that effective August 20, 1996, the Small
Business Job Protection Act of 1996 requires that all assets and income of an
Eligible Deferred Compensation Plan established by a governmental employer
which is a State, a political subdivision of a State, or any agency or
instrumentality of a State or political subdivision of a State, must be held
in trust (or under certain specified annuity contracts or custodial accounts)
for the exclusive benefit of participants and their beneficiaries.
Special transition rules apply to such Eligible governmental Deferred
Compensation Plans already in existence on August 20, 1996, and provide that
such plans need not establish a trust before January 1, 1999. However, this
requirement of a trust does not apply to amounts under an Eligible Deferred
Compensation Plan of a tax-exempt (non-governmental) organization, and such
amounts will be subject to the claims of such tax-exempt employer's general
creditors.
In general, distributions from an Eligible Deferred Compensation Plan are
prohibited under Section 457 of the Code unless made after the participating
employee attains age 702, separates from service, dies, or suffers an
unforeseeable financial emergency. Present
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<PAGE>
federal tax law does not allow tax-free transfers or rollovers for amounts
accumulated in a Section 457 plan except for transfers to other Section 457
plans in limited cases.
D. INDIVIDUAL RETIREMENT ANNUITIES UNDER SECTION 408 Section 408 of the Code
permits eligible individuals to establish individual retirement programs
through the purchase of Individual Retirement Annuities ("IRAs"). IRAs are
subject to limitations on the amount that may be contributed, the
contributions that may be deducted from taxable income, the persons who may
be eligible and the time when distributions may commence. Also, distributions
from certain qualified plans may be "rolled-over" on a tax-deferred basis
into an IRA.
The Contracts may be offered as SIMPLE IRAs in connection with a SIMPLE IRA
plan of an employer. Special rollover rules apply to SIMPLE IRAs. Amounts can
be rolled over from one SIMPLE IRA to another SIMPLE IRA. However, amounts
can be rolled over from a SIMPLE IRA to a regular IRA only after two years
have expired since the participant first commenced participation in your
employer's SIMPLE IRA plan. Amounts cannot be rolled over to a SIMPLE IRA
from a qualified plan or a regular IRA. Hartford is a non-designated
financial institution.
Beginning in 1998, the Contracts may be offered as ROTH IRAs under Section
408A of the Code. Contributions to a ROTH IRA are not deductible. Subject to
special limitations, a regular IRA may be converted into a ROTH IRA or a
distribution from a regular IRA may be rolled over to a ROTH IRA. However, a
conversion or a rollover from a regular IRA to a ROTH IRA is not excludable
from gross income. If certain conditions are met, qualified distributions
from a ROTH IRA are tax-free.
E. FEDERAL TAX PENALTIES AND WITHHOLDING Distributions from retirement plans are
generally taxed under Section 72 of the Code. Under these rules, a portion of
each distribution may be excludable from income. The excludable amount is the
portion of the distribution which bears the same ratio as the after-tax
contributions bear to the expected return.
1. PREMATURE DISTRIBUTION Distributions from a tax-qualified plan before the
Participant attains age 59 1/2 are generally subject to an additional
penalty tax equal to 10% of the taxable portion of the distribution. The
10% penalty does not apply to distributions made after the employee's
death, on account of disability, for eligible medical expenses and
distributions in the form of a life annuity and, except in the case of an
IRA, certain distributions after separation from service after age 55.
For these purposes, a life annuity means a scheduled series of
substantially equal periodic payments for the life or life expectancy of
the Participant (or the joint lives or life expectancies of the
Participant and Beneficiary).
In addition, effective for distributions made from an IRA after December
31, 1997, there is no such penalty tax on distributions that do not exceed
the amount of certain qualifying higher education expenses, as defined by
Section 72(t)(7) of the Code, or
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<PAGE>
which are qualified first-time homebuyer distributions meeting the
requirements of Section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that
the 10% penalty tax discussed above is increased to 25% with respect to
non-exempt premature distributions made from your SIMPLE IRA during the
first two years following the date you first commenced participation in
any SIMPLE IRA plan of your employer.
2. MINIMUM DISTRIBUTION TAX If the amount distributed is less than the
minimum required distribution for the year, the Participant is subject to
a 50% tax on the amount that was not properly distributed.
An individual's interest in a tax-qualified retirement plan generally
must be distributed, or begin to be distributed, not later than April 1 of
the calendar year following the later of (i) the calendar year in which
the individual attains age 70 1/2 or (ii) the calendar year in which the
individual retires from service with the employer sponsoring the plan
("required beginning date"). However, the required beginning date for an
individual who is a five (5) percent owner (as defined in the Code), or
who is the owner of an IRA, is April 1 of the calendar year following the
calendar year in which the individual attains age 70 1/2. The entire
interest of the Participant must be distributed beginning no later than
the required beginning date over a period which may not extend beyond a
maximum of the life expectancy of the Participant and a designated
Beneficiary. Each annual distribution must equal or exceed a "minimum
distribution amount" which is determined by dividing the account balance
by the applicable life expectancy. This account balance is generally based
upon the account value as of the close of business on the last day of the
previous calendar year. In addition, minimum distribution incidental
benefit rules may require a larger annual distribution.
If an individual dies before reaching his or her required beginning date,
the individual's entire interest must generally be distributed within five
years of the individual's death. However, this rule will be deemed
satisfied, if distributions begin before the close of the calendar year
following the individual's death to a designated Beneficiary (or over a
period not extending beyond the life expectancy of the beneficiary). If
the Beneficiary is the individual's surviving spouse, distributions may be
delayed until the individual would have attained age 70 1/2.
If an individual dies after reaching his or her required beginning date or
after distributions have commenced, the individual's interest must
generally be distributed at least as rapidly as under the method of
distribution in effect at the time of the individual's death.
3. Withholding In general, distributions from IRAs and plans described in
Section 457 of the Code are subject to regular wage withholding rules.
Periodic distributions from other tax-qualified retirement plans that are
made for a specified period of 10 or more
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<PAGE>
years or for the life or life expectancy of the participant (or the joint
lives or life expectancies of the participant and beneficiary) are
generally subject to federal income tax withholding as if the recipient
were married claiming three exemptions. The recipient of periodic
distributions may generally elect not to have withholding apply or to have
income taxes withheld at a different rate by providing a completed
election form.
Other distributions from such other tax-qualified retirement plans are
generally subject to mandatory income tax withholding at the flat rate of
20% unless such distributions are:
a) the non-taxable portion of the distribution;
b) required minimum distributions; or
c) direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
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<PAGE>
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
SECTION PAGE
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY ................
SAFEKEEPING OF ASSETS .....................................................
INDEPENDENT PUBLIC ACCOUNTANTS ............................................
DISTRIBUTION OF CONTRACTS .................................................
CALCULATION OF YIELD AND RETURN ...........................................
PERFORMANCE COMPARISONS ...................................................
FINANCIAL STATEMENTS ......................................................
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<PAGE>
To Obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Operations
P.O. Box 5085
Hartford, CT 06102-5085
Please send a Statement of Additional Information for the Putnam Hartford
Capital Manager Variable Annuity to me at the following address:
- --------------------------------------------------
Name
- ---------------------------------------------------
Address
- ---------------------------------------------------
City/State Zip Code
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT
PUTNAM HARTFORD CAPITAL MANAGER VARIABLE ANNUITY
This Statement of Additional Information is not a Prospectus. The information
contained herein should be read in conjunction with the Prospectus.
To obtain a Prospectus, send a written request to Hartford Life and Annuity
Insurance Company, Attn: Annuity Marketing Services, P.O. Box 5085, Hartford, CT
06102-5085.
Date of Prospectus: May 1, 1998
Date of Statement of Additional Information: May 1, 1998
33-73572
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
DESCRIPTION OF HARTFORD LIFE AND
ANNUITY INSURANCE COMPANY .........................................
SAFEKEEPING OF ASSETS ................................................
INDEPENDENT PUBLIC ACCOUNTANTS .......................................
DISTRIBUTION OF CONTRACTS ............................................
CALCULATION OF YIELD AND RETURN ......................................
PERFORMANCE COMPARISONS ..............................................
FINANCIAL STATEMENTS .................................................
<PAGE>
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States and the District of Columbia,
except New York. Effective on January 1, 1998, Hartford*s name changed from ITT
Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. Hartford was originally incorporated under the laws of
Wisconsin on January 9, 1956, and was subsequently redomiciled to Connecticut.
Its offices are located in Simsbury, Connecticut; however, its mailing address
is P.O. Box 2999, Hartford, CT 06104-2999. Hartford is a subsidiary of Hartford
Fire Insurance Company, one of the largest multiple lines insurance carriers in
the United States. Hartford is ultimately controlled by The Hartford Financial
Services Group, Inc., a Delaware corporation.
HARTFORD RATINGS
- -------------------------------------------------------------------------------
RATING AGENCY EFFECTIVE RATING BASIS OF RATING
DATE OF
RATING
- -------------------------------------------------------------------------------
A.M. Best and Company, Inc. 9/9/97 A+ Financial soundness and
operating performance.
- -------------------------------------------------------------------------------
Standard & Poor*s 1/23/98 AA Claims paying ability
- -------------------------------------------------------------------------------
Duff & Phelps 1/23/98 AA+ Claims paying ability
- -------------------------------------------------------------------------------
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. The assets are
kept physically segregated and are held separate and apart from Hartford's
general corporate assets. Records are maintained of all purchases and
redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in this 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 the report on the statutory-basis financial
statements of Hartford Life and Annuity Insurance Company (formerly ITT Hartford
Life and Annuity Insurance Company) which states the statutory-basis financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting
<PAGE>
principles. The principal business address of Arthur Andersen LLP is One
Financial Plaza, Hartford, Connecticut 06103.
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account and
will offer the Contracts on a continous basis.
HSD is a wholly-owned subsidiary of Hartford 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 Securities and Exchange Commission under the
Securities Exchange Act of 1934 as a Broker-Dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD").
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 promotion
incentives in cash or other compensation.
CALCULATION OF YIELD AND RETURN
YIELD OF THE PUTNAM MONEY MARKET SUB-ACCOUNT. As summarized in the Prospectus
under the heading "Performance Related Information," the yield of the
Sub-Account for a seven day period (the "base period") will be computed by
determining the "net change in value" of a hypothetical account having a balance
of one unit at the beginning of the period, dividing the net change in account
value by the value of the account at the beginning of the base period to obtain
the base period return, and multiplying the base period return by 365/7 with the
resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include net investment income of
the account (accrued dividends as declared by the underlying funds, less expense
and Contract charges of the account) for the period, but will not include
realized gains or losses or unrealized appreciation or depreciation on the
underlying fund shares.
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from the
result, according to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
The PCM Money Market Fund Sub-Account's yield and effective yield will vary in
response to
<PAGE>
fluctuations in interest rates and in the expenses of the Sub-Account. The
current yield and effective yield reflect recurring charges on the Separate
Account level, including the maximum Annual Maintenance Fee.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUB-ACCOUNTS YIELD EFFECTIVE YIELD
- --------------------------------------------------------------------------------
<S> <C> <C>
Putnam Money Market* 3.94 4.02
- --------------------------------------------------------------------------------
</TABLE>
* Yield and effective yield for the seven day period ending December 31, 1997.
YIELDS OF PUTNAM GROWTH AND INCOME, PUTNAM GLOBAL ASSET ALLOCATION, PUTNAM
HIGH YIELD, PUTNAM UTILITIES GROWTH AND INCOME, PUTNAM U.S. GOVERNMENT AND
HIGHT QUALITY BOND, AND PUTNAM DIVERSIFIED INCOME SUB-ACCOUNTS. As summarized
in the Prospectus under the heading "Performance Related Information," yields
of the above Sub-Accounts will be computed by annualizing a recent month's
net investment income, divided by a Fund share's net asset value on the last
trading day of that month. Net changes in the value of a hypothetical account
will assume the change in the underlying mutual fund's "net asset value per
share" for the same period in addition to the daily expense charge assessed,
at the sub-account level for the respective period. The Sub-Accounts' yields
will vary from time to time depending upon market conditions and, the
composition of the underlying funds' portfolios. Yield should also be
considered relative to changes in the value of the Sub-Accounts' shares and
to the relative risks associated with the investment objectives and policies
of the underlying Fund.
The yield reflects recurring charges on the Separate Account level, including
the Annual Maintenance Fee.
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges assessed
against a Contract Owner's account over the base period. Yield quotations based
on a 30 day period were computed by dividing the dividends and interests earned
during the period by the maximum offering price per unit on the last day of the
period, according to the following formula:
Example:
6
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1) - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the period that
were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the period.
At any time in the future, yields and total return may be higher or lower than
past yields and
<PAGE>
there can be no assurance that any historical results will continue.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUB-ACCOUNTS YIELD
- --------------------------------------------------------------------------------
<S> <C>
Putnam Growth and Income ** .41
- --------------------------------------------------------------------------------
Putnam Global Asset Allocation ** 1.08
- --------------------------------------------------------------------------------
Putnam High Yield ** 7.61
- --------------------------------------------------------------------------------
Putnam Utilities Growth and Income ** 1.67
- --------------------------------------------------------------------------------
Putnam U.S. Government and High Quality Bond** 4.08
- --------------------------------------------------------------------------------
Putnam Diversified Income ** 6.64
- --------------------------------------------------------------------------------
</TABLE>
** Yield quotation based on a 30 day period ended December 31, 1997.
CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the heading
"Performance Related Information", total return is a measure of the change in
value of an investment in a Sub-Account over the period covered. The formula for
total return used herein includes three steps: (1) calculating the value of the
hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of units owned at the end of the period by the unit
value per unit on the last trading day of the period; (2) assuming redemption at
the end of the period and deducting any applicable contingent deferred sales
charge and the $30.00 Annual Maintenance Fee (if applicable) and (3) dividing
this account value for the hypothetical investor by the initial $1,000
investment and annualizing the result for periods of less than one year. Total
return will be calculated for one year, five years, and ten years or some other
relevant periods if a Sub-Account has not been in existence for at least ten
years.
For the fiscal year ended December 31, 1997, the standardized average annual
total return for the Funds listed below were as follows:
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUB-ACCOUNTS INCEPTION DATE 1 YEAR 5 YEAR 10 YEAR OR SINCE
INCEPTION*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Putnam Asia Pacific 5/1/95 -23.89 na -8.12
Growth
- --------------------------------------------------------------------------------
Putnam Diversified 9/15/93 -3.12 na 1.67
Income
- --------------------------------------------------------------------------------
Putnam The George na na na na
- --------------------------------------------------------------------------------
<PAGE>
<CAPTION>
- --------------------------------------------------------------------------------
Putnam Fund of
Boston
- --------------------------------------------------------------------------------
Putnam Global Asset 2/1/88 9.01 9.85 8.17
Allocation
- --------------------------------------------------------------------------------
Putnam Global 5/1/90 3.74 10.72 6.29
Growth
- --------------------------------------------------------------------------------
Putnam Growth and 2/1/88 13.42 14.21 13.05
Income
- --------------------------------------------------------------------------------
Putnam Health na na na na
Sciences
- --------------------------------------------------------------------------------
Putnam High Yield 2/1/88 3.75 7.82 7.42
- --------------------------------------------------------------------------------
Putnam International 1/2/97 na na 5.51
Growth
- --------------------------------------------------------------------------------
Putnam International 1/2/97 na na 8.76
Growth and Income
- --------------------------------------------------------------------------------
Putnam International 1/2/97 na na -10.50
New Opportunities
- --------------------------------------------------------------------------------
Putnam Investors na na na na
- --------------------------------------------------------------------------------
Putnam New 6/20/94 12.57 na 17.69
Opportunities
- --------------------------------------------------------------------------------
Putnam New Value 1/2/97 na na 6.97
- --------------------------------------------------------------------------------
Putnam OTC & na na na na
Emerging Growth
- --------------------------------------------------------------------------------
Putnam U.S. 2/1/88 -1.87 2.58 4.74
Government and
High Quality
Bond
- --------------------------------------------------------------------------------
<PAGE>
<CAPTION>
- --------------------------------------------------------------------------------
Putnam Utilities 5/1/92 16.33 10.40 9.99
Growth and Income
Bond
- --------------------------------------------------------------------------------
Putnam Vista 1/2/97 na na 12.51
- --------------------------------------------------------------------------------
Putnam Voyager 2/1/88 15.76 14.68 14.46
- --------------------------------------------------------------------------------
Putnam Money 2/1/88 -5.24 -.76 1.27
Market
- --------------------------------------------------------------------------------
</TABLE>
*Figures represent performance since inception for Sub-Accounts in
existence for less than 10 years, or performance for 10 years for Sub-Accounts
in existence for more than 10 years.
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated for one
year, five years, and ten years or other periods. Non-standardized total return
is measured in the same manner as the standardized total return described above,
except that the contingent deferred sales charge and the Annual Maintenance Fee
are not deducted. Therefore, non-standardized total return for a Sub-Account is
higher than standardized total return for a Sub-Account.
For the fiscal year ended December 31, 1997, the non-standardized annualized
total return for the Sub-Accounts listed below were as follows:
NON-STANDARDIZED ANNUALIZED TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUB-ACCOUNTS INCEPTION DATE 1 YEAR 5 YEAR 10 YEAR OR SINCE
INCEPTION*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Putnam Asia Pacific 5/1/95 -15.84 na -3.17
Growth
- --------------------------------------------------------------------------------
Putnam Diversified 9/15/93 5.88 na 5.94
Income
- --------------------------------------------------------------------------------
Putnam The George na na na na
Putnam Fund of
Boston
- --------------------------------------------------------------------------------
Putnam Global Asset 2/1/88 18.01 13.01 10.55
Allocation
- --------------------------------------------------------------------------------
Putnam Global 5/1/90 12.74 13.64 9.10
Growth
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Putnam Growth and 2/1/88 22.42 17.21 15.01
Income
- --------------------------------------------------------------------------------
Putnam Health na na na na
Sciences
- --------------------------------------------------------------------------------
Putnam High 2/1/88 12.75 11.01 9.93
Yield
- --------------------------------------------------------------------------------
Putnam International 1/2/97 na na 14.51
Growth
- --------------------------------------------------------------------------------
Putnam International 1/2/97 na na 17.76
Growth and Income
- --------------------------------------------------------------------------------
Putnam International 1/2/97 na na -1.50
New Opportunities
- --------------------------------------------------------------------------------
Putnam Investors na na na na
- --------------------------------------------------------------------------------
Putnam New 6/20/94 21.57 na 21.18
Opportunities
- --------------------------------------------------------------------------------
Putnam New Value 1/2/97 na na 15.97
- --------------------------------------------------------------------------------
Putnam OTC & na na na na
Emerging Growth
- --------------------------------------------------------------------------------
Putnam U.S. 2/1/88 7.13 6.12 7.22
Government and
High Quality
Bond
- --------------------------------------------------------------------------------
Putnam Utilities 5/1/92 25.33 13.66 13.15
Growth and Income
Bond
- --------------------------------------------------------------------------------
Putnam Vista Fund 1/2/97 na na 21.51
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Putnam Voyager 2/1/88 24.76 17.59 16.43
- --------------------------------------------------------------------------------
Putnam Money 2/1/88 3.76 3.04 4.05
Market
- --------------------------------------------------------------------------------
</TABLE>
*Figures represent performance since inception for Sub-Accounts in
existence for less than 10 years, or performance for 10 years for Sub-Accounts
in existence for more than 10 years.
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. The total return and yield may also be used to compare
the performance of the Sub-Accounts against certain widely acknowledged outside
standards or indices for stock and bond market performance. Index performance is
not representative of the performance of the Sub-Account to which it is
compared and is not adjusted for commissions and other costs. Portfolio holdings
of the Sub-Account will differ from those of the index to which it is
compared. Performance comparison indices include the following:
The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics, is a
commonly used measure of the rate of inflation. The index shows the average
change in the cost of selected consumer goods and services and does not
represent a return on an investment vehicle.
The Dow Jones Industrial Average is an unmanaged list of 30 common stocks
frequently used as a general measure of stock market performance. Its
performance figures reflect changes of market prices and reinvestment of all
distributions.
Lehman Brothers Corporate Bond Index is an unmanaged list of publicly issued,
fixed-rate, non-convertible investment-grade domestic corporate debt
securities frequently used as a general measure of the performance of
fixed-income securities. The average quality of bonds included in the index
may be higher than the average quality of those bonds in which Putnam VT High
Yield Fund customarily invests. The index does not include bonds in certain
of the lower rating classifications in which the Fund may invest. The
performance figures of the index reflect changes in market prices and
reinvestment of all interest payments.
The Lehman Brothers Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Lehman Brothers Government/Corporate Bond Index (the "SL Government/
Corporate Index") is a measure of the market value of approximately 5,300 bonds
with a face value
<PAGE>
currently in excess of $1.3 trillion. To be included in the SL
Government/Corporate Index, an issue must have amounts outstanding in excess
of $1 million, have at least one year to maturity and be rated "Baa" or
higher ("investment grade") by a nationally recognized rating agency. The
index does not include bonds in certain of the lower-rating classifications
in which Putnam VT High Yield Fund invests. Its performance figures reflect
changes in market prices and reinvestment of all interest payments.
Morgan Stanley Capital International World Index is an unmanaged list of
approximately 1,450 equity securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand and the Far East, with all
values expressed in U.S. dollars. Performance figures reflect changes in market
prices and reinvestment of distributions net of withholding taxes. The
securities in the index change over time to maintain representativeness.
The NASDAQ-OTC Industrial Average (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded. Its performance figures reflect changes of market prices but do not
reflect reinvestment of cash dividends.
Salomon Brothers Long-Term High-Grade Corporate Bond Index is an unmanaged
list of publicly traded corporate bonds having a rating of at least AA by
Standard & Poor's or Aa by Moody's and is frequently used as general measure
of the performance of fixed-income securities. The average quality of bonds
included in the index may be higher than the average quality of those bonds
in which Putnam VT High Yield customarily invests. The index does not include
bonds in certain of the lower rating classifications in which the Fund may
invest. Performance figures for the index reflect changes of market prices
and reinvestment of all distributions.
The Salomon Brothers 7-10 Year Government Bond Index is an unmanaged list of
U.S. Government and government agency securities with maturities of 7 to 10
years. Performance figures for the index reflect changes of market prices and
reinvestment of all interest payments.
The Standard & Poor's Composite Index of 500 stocks (the "S&P 500") is a market
value-weighted and unmanaged index showing changes in the aggregate market value
of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40 financial services
concerns. The S&P 500 represents about 80% of the market value of all issues
traded on the New York Stock Exchange. Its performance figures reflect changes
of market prices and reinvestment of all regular cash dividends.
<PAGE>
The Standard & Poor's 40 Utilities Index is unmanaged list of 40 utility
stocks. The Index assumes reinvestment of all distributions and reflects
changes in market prices but does not take into account brokerage commissions
or other fees. Putnam VT Utilities Growth and Income Fund's telephone and
electric utility stocks are generally held in the same proportion as the
telephone and electric stocks in the S&P Utilities Index. However, there are
some utility stocks held by the Fund that are not part of the Index.
<PAGE>
Report of Independent Public Accountants
To ITT Hartford Life and Annuity Insurance Company Putnam Capital
Manager Trust Separate Account Two and to the Owners of Units of
Interest therein:
We have audited the accompanying statement of assets and liabilities of
ITT Hartford Life and Annuity Insurance Company Putnam Capital Manager
Trust Separate Account Two (the Account) as of December 31, 1997, and
the related statements of operations for the year then ended and
statements of changes in net assets for each of the two years in the
period then ended. These financial statements are the responsibility of
the Account's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of ITT Hartford
Life and Annuity Insurance Company Putnam Capital Manager Trust Separate
Account Two as of December 31, 1997, the results of its operations for
the year then ended and the changes in its net assets for each of the
two years in the period then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 16, 1998
<PAGE>
<TABLE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<CAPTION>
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------------------------------
December 31, 1997 Asia Pacific Diversified Global Asset Global
Growth Income Allocation Growth
Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments:
.......................................................................................................
Putnam VT Asia Pacific
Growth Fund
Shares 7,427,606
Cost $77,728,628
.......................................................................................................
Market Value: $68,333,972 $ -- $ -- $ --
.......................................................................................................
Putnam VT Diversified
Income Fund
Shares 23,880,205
Cost $250,110,003
.......................................................................................................
Market Value: -- 270,085,114 -- --
.......................................................................................................
Putnam VT Global
Asset Allocation Fund
Shares 24,063,166
Cost $364,923,735
.......................................................................................................
Market Value: -- -- 451,424,985 --
.......................................................................................................
Putnam VT Global
Growth Fund
Shares 46,326,997
Cost $679,679,857
.......................................................................................................
Market Value: -- -- -- 849,637,130
.......................................................................................................
Putnam VT Growth and
Income Fund
Shares 133,607,004
Cost $2,855,026,616
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT High Yield Fund
Shares 40,606,314
Cost $496,308,147
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT International
Growth Fund
Shares 6,966,423
Cost $77,975,764
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT International
Growth and Income Fund
Shares 10,124,438
Cost $113,567,754
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Due From ITT Hartford Life &
Annuity Insurance Company -- -- 73,206 --
.......................................................................................................
Receivable from fund
shares sold 3,089,245 267,880 -- 2,417,524
- -------------------------------------------------------------------------------------------------------
Total Assets 71,423,217 270,352,994 451,498,191 852,054,654
- -------------------------------------------------------------------------------------------------------
Liabilities
Due to ITT Hartford Life &
Annuity Insurance Company 3,089,242 268,102 -- 2,417,754
.......................................................................................................
Payable for fund
shares purchased -- -- 73,516 --
.......................................................................................................
Total Liabilities 3,089,242 268,102 73,516 2,417,754
- -------------------------------------------------------------------------------------------------------
Net Assets (variable
annuity contract
liabilities) $68,333,975 $270,084,892 $451,424,675 $849,636,900
- -------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Statement of Assets and Liabilities (continued)
- -------------------------------------------------------------------------------------------------------
December 31, 1997 Growth High Yield International International
and Income Fund Growth Growth
Fund Sub-Account Fund and Income
Sub-Account Sub-Account Fund
Sub-Account
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments:
.......................................................................................................
Putnam VT Asia Pacific
Growth Fund
Shares 7,427,606
Cost $77,728,628
.......................................................................................................
Market Value: $ -- $ -- $ -- $ --
.......................................................................................................
Putnam VT Diversified
Income Fund
Shares 23,880,205
Cost $250,110,003
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT Global
Asset Allocation Fund
Shares 24,063,166
Cost $364,923,735
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT Global
Growth Fund
Shares 46,326,997
Cost $679,679,857
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT Growth and
Income Fund
Shares 133,607,004
Cost $2,855,026,616
.......................................................................................................
Market Value: 3,783,750,348 -- -- --
.......................................................................................................
Putnam VT High Yield Fund
Shares 40,606,314
Cost $496,308,147
.......................................................................................................
Market Value: -- 553,058,000 -- --
.......................................................................................................
Putnam VT International
Growth Fund
Shares 6,966,423
Cost $77,975,764
.......................................................................................................
Market Value: -- -- 79,626,215 --
.......................................................................................................
Putnam VT International
Growth and Income Fund
Shares 10,124,438
Cost $113,567,754
.......................................................................................................
Market Value: -- -- -- 116,734,769
.......................................................................................................
Due From ITT Hartford Life &
Annuity Insurance Company 1,845,585 864,911 -- --
.......................................................................................................
Receivable from fund
shares sold -- -- 50,685 2,850,212
- -------------------------------------------------------------------------------------------------------
Total Assets 3,785,595,933 553,922,911 79,676,900 119,584,981
- -------------------------------------------------------------------------------------------------------
Liabilities
Due to ITT Hartford Life &
Annuity Insurance Company -- -- 50,608 2,849,709
.......................................................................................................
Payable for fund
shares purchased 1,850,786 858,648 -- --
.......................................................................................................
Total Liabilities 1,850,786 858,648 50,608 2,849,709
- -------------------------------------------------------------------------------------------------------
Net Assets (variable
annuity contract
liabilities) $3,783,745,147 $553,064,263 $79,626,292 $116,735,272
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<CAPTION>
Statement of Assets and Liabilities (continued)
- -------------------------------------------------------------------------------------------------------
December 31, 1997 International Money New New
New Market Opportunities Value
Opportunities Fund Fund Fund
Fund Sub-Account Sub-Account Sub-Account
Sub-Account
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments:
.......................................................................................................
Putnam VT International
New Opportunities Fund
Shares 6,438,325
Cost $67,522,570
.......................................................................................................
Market Value: $64,125,714 $ -- $ -- $ --
.......................................................................................................
Putnam VT Money
Market Fund
Shares 181,048,078
Cost $181,048,078
.......................................................................................................
Market Value: -- 181,048,078 -- --
.......................................................................................................
Putnam VT New
Opportunities Fund
Shares 57,126,747
Cost $930,119,603
.......................................................................................................
Market Value: -- -- 1,212,800,837 --
.......................................................................................................
Putnam VT New Value Fund
Shares 10,114,842
Cost $110,860,360
.......................................................................................................
Market Value: -- -- -- 118,950,540
.......................................................................................................
Putnam VT U.S. Government
and High Quality Fund
Shares 17,365,130
Cost $228,514,012
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT Utilities
Growth & Income Fund
Shares 20,663,783
Cost $253,987,357
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT Vista Fund
Shares 7,954,124
Cost $87,412,056
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT Voyager Fund
Shares 55,922,468
Cost $1,593,337,360
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Due From ITT Hartford Life &
Annuity Insurance Company -- 15,480,961 -- --
.......................................................................................................
Receivable from fund
shares sold 1,437,373 -- 1,187,843 450,391
- -------------------------------------------------------------------------------------------------------
Total Assets 65,563,087 196,529,039 1,213,988,680 119,400,931
- -------------------------------------------------------------------------------------------------------
Liabilities
Due to ITT Hartford Life &
Annuity Insurance Company 1,437,479 -- 1,187,518 450,497
.......................................................................................................
Payable for fund
shares purchased -- 15,480,652 -- --
.......................................................................................................
Total Liabilities 1,437,479 15,480,652 1,187,518 450,497
- -------------------------------------------------------------------------------------------------------
Net Assets (variable
annuity contract
liabilities) $64,125,608 $181,048,387 $1,212,801,162 $118,950,434
- -------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Statement of Assets and Liabilities (continued)
- -------------------------------------------------------------------------------------------------------
December 31, 1997 U.S. Government Utilities Vista Voyager
and High Growth Fund Fund
Quality Bond and Income Sub-Account Sub-Account
Fund Fund
Sub-Account Sub-Account
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments:
.......................................................................................................
Putnam VT International
New Opportunities Fund
Shares 6,438,325
Cost $67,522,570
.......................................................................................................
Market Value: $ -- $ -- $ -- $ --
.......................................................................................................
Putnam VT Money
Market Fund
Shares 181,048,078
Cost $181,048,078
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT New
Opportunities Fund
Shares 57,126,747
Cost $930,119,603
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT New Value Fund
Shares 10,114,842
Cost $110,860,360
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT U.S. Government
and High Quality Fund
Shares 17,365,130
Cost $228,514,012
.......................................................................................................
Market Value: 233,040,047 -- -- --
.......................................................................................................
Putnam VT Utilities
Growth & Income Fund
Shares 20,663,783
Cost $253,987,357
.......................................................................................................
Market Value: -- 354,177,234 -- --
.......................................................................................................
Putnam VT Vista Fund
Shares 7,954,124
Cost $87,412,056
.......................................................................................................
Market Value: -- -- 97,994,803 --
.......................................................................................................
Putnam VT Voyager Fund
Shares 55,922,468
Cost $1,593,337,360
.......................................................................................................
Market Value: -- -- -- 2,185,450,030
.......................................................................................................
Due From ITT Hartford Life &
Annuity Insurance Company 1,547,195 -- 181,478 --
.......................................................................................................
Receivable from fund
shares sold -- 160,002 -- 3,770,589
- -------------------------------------------------------------------------------------------------------
Total Assets 234,587,242 354,337,236 98,176,281 2,189,220,619
- -------------------------------------------------------------------------------------------------------
Liabilities
Due to ITT Hartford Life &
Annuity Insurance Company -- 165,937 -- 3,767,051
.......................................................................................................
Payable for fund
shares purchased 1,547,318 -- 181,404 --
.......................................................................................................
Total Liabilities 1,547,318 165,937 181,404 3,767,051
- -------------------------------------------------------------------------------------------------------
Net Assets (variable
annuity contract
liabilities) $233,039,924 $354,171,299 $97,994,877 $2,185,453,568
- -------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<CAPTION>
Statement of Assets and Liabilities (continued)
- -----------------------------------------------------------------------------------------------------------------------------
December 31, 1997 Units Unit Contract
Owned by Price Liability
Participants
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred annuity contracts in the accumulation period:
Individual Sub-Accounts
.............................................................................................................................
Asia Pacific Growth Fund Sub-Account 7,444,698 $ 9.175966 $ 68,312,294
.............................................................................................................................
Diversified Income Fund Sub-Account 21,016,690 12.840701 269,869,032
.............................................................................................................................
Global Asset Allocation Fund Sub-Account 16,683,299 27.026081 450,884,185
.............................................................................................................................
Global Growth Fund Sub-Account 43,484,814 19.497474 847,844,030
.............................................................................................................................
Growth and Income Fund Sub-Account 94,356,271 40.036154 3,777,662,185
.............................................................................................................................
High Yield Fund Sub-Account 21,602,342 25.574900 552,477,745
.............................................................................................................................
International Growth Fund Sub-Account 6,948,348 11.450726 79,563,629
.............................................................................................................................
International Growth and Income Fund Sub-Account 9,877,972 11.776424 116,327,187
.............................................................................................................................
International New Opportunities Fund Sub-Account 6,510,337 9.849814 64,125,608
.............................................................................................................................
Money Market Fund Sub-Account 122,079,468 1.482672 181,003,809
.............................................................................................................................
New Opportunities Fund Sub-Account 59,879,474 20.223432 1,210,968,462
.............................................................................................................................
New Value Fund Sub-Account 10,225,618 11.597024 118,586,732
.............................................................................................................................
U.S. Government and High Quality Bond Fund Sub-Account 11,665,758 19.958881 232,835,474
.............................................................................................................................
Utilities Growth and Income Fund Sub-Account 17,569,252 20.143040 353,898,139
.............................................................................................................................
Vista Fund Sub-Account 8,062,390 12.151064 97,966,626
.............................................................................................................................
Voyager Fund Sub-Account 48,249,790 45.196582 2,180,725,590
.............................................................................................................................
Sub-total Individual Sub-Accounts 10,603,050,727
.............................................................................................................................
Annuity contracts in the annuity period:
.............................................................................................................................
Individual Sub-Accounts:
.............................................................................................................................
Asia Pacific Growth Fund Sub-Account 2,363 $ 9.175966 $21,681
.............................................................................................................................
Diversified Income Fund Sub-Account 16,811 12.840701 215,860
.............................................................................................................................
Global Asset Allocation Fund Sub-Account 19,999 27.026081 540,490
.............................................................................................................................
Global Growth Fund Sub-Account 91,954 19.497474 1,792,870
.............................................................................................................................
Growth and Income Fund Sub-Account 151,937 40.036154 6,082,962
.............................................................................................................................
High Yield Fund Sub-Account 22,933 25.574900 586,518
.............................................................................................................................
International Growth Fund Sub-Account 5,473 11.450726 62,663
.............................................................................................................................
International Growth and Income Fund Sub-Account 34,653 11.776424 408,085
.............................................................................................................................
Money Market Fund Sub-Account 30,066 1.482672 44,578
.............................................................................................................................
New Opportunities Fund Sub-Account 90,623 20.223432 1,832,700
.............................................................................................................................
New Value Fund Sub-Account 31,362 11.597024 363,702
.............................................................................................................................
U.S. Government and High Quality Bond Fund Sub-Account 10,244 19.958881 204,450
.............................................................................................................................
Utilities Growth and Income Fund Sub-Account 13,561 20.143040 273,160
.............................................................................................................................
Vista Fund Sub-Account 2,325 12.151064 28,251
.............................................................................................................................
Voyager Fund Sub-Account 104,609 45.196582 4,727,978
.............................................................................................................................
Sub-total Individual Sub-Accounts 17,185,948
- -----------------------------------------------------------------------------------------------------------------------------
Grand Total $10,620,236,675
- -----------------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<CAPTION>
Statement of Operations
- ----------------------------------------------------------------------------------------------------------------
For the year ended Asia Pacific Diversified Global Asset Global
December 31, 1997 Growth Income Allocation Growth
Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Dividends $ 1,583,349 $12,997,452 $11,993,572 $17,352,213
................................................................................................................
Expense:
Mortality and expense
undertakings (1,123,401) (3,442,134) (5,622,340) (11,348,642)
................................................................................................................
Capital gains income -- 2,048,961 20,499,937 18,664,210
................................................................................................................
Net realized and
unrealized gain (loss)
on investments:
................................................................................................................
Net realized gain (loss)
on security transactions 381,797 4,201 42,533 (70,313)
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (13,132,923) 2,897,636 36,929,311 66,628,239
................................................................................................................
Net gain (loss) on investments (12,751,126) 2,901,837 36,971,844 66,557,926
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations: $(12,291,178) $14,506,116 $63,843,013 $91,225,707
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Operations (continued)
- ----------------------------------------------------------------------------------------------------------------
For the year ended Growth High Yield International International
December 31, 1997 and Income Fund Growth Growth
Fund Sub-Account Fund and Income
Sub-Account Sub-Account* Fund
Sub-Account*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Dividends $ 55,603,806 $30,314,263 $1,197,977 $3,863,584
................................................................................................................
Expense:
Mortality and expense
undertakings (44,444,177) (6,636,856) (550,679) (848,822)
................................................................................................................
Capital gains income 135,341,577 3,515,165 -- --
................................................................................................................
Net realized and
unrealized gain (loss)
on investments:
................................................................................................................
Net realized gain (loss)
on security transactions (14,039) (4,814) 112,426 254,024
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 464,399,235 30,275,390 1,650,451 3,167,015
................................................................................................................
Net gain (loss) on investments 464,385,196 30,270,576 1,762,877 3,421,039
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations: $610,886,402 $57,463,148 $2,410,175 $6,435,801
- ----------------------------------------------------------------------------------------------------------------
*From inception, January 2, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<CAPTION>
Statement of Operations (continued)
- ----------------------------------------------------------------------------------------------------------------
For the year ended International Money New New
December 31, 1997 New Market Opportunities Value
Opportunities Fund Fund Fund
Fund Sub-Account Sub-Account Sub-Account*
Sub-Account*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Dividends $ 184,429 $10,950,891 $ -- $ --
................................................................................................................
Expense:
Mortality and expense
undertakings (613,179) (3,015,098) (14,288,485) (930,950)
................................................................................................................
Capital gains income -- -- -- --
................................................................................................................
Net realized and
unrealized gain (loss)
on investments:
................................................................................................................
Net realized gain (loss)
on security transactions 93,448 -- (674,928) (53,025)
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (3,396,856) -- 216,776,192 8,090,180
................................................................................................................
Net gain (loss) on investments (3,303,408) -- 216,101,264 8,037,155
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations: $(3,732,158) $ 7,935,793 $201,812,779 $7,106,205
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Operations (continued)
- ----------------------------------------------------------------------------------------------------------------
For the year ended U.S. Government Utilities Vista Voyager
December 31, 1997 and High Growth Fund Fund
Quality Bond and Income Sub-Account* Sub-Account
Fund Fund
Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Dividends $13,324,652 $10,305,478 $ 7,736 $ 3,327,367
................................................................................................................
Expense:
Mortality and expense
undertakings (3,007,439) (4,156,594) (725,784) (25,571,650)
................................................................................................................
Capital gains income -- 14,052,925 -- 71,707,177
................................................................................................................
Net realized and
unrealized gain (loss)
on investments:
................................................................................................................
Net realized gain (loss)
on security transactions 92,811 316,145 (41,487) (808,610)
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 4,496,793 50,135,725 10,582,747 357,032,488
................................................................................................................
Net gain (loss) on investments 4,589,604 50,451,870 10,541,260 356,223,878
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations: $14,906,817 $70,653,679 $9,823,212 $405,686,772
- ----------------------------------------------------------------------------------------------------------------
*From inception, January 2, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------
For the year ended Asia Pacific Diversified Global Asset Global
December 31, 1997 Growth Income Allocation Growth
Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 459,948 $ 9,555,318 $ 6,371,232 $ 6,003,571
................................................................................................................
Capital gains income -- 2,048,961 20,499,937 18,664,210
................................................................................................................
Net realized gain(loss)
on security transactions 381,797 4,201 42,533 (70,313)
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (13,132,923) 2,897,636 36,929,311 66,628,239
................................................................................................................
Net increase (decrease)
in net assets resulting
from operations (12,291,178) 14,506,116 63,843,013 91,225,707
................................................................................................................
Unit transactions:
Purchases 15,296,904 55,905,675 53,215,802 94,655,178
................................................................................................................
Net transfers (8,269,677) (9,769,014) 23,676,122 8,639,167
................................................................................................................
Surrenders (2,530,242) (12,309,013) (18,260,579) (29,632,010)
................................................................................................................
Net annuity transactions 8,025 146,954 145,121 886,113
................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 4,505,010 33,974,602 58,776,466 74,548,448
................................................................................................................
Total increase (decrease)
in net assets (7,786,168) 48,480,718 122,619,479 165,774,155
................................................................................................................
Net assets:
Beginning of period 76,120,143 221,604,174 328,805,196 683,862,745
- ----------------------------------------------------------------------------------------------------------------
End of period $68,333,975 $270,084,892 $451,424,675 $849,636,900
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Changes in Net Assets (continued)
- ----------------------------------------------------------------------------------------------------------------
For the year ended Growth High Yield International International
December 31, 1997 and Income Fund Growth Growth
Fund Sub-Account Fund and Income
Sub-Account Sub-Account* Fund
Sub-Account*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 11,159,629 $ 23,677,407 $ 647,298 $ 3,014,762
................................................................................................................
Capital gains income 135,341,577 3,515,165 -- --
................................................................................................................
Net realized gain(loss)
on security transactions (14,039) (4,814) 112,426 254,024
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 464,399,235 30,275,390 1,650,451 3,167,015
................................................................................................................
Net increase (decrease)
in net assets resulting
from operations 610,886,402 57,463,148 2,410,175 6,435,801
................................................................................................................
Unit transactions:
Purchases 653,735,175 119,907,763 42,465,632 60,593,915
................................................................................................................
Net transfers 243,532,477 11,079,099 35,605,842 50,937,686
................................................................................................................
Surrenders (121,451,891) (22,220,046) (916,342) (1,623,364)
................................................................................................................
Net annuity transactions 3,412,370 452,320 60,985 391,234
................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 779,228,131 109,219,136 77,216,117 110,299,471
................................................................................................................
Total increase (decrease)
in net assets 1,390,114,533 166,682,284 79,626,292 116,735,272
................................................................................................................
Net assets:
Beginning of period 2,393,630,614 386,381,979 -- --
- ----------------------------------------------------------------------------------------------------------------
End of period $3,783,745,147 $553,064,263 $79,626,292 $116,735,272
- ----------------------------------------------------------------------------------------------------------------
*From inception, January 2, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<CAPTION>
Statement of Changes in Net Assets (continued)
- ----------------------------------------------------------------------------------------------------------------
For the year ended International Money New New
December 31, 1997 New Market Opportunities Value
Opportunities Fund Fund Fund
Fund Sub-Account Sub-Account Sub-Account*
Sub-Account*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ (428,750) $ 7,935,793 $ (14,288,485) $ (930,950)
................................................................................................................
Capital gains income -- -- -- --
................................................................................................................
Net realized gain(loss)
on security transactions 93,448 -- (674,928) (53,025)
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (3,396,856) -- 216,776,192 8,090,180
................................................................................................................
Net increase (decrease)
in net assets resulting
from operations (3,732,158) 7,935,793 201,812,779 7,106,205
................................................................................................................
Unit transactions:
Purchases 35,294,318 159,829,719 173,232,758 55,890,696
................................................................................................................
Net transfers 33,818,005 (163,808,043) 23,002,452 58,041,788
................................................................................................................
Surrenders (1,254,557) (33,923,982) (34,774,552) (2,436,634)
................................................................................................................
Net annuity transactions -- (59,424) 525,040 348,379
................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 67,857,766 (37,961,730) 161,985,698 111,844,229
................................................................................................................
Total increase (decrease)
in net assets 64,125,608 (30,025,937) 363,798,477 118,950,434
................................................................................................................
Net assets:
Beginning of period -- 211,074,324 849,002,685 --
- ----------------------------------------------------------------------------------------------------------------
End of period $64,125,608 $181,048,387 $1,212,801,162 $118,950,434
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Changes in Net Assets (continued)
- ----------------------------------------------------------------------------------------------------------------
For the year ended U.S. Government Utilities Vista Voyager
December 31, 1997 and High Growth Fund Fund
Quality Bond and Income Sub-Account* Sub-Account
Fund Fund
Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 10,317,213 $ 6,148,884 $ (718,048) $ (22,244,283)
................................................................................................................
Capital gains income -- 14,052,925 -- 71,707,177
................................................................................................................
Net realized gain(loss)
on security transactions 92,811 316,145 (41,487) (808,610)
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 4,496,793 50,135,725 10,582,747 357,032,488
................................................................................................................
Net increase (decrease)
in net assets resulting
from operations 14,906,817 70,653,679 9,823,212 405,686,772
................................................................................................................
Unit transactions:
Purchases 30,608,860 30,748,249 48,980,888 288,568,056
................................................................................................................
Net transfers (7,633,402) (8,439,229) 40,279,408 63,585,706
................................................................................................................
Surrenders (12,023,717) (12,334,942) (1,114,398) (65,966,528)
................................................................................................................
Net annuity transactions 87,519 116,058 25,767 1,321,830
................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 11,039,260 10,090,136 88,171,665 287,509,064
................................................................................................................
Total increase (decrease)
in net assets 25,946,077 80,743,815 97,994,877 693,195,836
................................................................................................................
Net assets:
Beginning of period 207,093,847 273,427,484 -- 1,492,257,732
- ----------------------------------------------------------------------------------------------------------------
End of period $233,039,924 $354,171,299 $97,994,877 $2,185,453,568
- ----------------------------------------------------------------------------------------------------------------
*From inception, January 2, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------
For the year ended Asia Pacific Diversified Global Asset Global
December 31, 1996 Growth Income Allocation Growth
Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ (233,515) $ 6,318,740 $ 6,886,175 $ 2,049,900
................................................................................................................
Capital gains income -- -- 6,905,232 13,626,134
................................................................................................................
Net realized gain(loss)
on security transactions 503,364 (13,440) (5,880) 115,502
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 3,413,284 7,205,260 21,830,738 60,644,344
................................................................................................................
Net increase (decrease)
in net assets resulting
from operations 3,683,133 13,510,560 35,616,265 76,435,880
................................................................................................................
Unit transactions:
Purchases 43,835,968 86,101,578 76,481,223 182,210,555
................................................................................................................
Net transfers 16,464,173 4,387,499 19,773,407 61,807,258
................................................................................................................
Surrenders (976,032) (6,844,044) (7,867,916) (13,688,662)
................................................................................................................
Net annuity transactions 9,557 45,237 49,595 357,636
................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 59,333,666 83,690,270 88,436,309 230,686,787
................................................................................................................
Total increase (decrease)
in net assets 63,016,799 97,200,830 124,052,574 307,122,667
................................................................................................................
Net assets:
Beginning of period 13,103,344 124,403,344 204,752,622 376,740,078
- ----------------------------------------------------------------------------------------------------------------
End of period $76,120,143 $221,604,174 $328,805,196 $683,862,745
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Changes in Net Assets (continued)
- ----------------------------------------------------------------------------------------------------------------
For the year ended Growth High Yield Money New
December 31, 1996 and Income Fund Market Opportunities
Fund Sub-Account Fund Fund
Sub-Account Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 36,106,325 $ 13,520,455 $ 5,547,548 $ (8,148,912)
................................................................................................................
Capital gains income 27,273,294 -- -- --
................................................................................................................
Net realized gain(loss)
on security transactions (2,128) 3,557 -- (338,446)
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 265,013,647 18,332,001 -- 22,918,086
................................................................................................................
Net increase (decrease)
in net assets resulting
from operations 328,391,138 31,856,013 5,547,548 14,430,728
................................................................................................................
Unit transactions:
Purchases 779,047,762 143,881,346 274,781,350 468,698,683
................................................................................................................
Net transfers 185,288,431 7,295,366 (147,255,813) 118,659,486
................................................................................................................
Surrenders (54,682,231) (12,925,712) (13,490,742) (13,631,981)
................................................................................................................
Net annuity transactions 850,976 66,417 (48,622) 669,701
................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 910,504,938 138,317,417 113,986,173 574,395,889
................................................................................................................
Total increase (decrease)
in net assets 1,238,896,076 170,173,430 119,533,721 588,826,617
................................................................................................................
Net assets:
Beginning of period 1,154,734,538 216,208,549 91,540,603 260,176,068
- ----------------------------------------------------------------------------------------------------------------
End of period $2,393,630,614 $386,381,979 $211,074,324 $849,002,685
- ----------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Statement of Changes in Net Assets (continued)
- ----------------------------------------------------------------------------------------------
For the year ended U.S. Government Utilities Voyager
December 31, 1996 and High Growth Fund
Quality Bond and Income Sub-Account
Fund Fund
Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) $ 8,015,651 $ 4,954,386 $ 1,737,117
..............................................................................................
Capital gains income -- -- 34,544,297
..............................................................................................
Net realized gain(loss)
on security transactions (15,593) 3,070 (111,435)
..............................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (5,205,099) 27,539,072 66,299,654
..............................................................................................
Net increase (decrease)
in net assets resulting
from operations 2,794,959 32,496,528 102,469,633
..............................................................................................
Unit transactions:
Purchases 58,254,930 54,540,316 537,341,531
..............................................................................................
Net transfers (9,888,428) (6,591,159) 122,185,850
..............................................................................................
Surrenders (9,247,533) (8,471,777) (31,687,683)
..............................................................................................
Net annuity transactions (34,898) 25,329 1,230,624
..............................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 39,084,071 39,502,709 629,070,322
..............................................................................................
Total increase (decrease)
in net assets 41,879,030 71,999,237 731,539,955
..............................................................................................
Net assets:
Beginning of period 165,214,817 201,428,247 760,717,777
- ----------------------------------------------------------------------------------------------
End of period $207,093,847 $273,427,484 $1,492,257,732
- ----------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
ITT HARTFORD LIFE AND ANNUITY INSURANCE
Notes to Financial Statements
December 31, 1997
1. ORGANIZATION:
Putnam Capital Manager Trust Separate Account Two (the Account) is a
separate investment account within ITT Hartford Life and Annuity
Insurance Company (the Company) and is registered with the Securities
and Exchange Commission (SEC) as a unit investment trust under the
Investment Company Act of 1940, as amended. Both the Company and the
Account are subject to supervision and regulation by the Department of
Insurance of the State of Connecticut and the SEC. The Account invests
deposits by variable annuity contractholders of the Company in the
various mutual funds (the Funds) as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
A) Security Transactions -- Security transactions are recorded on the
trade date (date the order to buy or sell is executed). Cost of
investments sold is determined on the basis of identified cost. Dividend
and capital gains income are accrued as of the ex-dividend date. Capital
gains income represents dividends from the Funds which are characterized
as capital gains under tax regulations.
B) Security Valuation -- The investment in shares of the Funds are
valued at the closing net asset value per share as determined by the
appropriate Fund as of December 31, 1997.
C) Federal Income Taxes -- The operations of the Account form a part of,
and are taxed with, the total operations of the Company, which is taxed
as an insurance company under the Internal Revenue Code. Under current
law, no federal income taxes are payable with respect to the operations
of the Account.
D) Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the financial
statements and the reported amounts of income and expenses during the
period. Operating results in the future could vary from the amounts
derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
A) Mortality and Expense Undertakings -- The Company, as issuer of
variable annuity contracts, provides the mortality and expense
undertakings and, with respect to the Account, receives a maximum annual
fee of 1.25% of the Account's average daily net assets. The Company also
provides administrative services and receives an annual fee of 0.15% of
the Account's average daily net assets.
B) Deduction of Annual Maintenance Fees -- Annual maintenance fees are
deducted through termination of units of interest from applicable
contract owners' accounts, in accordance with the terms of the
contracts.
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of ITT Hartford Life
and Annuity Insurance Company:
We have audited the accompanying statutory balance sheets of ITT Hartford Life
and Annuity Insurance Company (a Connecticut Corporation and wholly owned
subsidiary of Hartford Life Insurance Company) (the Company) as of December 31,
1997 and 1996, and the related statutory statements of income, changes in
capital and surplus, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
statutory financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 1 of notes to statutory financial
statements. When statutory financial statements are presented for purposes other
than for filing with a regulatory agency, generally accepted auditing standards
require that an auditors' report on them state whether they are presented in
conformity with generally accepted accounting principles. The accounting
practices used by the Company vary from generally accepted accounting principles
as explained and quantified in Note 1.
In our opinion, because the differences in accounting practices as described in
Note 1 are material, the statutory financial statements referred to above do not
present fairly, in accordance with generally accepted accounting principles, the
financial position of the Company as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for each of three years in the
period ended December 31, 1997.
However, in our opinion, the statutory financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1997 and 1996, and the results of operations and its cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with statutory accounting practices as described in Note 1.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 27, 1998
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
($000)
<S> <C> <C> <C>
Revenues
Premiums and annuity considerations............. $ 296,645 $ 250,244 $ 165,792
Annuity and other fund deposits................. 1,981,246 1,897,347 1,087,661
Net investment income........................... 102,285 98,441 78,787
Commissions and expense allowances on
reinsurance ceded.............................. 396,921 370,637 183,380
Reserve adjustment on reinsurance ceded......... 3,672,076 3,864,395 1,879,785
Other revenues.................................. 288,632 161,906 140,796
---------- ---------- ----------
Total Revenues................................ 6,737,805 6,642,970 3,536,201
---------- ---------- ----------
Benefits and Expenses
Death and annuity benefits...................... 66,013 60,111 53,029
Surrenders and other benefit payments........... 461,733 276,720 221,392
Commissions and other expenses.................. 564,240 491,720 236,202
Increase in aggregate reserves for future
benefits....................................... 33,213 27,351 94,253
Increase in liability for premium and other
deposit funds.................................. 640,006 207,156 460,124
Net transfers to Separate Accounts.............. 4,914,980 5,492,964 2,414,669
---------- ---------- ----------
Total Benefits and Expenses................... 6,680,185 6,556,022 3,479,669
---------- ---------- ----------
Net Gain from Operations Before Federal Income
Taxes............................................ 57,620 86,948 56,532
Federal income tax (benefit) expense............ (14,878) 19,360 14,048
---------- ---------- ----------
Net Gain from Operations.......................... 72,498 67,588 42,484
Net realized capital gains, after tax........... 1,544 407 374
---------- ---------- ----------
Net Income........................................ $ 74,042 $ 67,995 $ 42,858
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------
1997 1996
----------- -----------
($000)
<S> <C> <C>
Assets
Bonds........................................... $ 1,501,311 $ 1,268,480
Common stocks................................... 64,408 44,996
Mortgage loans.................................. 85,103 0
Policy loans.................................... 36,533 28,853
Cash and short-term investments................. 309,432 176,830
Other invested assets........................... 20,942 2,858
----------- -----------
Total cash and invested assets................ 2,017,729 1,522,017
----------- -----------
Investment income due and accrued............... 15,878 14,555
Premium balances receivable..................... 389 373
Receivables from affiliates..................... 1,269 257
Other assets.................................... 22,788 19,099
Separate Account assets......................... 23,208,728 14,619,324
----------- -----------
Total Assets.................................. $25,266,781 $16,175,625
----------- -----------
----------- -----------
Liabilities
Aggregate reserves for future benefits.......... $ 605,183 $ 571,970
Policy and contract claims...................... 5,672 6,806
Liability for premium and other deposit funds... 1,795,149 1,155,143
Asset valuation reserve......................... 13,670 7,442
Payable to affiliates........................... 20,972 10,022
Other liabilities............................... (754,393) (498,195)
Separate Account liabilities.................... 23,208,728 14,619,324
----------- -----------
Total liabilities............................. 24,894,981 15,872,512
----------- -----------
Capital and Surplus
Common stock.................................... 2,500 2,500
Gross paid-in and contributed surplus........... 226,043 226,043
Unassigned funds................................ 143,257 74,570
----------- -----------
Total capital and surplus..................... 371,800 303,113
----------- -----------
Total liabilities, capital and surplus.......... $25,266,781 $16,175,625
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
($000)
<S> <C> <C> <C>
Capital and surplus -- beginning of year $ 303,113 $ 238,334 $ 91,285
--------- --------- ---------
Net income...................................... 74,042 67,995 42,858
Change in net unrealized capital gains (losses)
on common stocks and other invested assets..... 2,186 (5,171) 1,709
Change in asset valuation reserve............... (6,228) 568 (5,588)
Change in non-admitted assets................... (1,313) 1,387 (1,944)
Aggregate write-ins for surplus (See Note 3).... 0 0 8,080
Dividends to shareholder........................ 0 0 (10,000)
Paid-in surplus................................. 0 0 111,934
--------- --------- ---------
Change in capital and surplus................... 68,687 64,779 147,049
--------- --------- ---------
Capital and surplus -- end of year.............. $ 371,800 $ 303,113 $ 238,334
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
($000)
<S> <C> <C> <C>
Operations
Premiums, annuity considerations and fund
deposits....................................... $ 2,277,874 $ 2,147,627 $ 1,253,511
Investment income............................... 101,991 106,178 78,328
Other income.................................... 4,381,718 4,396,892 2,253,466
----------- ----------- -----------
Total income.................................. 6,761,583 6,650,697 3,585,305
----------- ----------- -----------
Benefits Paid................................... 529,733 338,998 277,965
Federal income taxes (received) paid on
operations..................................... (14,499) 28,857 208,423
Other expenses.................................. 5,754,725 6,254,139 2,664,385
----------- ----------- -----------
Total benefits and expenses..................... 6,269,959 6,621,994 3,150,773
----------- ----------- -----------
Net cash from operations........................ 491,624 28,703 434,532
----------- ----------- -----------
Proceeds from Investments
Bonds........................................... 614,413 871,019 287,941
Common stocks................................... 11,481 72,100 52
Other........................................... 152 10 28
----------- ----------- -----------
Net investment proceeds....................... 626,046 943,129 288,021
----------- ----------- -----------
Taxes Paid on Capital Gains....................... 0 936 226
Paid-In Surplus................................... 0 0 111,934
Other Cash Provided............................. 0 41,998 28,199
----------- ----------- -----------
Total Proceeds................................ 1,117,670 1,012,894 862,460
----------- ----------- -----------
Cost of Investments Acquired
Bonds........................................... 848,267 914,523 720,521
Common stocks................................... 28,302 82,495 35,794
Mortgage loans.................................. 85,103 0 0
Miscellaneous applications...................... 18,548 130 2,146
----------- ----------- -----------
Total Investments Acquired.................... 980,220 997,148 758,461
----------- ----------- -----------
Other Cash Applied
Dividends paid to stockholders.................. 0 0 10,000
Other........................................... 4,848 12,220 5,007
----------- ----------- -----------
Total other cash applied...................... 4,848 12,220 15,007
----------- ----------- -----------
Total applications.......................... 985,068 1,009,368 773,468
----------- ----------- -----------
Net Change in Cash and Short-Term Investments..... 132,602 3,526 88,992
Cash and Short-Term Investments, Beginning of
Year........................................... 176,830 173,304 84,312
----------- ----------- -----------
Cash and Short-Term Investments, End of Year.... $ 309,432 $ 176,830 $ 173,304
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
- --------------------------------------------------------------------------------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
ITT Hartford Life and Annuity Insurance Company ("ILA" or "the Company"),
formerly known as ITT Life Insurance Corporation, is a wholly owned subsidiary
of Hartford Life Insurance Company ("HLIC"), which is an indirect subsidiary of
Hartford Life, Inc. ("HLI"), which is majority owned by The Hartford Financial
Services Group, Inc. ("The Hartford"), formerly a wholly owned subsidiary of ITT
Corporation ("ITT"). On February 10, 1997, HLI filed a registration statement,
as amended, with the Securities and Exchange Commission relating to the initial
public offering of HLI Class A Common Stock (the "Offering"). Pursuant to the
Offering on May 22, 1997, HLI sold to the public 26 million shares, representing
18.6% of the equity ownership of HLI. On December 19, 1995, ITT Corporation
distributed all the outstanding shares of The Hartford to ITT shareholders of
record in an action known herein as the "Distribution". As a result of the
Distribution, The Hartford became an independent, publicly traded company.
During 1996, ILA re-domesticated from the State of Wisconsin to the State of
Connecticut.
ILA offers a complete line of ordinary and universal life insurance,
individual annuities and certain supplemental accident and health benefit
coverages.
BASIS OF PRESENTATION
The accompanying ILA statutory financial statements were prepared in
conformity with statutory accounting practices prescribed or permitted by the
National Association of Insurance Commissioners ("NAIC") and the State of
Connecticut Department of Insurance.
The preparation of financial statements in conformity with statutory
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates. The most significant estimates are
for determining the liability for aggregate reserves for future benefits and the
liability for premium and other deposit funds. Although some variability is
inherent in these estimates, management believes the amounts provided are
adequate.
Statutory accounting practices and generally accepted accounting principles
("GAAP") differ in certain significant respects. These differences principally
involve:
(1) treatment of policy acquisition costs (commissions, underwriting and selling
expenses, premium taxes, etc.) which are charged to expense when incurred
for statutory purposes rather than on a pro-rata basis over the expected
life of the policy;
(2) recognition of premium revenues, which for statutory purposes are generally
recorded as collected or when due during the premium paying period of the
contract and which for GAAP purposes, for universal life policies and
investment products, generally, are only recorded for policy charges for the
cost of insurance, policy administration and surrender charges assessed to
policy account balances. Also, for GAAP purposes, premiums for traditional
life insurance policies are recognized as revenues when they are due from
policyholders and the retrospective deposit method is used in accounting for
universal life and other types of contracts where the payment pattern is
irregular or surrender charges are a significant source of profit. The
prospective deposit method is used for GAAP purposes where investment
margins are the primary source of profit;
(3) development of liabilities for future policy benefits, which for statutory
purposes predominantly use interest rate and mortality assumptions
prescribed by the NAIC which may vary considerably from interest and
mortality assumptions used for GAAP financial reporting;
(4) providing for income taxes based on current taxable income (tax return) only
for statutory purposes, rather than establishing additional assets or
liabilities for deferred Federal income taxes to recognize the tax effect
related to reporting revenues and expenses in different periods for
financial reporting and tax return purposes;
(5) excluding certain GAAP assets designated as non-admitted assets (e.g., past
due agents' balances and furniture and equipment) from the balance sheet for
statutory purposes by directly charging surplus;
(6) establishing accruals for post-retirement and post-employment health care
benefits on an option basis, using a twenty year phase-in approach, whereas
GAAP liabilities are recorded upon adoption of the applicable standard;
<PAGE>
- --------------------------------------------------------------------------------
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve); as well as the deferral and amortization of realized
gains and losses, motivated by changes in interest rates during the period
the asset is held, into income over the remaining life to maturity of the
asset sold (Interest Maintenance Reserve); whereas on a GAAP basis, no such
formula reserve is required and realized gains and losses are recognized in
the period the asset is sold;
(8) the reporting of reserves and benefits net of reinsurance ceded, where risk
transfer has taken place; whereas on a GAAP basis, reserves are reported
gross of reinsurance with reserve credits presented as recoverable assets;
(9) the reporting of fixed maturities at amortized cost, whereas GAAP requires
that fixed maturities be classified as "held-to-maturity",
"available-for-sale" or "trading", based on the Company's intentions with
respect to the ultimate disposition of the security and its ability to
affect those intentions. The Company's bonds were classified on a GAAP basis
as "available-for-sale" and accordingly, those investments and common stocks
were reflected at fair value with the corresponding impact included as a
component of Stockholder's Equity designated as "Net unrealized capital
gains (losses) on securities net of tax". For statutory reporting purposes,
Change in Net Unrealized Capital Gains (Losses) on Common Stocks and Other
Invested Assets includes the change in unrealized gains (losses) on common
stock reported at fair value; and
(10) separate account liabilities are valued on the Commissioner's Annuity
Reserve Valuation Method ("CARVM"), with the surplus generated recorded as a
liability to the general account (and a contra liability on the balance
sheet of the general account), whereas GAAP liabilities are valued at
account value.
As of and for the years ended December 31, 1997, 1996 and 1995, the
significant differences between statutory and GAAP basis net income and capital
and surplus for the Company are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
GAAP Net Income............... $ 58,050 $ 41,202 $ 38,821
Amortization and
deferral of policy
acquisition costs............ (345,658) (341,572) (174,341)
Change in unearned revenue
reserve...................... 4,641 55,504 32,300
Deferred taxes................ 47,113 2,090 2,801
Separate accounts............. 282,818 306,978 146,635
Other, net.................... 27,078 3,793 (3,358)
------------ ---------- ----------
Statutory Net Income.......... $ 74,042 $ 67,995 $ 42,858
------------ ---------- ----------
------------ ---------- ----------
<CAPTION>
1997 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
GAAP Capital and
Surplus...................... $ 570,469 $ 503,887 $ 455,541
Deferred policy acquisition
costs........................ (1,283,771) (938,114) (596,542)
Unearned revenue reserve...... 134,789 130,148 74,644
Deferred taxes................ 64,522 12,823 1,493
Separate accounts............. 923,040 640,101 333,123
Asset valuation reserve....... (13,670) (7,442) (8,010)
Unrealized gains (losses) on
bonds........................ 13,943 5,112 (1,696)
Adjustment relating to Lyndon
contribution (see Note 3).... (41,277) (41,277) (41,277)
Other, net.................... 3,755 (2,125) 21,058
------------ ---------- ----------
Statutory Capital and
Surplus...................... $ 371,800 $ 303,113 $ 238,334
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
AGGREGATE RESERVES FOR FUTURE BENEFITS AND LIABILITY FOR PREMIUM AND OTHER
DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits
were computed in accordance with actuarial standards. Reserves for life
insurance policies are generally based on the 1958 and 1980 Commissioner's
Standard Ordinary Mortality Tables and various valuation rates ranging from 2.5%
to 6%. Accumulation and on-benefit annuity reserves are based principally on
individual annuity tables at various rates ranging from 2.5% to 8.75% and using
CARVM. Accident and health reserves are established using a two year preliminary
term method and morbidity tables based on Company experience.
ILA has established separate accounts to segregate the assets and
liabilities of certain annuity contracts that must be segregated from the
Company's general assets under the terms of the contracts. The assets consist
primarily of marketable securities reported at market value. Premiums, benefits
and expenses of these contracts are reported in the Statutory Statements of
Income.
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds which are deemed
ineligible to be held at amortized cost by the NAIC Securities Valuation Office
("SVO") are carried at the appropriate SVO published value. When a permanent
reduction in the value of publicly traded securities occurs, the decrease is
reported as a realized loss and the carrying value is adjusted accordingly.
Common stocks are carried at fair value with the current year change in the
difference from cost reflected in surplus. Other invested assets are generally
recorded at fair value.
The Asset Valuation Reserve ("AVR") is designed to provide a standardized
reserving process for realized and unrealized losses due to default and equity
risks associated with invested assets. The reserve increased by $6,228 in 1997,
decreased by $568 in 1996 and increased by $5,588 in 1995. Additionally, the
Interest Maintenance Reserve
<PAGE>
- --------------------------------------------------------------------------------
("IMR") captures net realized capital gains and losses, net of applicable income
taxes, resulting from changes in interest rates and amortizes these gains or
losses into income over the remaining life of the mortgage loan or bond sold.
Realized capital gains and losses, net of taxes not included in IMR are reported
in the Statutory Statements of Income. Realized investment gains and losses are
determined on a specific identification basis. The amount of net capital losses
reclassified from the IMR was $719 in 1997 and the amount of net capital gains
reclassified was $1,413 and $39 in 1996 and 1995, respectively. The amount of
income amortized was $85, $392 and $256 in 1997, 1996 and 1995, respectively.
OTHER LIABILITIES
The amount reflected in other liabilities includes a receivable from the
separate accounts of $923 million and $640 million as of December 31, 1997 and
1996, respectively. The balances are classified in accordance with NAIC
accounting practices.
MORTGAGE LOANS
Mortgage loans, carried at cost, which approximates fair value, include
investments in assets backed by mortgage loan pools.
2. INVESTMENTS:
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
Interest income from bonds and
short-term investments....... $100,475 $89,940 $ 76,100
Interest income from policy
loans........................ 1,958 1,846 1,504
Interest and dividends from
other investments............ 1,005 7,864 2,288
-------- ------- --------
Gross investment income....... 103,438 99,650 79,892
Less: investment expenses..... 1,153 1,209 1,105
-------- ------- --------
Net investment income......... $102,285 $98,441 $ 78,787
-------- ------- --------
-------- ------- --------
</TABLE>
(B) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON COMMON STOCKS
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
Gross unrealized capital gains at
end of year........................ $ 537 $ 713 $ 1,724
Gross unrealized capital losses at
end of year........................ (1,820) (4,160) 0
-------- ------- --------
Net unrealized capital (losses)
gains.............................. (1,283) (3,447) 1,724
Balance at beginning of year........ (3,447) 1,724 15
-------- ------- --------
Change in net unrealized capital
gains (losses) on common stocks.... $ 2,164 $(5,171) $ 1,709
-------- ------- --------
-------- ------- --------
</TABLE>
(C) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON BONDS AND SHORT-TERM
INVESTMENTS
<TABLE>
<CAPTION>
1997 1996 1995
------- -------- --------
<S> <C> <C> <C>
Gross unrealized capital gains at
end of year........................ $23,357 $ 11,821 $ 22,251
Gross unrealized capital losses at
end of year........................ (1,906) (3,842) (1,374)
------- -------- --------
Net unrealized capital gains........ 21,451 7,979 20,877
Balance at beginning of year........ 7,979 20,877 33,732
------- -------- --------
Change in net unrealized capital
gains (losses) on bonds and
short-term investments............. $13,472 $(12,898) $ 54,609
------- -------- --------
------- -------- --------
</TABLE>
(D) COMPONENTS OF NET REALIZED CAPITAL GAINS
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Bonds and short-term investments......... $ (120) $ 2,756 $ 56
Common stocks............................ 0 0 52
Real estate and other.................... 114 0 0
------- ------- ------
Realized capital (losses) gains.......... (6) 2,756 208
Capital gains (benefit) tax.............. (831) 936 (205)
------- ------- ------
Net realized capital gains, after tax.... 825 1,820 413
Less: IMR capital (losses) gains......... (719) 1,413 39
------- ------- ------
Net realized capital gains............... $ 1,544 $ 407 $ 374
------- ------- ------
------- ------- ------
</TABLE>
(E) OFF-BALANCE SHEET INVESTMENTS
The Company had no significant financial instruments with off-balance sheet
risk as of December 31, 1997 and 1996.
(F) CONCENTRATION OF CREDIT RISK
Excluding U.S. government and government agency investments, the Company is
not exposed to any significant concentration of credit risk.
<PAGE>
- --------------------------------------------------------------------------------
(G) BONDS, SHORT-TERM INVESTMENTS AND COMMON STOCKS
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- --------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. government and government agencies and
authorities:
Guaranteed and sponsored................... $ 11,114 $ 55 $ (51) $ 11,118
Guaranteed and sponsored -- asset-backed... 55,506 1,056 (269) 56,293
States, municipalities and political
subdivisions................................ 26,404 329 0 26,733
International governments.................... 7,609 500 0 8,109
Public utilities............................. 73,024 754 (132) 73,646
All other corporate.......................... 517,715 14,110 (704) 531,121
All other corporate -- asset-backed.......... 630,069 5,005 (739) 634,335
Short-term investments....................... 277,330 33 (8) 277,355
Certificates of deposit...................... 93,770 1,515 (3) 95,282
Parents, subsidiaries and affiliates......... 86,100 0 0 86,100
----------- ---------- ---------- -----------
Total bonds and short-term investments....... $ 1,778,641 $23,357 $(1,906) $ 1,800,092
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- --------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Common stock -- unaffiliated................. $ 30,307 $ 537 $ 0 $ 30,844
Common stock -- affiliated................... 35,384 0 (1,820) 33,564
----------- ---------- ---------- -----------
Total common stocks.......................... $ 65,691 $ 537 $(1,820) $ 64,408
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- --------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. government and government agencies and
authorities:
Guaranteed and sponsored................... $ 58,761 $ 6 $ (195) $ 58,572
Guaranteed and sponsored -- asset-backed... 78,237 1,477 (609) 79,105
States, municipalities and political
subdivisions................................ 25,958 163 (2) 26,119
International governments.................... 7,447 205 0 7,652
Public utilities............................. 70,116 396 (424) 70,088
All other corporate.......................... 410,530 6,357 (1,355) 415,532
All other corporate -- asset-backed.......... 485,953 2,654 (1,081) 487,526
Short-term investments....................... 148,094 0 (66) 148,028
Certificates of deposit...................... 83,378 563 (110) 83,831
Parents, subsidiaries and affiliates......... 48,100 0 0 48,100
----------- ---------- ---------- -----------
Total bonds and short-term investments....... $ 1,416,574 $11,821 $(3,842) $ 1,424,553
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- --------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Common stock -- unaffiliated................. $ 13,064 $ 713 $ 0 $ 13,777
Common stock -- affiliated................... 35,379 0 (4,160) 31,219
----------- ---------- ---------- -----------
Total common stocks.......................... $ 48,443 $ 713 $(4,160) $ 44,996
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
The amortized cost and estimated fair value of bonds and short-term
investments at December 31, 1997 by management's anticipated maturity are shown
below. Asset-backed securities are distributed to maturity year based on ILA's
estimate of the rate of future prepayments of principal
<PAGE>
- --------------------------------------------------------------------------------
over the remaining life of the securities. Expected maturities differ from
contractual maturities reflecting borrowers' rights to call or prepay their
obligations.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
MATURITY COST FAIR VALUE
- --------------------------------------------- ---------- -----------
<S> <C> <C>
Due in one year or less...................... $ 424,518 $ 696,203
Due after one year through five years........ 586,980 708,365
Due after five years through ten years....... 451,963 295,896
Due after ten years.......................... 315,180 99,628
---------- -----------
Total...................................... $1,778,641 $ 1,800,092
---------- -----------
---------- -----------
</TABLE>
Proceeds from sales of investments in bonds and short-term investments
during 1997, 1996 and 1995 were $367,626, $668,078 and $313,961, respectively,
resulting in gross realized gains of $964, $3,675 and $1,419, respectively, and
gross realized losses of $1,084, $919 and $1,263, respectively, before transfers
to IMR. The Company had realized gains of $52 during 1995 from a capital gain
distribution.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
ASSETS
Bonds and short-term investments........... $1,778 $ 1,800 $1,417 $ 1,425
Common stocks.............................. 64 64 45 45
Policy loans............................... 37 37 29 29
Mortgage loans............................. 85 85 0 0
Other invested assets...................... 21 21 3 3
LIABILITIES
Liabilities on investment contracts........ $1,911 $ 1,835 $1,245 $ 1,191
</TABLE>
The carrying amounts for policy loans approximates fair value. The fair
value of liabilities on investment contracts are determined by forecasting
future cash flows and discounting the forecasted cash flows at current market
rates.
3. RELATED PARTY TRANSACTIONS:
Transactions between the Company and its affiliates within The Hartford
relate principally to tax settlements, reinsurance, service fees, capital
contributions and payments of dividends. The Company has also invested in bonds
of its subsidiaries, Hartford Financial Services Corporation and HL Investment
Advisors, Inc., and common stock of its subsidiary, ITT Hartford Life, LTD.
On June 30, 1995, the assets of Lyndon Insurance Company were contributed to
ILA. As a result, ILA received approximately $365 million in bonds and
short-term investments, common stocks and cash, $28 million in policy reserves,
$187 million of current tax liability, $26 million in IMR, $8 million in AVR
(offset by an aggregate write-in to surplus), and $4 million of other
liabilities. The assets in excess of liabilities of $112 million were recorded
as an increase to paid-in surplus.
For additional information, see Note 5.
4. FEDERAL INCOME TAXES:
The Company and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. Federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were to file separate Federal, state and local
income tax returns.
As long as The Hartford continues to beneficially own, directly or
indirectly, at least 80% of the combined voting power and 80% of the value of
the outstanding capital stock of HLI, the Company will be included for Federal
income tax purposes in the consolidated group of which The Hartford is the
common parent. It is the current intention of The Hartford and its subsidiaries
to continue to file a single consolidated Federal income tax return. The Company
will continue to remit (receive from) The Hartford a current income tax
provision (benefit) computed in accordance with such tax sharing agreement.
Federal income taxes (received) paid by the Company were $(14,499), $29,792 and
$215,921 in 1997, 1996 and 1995, respectively. The effective tax rate was (26)%,
22% and 25% in 1997, 1996 and 1995, respectively. The following schedule
provides a reconciliation of the tax provision at the U.S. Federal Statutory
rate to Federal income tax (benefit) expense (in millions).
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Tax provision at U.S. Federal statutory
rate........................................ $ 20 $ 30 $ 20
Tax deferred acquisition costs............... 25 27 8
Statutory to tax reserve differences......... 1 0 3
Unrealized gain on separate accounts......... (44) (21) (13)
Investments and other........................ (17) (17) (4)
----- ----- -----
Federal income tax (benefit) expense......... $ (15) $ 19 $ 14
----- ----- -----
----- ----- -----
</TABLE>
5. CAPITAL AND SURPLUS AND SHAREHOLDER
DIVIDEND RESTRICTIONS:
The maximum amount of dividends which can be paid, without prior approval,
by State of Connecticut insurance companies to shareholders is subject to
restrictions relating to statutory surplus. Dividends are paid as determined by
the Board of Directors and are not cumulative. No dividends were paid in 1997 or
1996. ILA paid dividends of $10 million to its parent, HLIC, in 1995. As a
result of the Distribution by ITT, the assets of ITT Lyndon Insurance Company
(Lyndon) were contributed to ILA in June 1995. Substantially all the business
was removed from Lyndon prior to the contribution. The amount of assets which
<PAGE>
- --------------------------------------------------------------------------------
exceeded liabilities at the contribution date ($112 million) was included in
paid-in surplus.
6. PENSION PLANS AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:
The Company's employees are included in The Hartford's non-contributory
defined benefit pension plans. These plans provide pension benefits that are
based on years of service and the employee's compensation during the last ten
years of employment. The Company's funding policy is to contribute annually an
amount between the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974 and the maximum amount that can be
deducted for Federal income tax purposes. Generally, pension costs are funded
through the purchase of HLIC's group pension contracts. Pension expense was
$265, $358, and $1,034 in 1997, 1996 and 1995, respectively. Liabilities for the
plan are held by The Hartford.
The Company also participates in The Hartford's Investment and Savings Plan,
which includes a deferred compensation option under IRC section 401(k) and an
ESOP allocation under IRC section 404(k). The liabilities for these plans are
included in the financial statements of The Hartford. The cost to ILA was not
material in 1997, 1996 and 1995.
The Company's employees are included in The Hartford's contributory defined
health care and life insurance benefit plans. These plans provide health care
and life insurance benefits for retired employees. Substantially all employees
may become eligible for those benefits if they reach normal or early retirement
age while still working for the Company. The Company has prefunded a portion of
the health care and life insurance obligations through trust funds where such
prefunding can be accomplished on a tax effective basis. Amounts allocated by
The Hartford for post-retirement health care and life insurance benefits expense
(not including provisions for accrual of post-retirement benefit obligations)
are immaterial. The assumed rate of future increases in the per capita cost of
health care (the health care trend rate) was 8.5% for 1997, decreasing ratably
to 6% in the year 2001. Increasing the health care trend rates by one percent
per year would have an immaterial impact on the accumulated post-retirement
benefit obligation and the annual expense. The cost to ILA was not material in
1997, 1996 and 1995.
Post-employment benefits are primarily comprised of obligations to provide
medical and life insurance to employees on long-term disability. Post-employment
benefit expense was not material in 1997, 1996 and 1995.
7. REINSURANCE:
The Company cedes insurance to non-affiliated insurers in order to limit its
maximum loss. Such transfer does not relieve ILA of its primary liability. ILA
also assumes insurance from other insurers.
Life insurance net retained premiums were comprised of the following:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Direct premiums................... $266,427 $226,612 $159,918
Premiums assumed.................. 51,630 33,817 13,299
Premiums ceded.................... (21,412) (10,185) (7,425)
-------- -------- --------
Premiums and annuity
considerations................... $296,645 $250,244 $165,792
-------- -------- --------
-------- -------- --------
</TABLE>
The Company cedes to RGA Reinsurance Company, on a modified coinsurance
basis, 80% of the variable annuity business written since 1994.
8. SEPARATE ACCOUNTS:
The Company maintains separate account assets and liabilities totaling $23.2
billion and $14.6 billion at December 31, 1997 and 1996, respectively. Separate
account assets are reported at fair value and separate account liabilities are
determined in accordance with CARVM, which approximates the market value less
applicable surrender charges. Separate account assets are segregated from other
investments, the policyholder assumes the investment risk, and the investment
income and gains and losses accrue directly to the policyholder. Separate
account management fees, net of minimum guarantees, were $252 million, $144
million and $72 million in 1997, 1996 and 1995, respectively, and are recorded
as a component of other revenues on the Statutory Statements of Income.
9. COMMITMENTS AND CONTINGENCIES:
As of December 31, 1997 and 1996, the Company had no material contingent
liabilities, nor had the Company committed any surplus funds for any contingent
liabilities or arrangements. The Company is involved in various legal actions
which have arisen in the normal course of its business. In the opinion of
management, the ultimate liability with respect to such lawsuits as well as
other contingencies is not considered to be material in relation to the results
of operations and financial position of the Company.
Under insurance guaranty laws in most states, insurers doing business
therein can be assessed up to prescribed limits for policyholder losses incurred
by insolvent companies. The amount of any future assessments on ILA under these
laws cannot be reasonably estimated. Most of the laws do provide, however, that
an assessment may be excused or deferred if it would threaten an insurer's own
financial strength. Additionally, guaranty fund assessments are used to reduce
state premium taxes paid by the Company in certain states. ILA paid guaranty
fund assessments of $1,544, $1,262 and $1,684 in 1997, 1996 and 1995,
respectively. ILA incurred guaranteed fund expense of $548 in 1997 and 1996 and
$0 in 1995.
<PAGE>
PART C
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
(b) (1) Resolution of the Board of Directors of Hartford Life and
Annuity Insurance Company ("Hartford") authorizing the establishment
of the Separate Account. (1)
(2) Not applicable.
(3) (a) Principal Underwriter Agreement. (2)
(3) (b) Form of Dealer Agreement. (2)
(4) Form of Individual Flexible Premium Variable Annuity Contract.
(1)
(5) Form of Application. (1)
(6) (a) Certificate of Incorporation of Hartford.
(6) (b) Bylaws of Hartford. (2)
(7) Not applicable.
(8) Form of Participation Agreement.
(9) Opinion and Consent of Lynda Godkin, General Counsel, Senior
Vice President, and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public
Accountants.
(11) No financial statements are omitted.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
- --------
1 Incorporated by reference to Post-Effective Amendment No. 2, to
the Registration Statement File No. 33-73572, dated May 1, 1995.
2 Incorporated by reference to Post-Effective Amendment No. 3, to
the Registration Statement File No. 33-73572, dated May 1, 1996.
<PAGE>
(15) Copy of Power of Attorney.
(16) Organizational Chart.
Item 25. Directors and Officers of the Depositor
- -------------------------------------------------------------------------------
NAME, AGE POSITION WITH HARTFORD
- -------------------------------------------------------------------------------
Wendell J. Bossen Vice President
- -------------------------------------------------------------------------------
Gregory A. Boyko Senior Vice President, Chief Financial
Officer, and Treasurer, Director*
- -------------------------------------------------------------------------------
Peter W. Cummins Senior Vice President
- -------------------------------------------------------------------------------
Ann M. de Raismes Senior Vice President
- -------------------------------------------------------------------------------
James R. Dooley Vice President
- -------------------------------------------------------------------------------
Timothy M. Fitch Vice President
- -------------------------------------------------------------------------------
David T. Foy Vice President
- -------------------------------------------------------------------------------
J. Richard Garrett Vice President and Assistant Treasurer
- -------------------------------------------------------------------------------
Donald J. Gillette Vice President
- -------------------------------------------------------------------------------
John P. Ginnetti Executive Vice President
- -------------------------------------------------------------------------------
William A. Godfrey, III Senior Vice President
- -------------------------------------------------------------------------------
Lynda Godkin Senior Vice President, General Counsel, and
Corporate Secretary, Director*
- -------------------------------------------------------------------------------
Lois W. Grady Senior Vice President
- -------------------------------------------------------------------------------
Christopher Graham Vice President
- -------------------------------------------------------------------------------
Mark E. Hunt Vice President
- -------------------------------------------------------------------------------
Stephen T. Joyce Vice President
- -------------------------------------------------------------------------------
Michael D. Keeler Vice President
- -------------------------------------------------------------------------------
Robert A. Kerzner Senior Vice President
- -------------------------------------------------------------------------------
David N. Levenson Vice President
- -------------------------------------------------------------------------------
William B. Malchodi, Jr. Vice President
- -------------------------------------------------------------------------------
Thomas M. Marra Executive Vice President and Director,
Individual Life and Annuity Division, Director*
- -------------------------------------------------------------------------------
<PAGE>
-3-
- --------------------------------------------------------------------------------
Steven L. Matthiesen Vice President
- -------------------------------------------------------------------------------
Michael C. O'Halloran Vice President
- -------------------------------------------------------------------------------
Daniel E. O'Sullivan Vice President
- -------------------------------------------------------------------------------
Craig D. Raymond Senior Vice President and Chief Actuary
- -------------------------------------------------------------------------------
David T. Schrandt Vice President
- -------------------------------------------------------------------------------
Lowndes A. Smith President and Chief Executive Officer,
Director*
- -------------------------------------------------------------------------------
Walter C. Welsh Senior Vice President
- -------------------------------------------------------------------------------
Raymond P. Welnicki Senior Vice President
- -------------------------------------------------------------------------------
Lizabeth H. Zlatkus Senior Vice President
- -------------------------------------------------------------------------------
David M. Znamierowski Senior Vice President, Director*
- -------------------------------------------------------------------------------
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
*Denotes date of election to Board of Directors.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant.
Filed herewith as Exhibit 16.
Item 27. Number of Contract Owners
As of February 28, 1998 there were 162,288 Contract Owners.
Item 28. Indemnification
Under Section 33-772 of the Connecticut General Statutes, unless limited by
its certificate of incorporation, the Registrant must indemnify a director who
was wholly successful, on the merits or otherwise, in the defense of any
proceeding to which he was a party because he is or was a director of the
corporation against reasonable expenses incurred by him in connection with the
proceeding.
The Registrant may indemnify an individual made a party to a proceeding
because he is or was a
<PAGE>
-4-
director against liability incurred in the proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Registrant, and, with respect to any criminal proceeding, had
no reason to believe his conduct was unlawful. Conn. Gen. Stat. ss. 33-771(a).
Additionally, pursuant to Conn. Gen. Stat. ss. 33-776, the Registrant may
indemnify officers and employees or agents for liability incurred and for any
expenses to which they becomes subject by reason of being or having been an
employees or officers of the Registrant. Connecticut law does not prescribe
standards for the indemnification of officers, employees and agents and
expressly states that their indemnification may be broader than the right of
indemnification granted to directors.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-770 et seq.
Notwithstanding the fact that Connecticut law obligates the Registrant to
indemnify only a director that was successful on the merits in a suit, under
Article VIII, Section 2 of the Registrant=s bylaws, the Registrant must
indemnify both directors and officers of the Registrant who are parties or
threatened to be parties to a legal proceeding by reason of his being or having
been a director or officer of the Registrant for any expenses if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the company, and with respect to criminal proceedings, had no
reason to believe his conduct was unlawful. Unless otherwise mandated by a
court, no indemnification shall be made if such officer or director is adjudged
to be liable for negligence or misconduct in the performance of his duty to the
Registrant.
Additionally, the directors and officers of Hartford and Hartford Securities
Distribution Company, Inc. ("HSD") are covered under a directors and officers
liability insurance policy issued to The Hartford Financial Services Group,
Inc. and its subsidiaries. Such policy will reimburse the Registrant for any
payments that it shall make to directors and officers pursuant to law and will,
subject to certain exclusions contained in the policy, further pay any other
costs, charges and expenses and settlements and judgments arising from any
proceeding involving any director or officer of the Registrant in his past or
present capacity as such, and for which he may be liable, except as to any
liabilities arising from acts that are deemed to be uninsurable.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
<PAGE>
-5-
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 29. Principal Underwriters
(a) HSD acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - Separate Account One
Hartford Life Insurance Company - Separate Account Two
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account I)
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account II)
Hartford Life Insurance Company - Separate Account Two (QP Variable
Account)
Hartford Life Insurance Company - Separate Account Two (Variable
Account "A")
Hartford Life Insurance Company - Separate Account Two (NQ Variable
Account)
Hartford Life Insurance Company - Putnam Capital Manager Trust
Separate Account
Hartford Life Insurance Company - Separate Account Three Hartford
Life Insurance Company - Separate Account Five Hartford Life and
Annuity Insurance Company - Separate Account One Hartford Life and
Annuity Insurance Company - Putnam Capital Manager Trust Separate
Account Two
Hartford Life and Annuity Insurance Company - Separate Account Three
Hartford Life and Annuity Insurance Company - Separate Account Five
Hartford Life and Annuity Insurance Company - Separate Account Six
American Maturity Life Insurance Company - Separate Account AMLVA
(b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
---------------- ----------------
Lowndes A. Smith President and Chief Executive Officer,
Director
John P. Ginnetti Executive Vice President, Director
Thomas M. Marra Executive Vice President, Director
Lynda Godkin Senior Vice President, General Counsel
and Corporate Secretary
Peter W. Cummins Senior Vice President
Donald E. Waggaman, Jr. Treasurer
George R. Jay Controller
Unless otherwise indicated, the principal business address of each
of the above individuals is P. O. Box 2999, Hartford, Connecticut
06104-2999.
Item 30. Location of Accounts and Records
<PAGE>
-6-
All of the accounts, books, records or other documents required to by
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder are maintained by Hartford at 200 Hopmeadow Street,
Simsbury, Connecticut 06089.
Item 31. Management Services
All management contracts are discussed in Part A and Part B of this
Registration Statement.
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective amendment to
this Registration Statement as frequently as is necessary to ensure
that the audited financial statements in the Registration Statement are
never more than 16 months old so long as payments under the variable
annuity contracts may be accepted.
(b) The Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space
that an applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written communication
affixed to or included in the Prospectus that the applicant can remove
to send for a Statement of Additional Information.
(c) The Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request.
(d) Hartford hereby represents that the aggregate fees and charges under
the Contracts are reasonable in relation to the services rendered, the
expenses expected to be incurred, and the risks assumed by Hartford.
The Registrant is relying on the no-action letter issued by the
Division of Investment Management to American Counsel of Life
Insurance, Ref. No. IP-6-88, November 28, 1988. The Registrant has
complied with conditions one through four of the no-action letter.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and duly caused this Registration Statement to be signed
on its behalf, in the City of Hartford, and State of Connecticut on this 10th
day of April, 1998.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY -
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO
(Registrant)
*By: /s/ Thomas M. Marra *By: /s/ Lynda Godkin
----------------------------------------- ----------------
Thomas M. Marra, Executive Vice President Lynda Godkin
Attorney-in-Fact
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Depositor)
*By: /s/ Thomas M. Marra
-----------------------------------------
Thomas M. Marra, Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons and in the
capacity and on the date indicated.
Gregory A. Boyko, Senior Vice
President, Chief Financial Officer
& Treasurer, Director *
Lynda Godkin, Senior Vice President,
General Counsel & Corporate Secretary*
Thomas M. Marra, Executive Vice
President, Director *
Lowndes A. Smith, President &
Chief Operating Officer, Director *
David M. Znamierowski, Senior
Vice President, Director*
By: /s/ Lynda Godkin
---------------------
Lynda Godkin
Attorney-In-Fact
Dated: April 10, 1998
<PAGE>
EXHIBIT INDEX
(6)(a) Certificate of Incorporation of Hartford
(8) Form of Participation Agreement
(9) Opinion and Consent of Lynda Godkin, Senior Vice President, General
Counsel & Corporate Secretary
(10) Consent of Arthur Andersen LLP, Independent Public Accountants
(15) Copy of Power of Attorney
(16) Organizational Chart
<PAGE>
EXHIBIT 6(a)
FILING #0001734855 PG 03 OF OS VOL B-00133
FILED 07/11/1997 11:32 AM PAGE 03683
SECRETARY OF THE STATE
CONNECTICUT SECRETARY OF THE STATE
FIRST AMENDMENT TO AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION BY ACTIONS OF THE
BOARD OF DIRECTORS AND THE SOLE SHAREHOLDER
1. The name of the Corporation is ITT Hartford Life and Annuity Insurance
Company (the "Company").
2. The Amended and Restated Certificate of Incorporation of the Company (the
"Certificate of Incorporation") is further amended by the following
resolution:
RESOLVED, that the Certificate of Incorporation be further amended
by deleting Section 1 in its entirety and replacing it with the
following, such amendment to become effective at January 1, 1998.
All other sections of the Certificate of Incorporation shall remain
unchanged and continue in full force and effect:
Section 1. Effective January 1, 1998, the name of the Company
is HARTFORD LIFE AND ANNUITY INSURANCE COMPANY.
3. The above resolution was adopted by each of the Company's Board of
Directors and its sole shareholder. The number of shares of the Company's
common capital stock entitled to vote thereon was 3,000 and the vote
required for adoption was 2,000 shares. The vote favoring adoption was
3,000 shares, which was the greatest vote required to pass the resolution.
Dated at Simsbury, Connecticut this 30 day of June, 1997.
We hereby declare, under penalty of false statement, that the statements made
in the foregoing Certificate are true.
HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
/s/ Thomas M. Marra
-----------------------------------------
Thomas M. Marra, Executive Vice President
/s/ Lynda Godkin
-----------------------------------------
Lynda Godkin, Senior Vice President,
General Counsel and Corporate Secretary
<PAGE>
FILING #0001681641 PG 04 OF 05 VOL B-00105
FILED 12/31/1996 10:00 AM PAGE 00897
SECRETARY OF STATE
CONNECTICUT SECRETARY OF THE STATE
CERTIFICATE AMENDING
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
BY ACTIONS OF THE BOARD OF DIRECTORS AND THE SOLE SHAREHOLDER
1. The name of the Corporation is ITT HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY.
2. The Amended and Restated Certificate of Incorporation is amended by the
following resolution of each of the Board of Directors and the Sole
Shareholder:
RESOLVED, that the Amended and Restated Certificate of
Incorporation of the Company, as supplemented and amended to
date, is hereby amended by striking out Section 9 in its entirety
and adding the following Sections 9 and 10. All other sections
of the Amended and Restated Certificate of Incorporation shall
remain unchanged and continue in full force and effect.
"Section 9. The Board of Directors may, at any time, appoint
from among its own members such committees as it
may deem necessary for the proper conduct of the
business of the Company. The Board of Directors
shall be unrestricted as to the powers it may
confer upon such committees."
"Section 10. So much of the charter of said corporation, as
amended, as is inconsistent herewith is repealed,
provided that such repeal shall not invalidate or
otherwise affect any action taken pursuant to the
charter of the corporation, in accordance with its
terms, prior to the effective date of such
repeal."
3. The above resolutions were passed by the Board of Directors and the Sole
Shareholder of the Corporation. The number of shares of the Corporation's
common capital stock entitled to vote thereon was 3,000 and the vote
required for adoption was 2,000 shares. The vote favoring adoption was
3,000 shares, which was the greatest vote required to pass the resolution.
<PAGE>
2
Dated at Simsbury, Connecticut this 30th day of December, 1996.
We hereby declare, under penalty of false statement, that the statements made in
the foregoing Certificate are true.
ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
/s/Thomas M. Marra
------------------------------------
Thomas M. Marra, Executive Vice
President and Director - Individual
Life and Annuity Division
/s/Lynda Godkin
------------------------------------
Lynda Godkin, General Counsel and
Corporate Secretary
<PAGE>
CERTIFICATE AMENDING AND RESTATING
THE CERTIFICATE OF INCORPORATION BY
ACTION OF THE BOARD OF DIRECTORS AND SHAREHOLDERS
The name of the Corporation is ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY.
2. The Certificate of Incorporation is amended and restated by the following
resolution of the Board of Directors and Shareholder of the Corporation.
RESOLVED, that the Certificate of Incorporation of the Corporation, as
supplemented and amended to date, is further amended and restated to read
as follows:
Section 1. The name of the Corporation is ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY.
Section 2. The address of the Registered Office of the Corporation is
Hartford Plaza, Hartford, Connecticut 06104-2999.
Section 3. The Corporation is a body politic and corporate and shall
have all the powers granted by the general statutes, as now
enacted or hereinafter amended, to corporations formed under
the Stock Corporation Act.
Section 4. The Corporation shall have the purposes and powers to write
any and all forms of insurance which any other corporation
now or hereafter chartered in Connecticut and empowered to
do an insurance business may now or hereafter lawfully do;
to accept and to cede reinsurance; to issue policies and
contracts for any kind or combination of kinds of insurance;
to issue policies or contracts either with or without
participation in profits; to acquire and hold any or all of
the shares or other securities of any insurance corporation
or any other kind of corporation; and to engage in any
lawful act or activity for which corporations may be formed
under the Stock Corporation Act. The corporation is
authorized to exercise the powers herein granted in any
state, territory or jurisdiction of the United States or
in any foreign country.
Section 5. The Corporation shall obtain a license from the insurance
commissioner prior to the commencement of business and
shall be subject to all general statutes applicable to
insurance companies.
Section 6. The aggregate number of shares which the corporation shall
have authority to issue is 3,000 shares consisting of one
class only, designated as Common Shares, of the par value
of $1,250.
Section 7. No shareholder shall, because of his ownership of shares,
have a preemptive or other right to purchase, subscribe for,
or take any part of any shares or any
<PAGE>
2
part of the notes, debentures, bonds, or other securities
convertible into or carrying options or warrants to purchase
shares of this corporation issued, optioned, or sold by it
after its incorporation.
Section 8. The minimum amount of stated capital with which the
corporation shall commence business is One Thousand
Dollars ($1,000.00).
Section 9. So much of the charter of said corporation is amended, as is
inconsistent herewith is repealed, provided such repeal shall
not invalidate or otherwise affect any action taken pursuant
to the charter of the corporation, in accordance with its
terms, prior to the effective date of such repeal.
3. The above resolution was passed by the Board of Directors and the
Shareholder of the Corporation. The number of shares entitled to vote
thereon was 3,000 and the vote required for adoption was 2,000 shares.
The vote favoring adoption was 3,000 which was the greatest vote needed to
pass the resolution.
Dated at Simsbury, Connecticut this 30th day of April, 1996.
We hereby declare, under the penalties of false statement, that the
statements made in the foregoing Certificate are true.
ITT HARTFORD LIFE AND
ANNUITY INSURANCE COMPANY
/s/ Lowndes A. Smith
---------------------------------
Lowndes A. Smith, President
/s/ Lynda Godkin
----------------------------------
Lynda Godkin, General Counsel
and Corporate Secretary
<PAGE>
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this [DAY] day of [MONTH], [YEAR], between [FUND NAME],
an open-end management investment company organized as a Massachusetts business
trust (the "Trust"), its investment adviser [ADVISOR NAME] ("Adviser"), HARTFORD
LIFE INSURANCE COMPANY and HARTFORD LIFE AND ANNUITY INSURANCE COMPANY, each a
life insurance company organized under the laws of the State of Connecticut
(collectively, the "Company"), on its own behalf and on behalf of each
segregated asset account of the Company or of such affiliated life insurance
companies set forth on Schedule A, as may be amended from time to time (the
"Accounts").
W I T N E S S E T H:
--------------------
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and has registered the offer
and sale of its shares under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Funds"); and
WHEREAS, the Trust has received an order from the Securities and Exchange
Commission, dated [DATE AND FILE NUMBER OF EXEMPTION ORDER], granting the
variable annuity and variable life insurance separate accounts participating in
the Trust exemptions from the provisions of Sections 9(a), 13(a), 15(a) and
15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to
the extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and the sale of its shares is registered under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has registered or will register (unless registration
is not required under applicable law) certain variable life insurance policies
and/or variable annuity contracts under the 1933 Act (the "Contracts"); and
WHEREAS, the Company has registered or will register (unless registration
is not
<PAGE>
required under applicable law) each Account as a unit investment trust
under the 1940 Act; and
WHEREAS, the Company desires to utilize shares of one or more Funds on
behalf of each of the Accounts to fund certain of the Contracts;
NOW THEREFORE, in consideration of their mutual promises, the parties agree
as follows:
ARTICLE I
SALE OF TRUST SHARES
1.1 The Trust shall make shares of its Funds available to the Accounts at
the net asset value next computed after receipt of such purchase order by the
Trust (or its agent), as established in accordance with the provisions of the
then current prospectus of the Trust. Shares of a particular Portfolio of the
Trust shall be ordered in such quantities and at such times as determined by the
Company to be necessary to meet the requirements of the Contracts. The Trustees
of the Trust (the "Trustees") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Trustees acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.2 The Trust will redeem any full or fractional shares of any Portfolio
when requested by the Company on behalf of an Account at the net asset value
next computed after receipt by the Trust (or its agent) of the request for
redemption, as established in accordance with the provisions of the then current
prospectus of the Trust. The Trust shall make payment for such shares in the
manner established from time to time by the Trust, but in no event shall payment
be delayed for a greater period than is permitted by the 1940 Act.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints
the Company as its agent for the limited purpose of receiving and accepting
purchase and redemption orders resulting from investment in and payments under
the Contracts. Receipt by the Company shall constitute receipt by the Trust
provided that i) such orders are received by the Company in good order prior to
the time the net asset value of each Portfolio is priced in accordance with its
prospectus and ii) the Trust receives notice of such orders by 11:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.4 Purchase orders that are transmitted to the Trust in accordance with
Section 1.3 shall be paid no later than 12:00 noon New York time on the next
Business Day after the Trust receives notice of the order. Payments shall be
made in federal funds transmitted by wire.
1.5 Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Trust will
<PAGE>
be recorded in the appropriate title for each Account or the appropriate
subaccountof each Account.
1.6 The Trust shall furnish prompt notice to the Company of any income
dividends or capital gain distributions payable on the Trust's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Trust shall notify the Company of the number of shares so
issued as payment of such dividends and distributions.
1.7 The Trust shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 7 p.m. New York time.
1.8 The Trust agrees that its shares will be sold only to Participating
Insurance Companies and their separate accounts and to certain qualified pension
and retirement plans to the extent permitted by the Exemptive Order. No shares
of any Portfolio will be sold directly to the general public. The Company
agrees that Trust shares will be used only for the purposes of funding the
Contracts and Accounts listed in Schedule A, as amended from time to time.
1.9 The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and conflicts
of interest corresponding to those contained in Section 2.10 and Article IV of
this Agreement.
ARTICLE II
OBLIGATIONS OF THE PARTIES
2.1 The Trust shall prepare and be responsible for filing with the
Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an issuer is subject
on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a) provide the
Company (at the Company's expense) with as many copies of the Trust's current
prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
as the Company shall reasonably request; or (b) provide the Company with a
camera ready copy of such documents in a form suitable for printing. The Trust
shall provide the Company with a copy of its statement of additional information
in a form suitable for duplication by the Company. The Trust (at its expense)
shall provide the Company with copies of any Trust-sponsored proxy materials in
such quantity as the Company shall reasonably require for distribution to
Contract owners.
<PAGE>
2.3 The Company shall bear the costs of printing and distributing the
Trust's prospectus, statement of additional information, shareholder reports and
other shareholder communications to owners of and applicants for policies for
which the Trust is serving or is to serve as an investment vehicle. The Company
shall bear the costs of distributing proxy materials (or similar materials such
as voting solicitation instructions) to Contract owners. The Company assumes
sole responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
2.4 The Company shall furnish, or cause to be furnished, to the Trust or
its designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or its investment adviser is named prior to the
filing of such document with the Securities and Exchange Commission. The
Company shall furnish, or shall cause to be furnished, to the Trust or its
designee, each piece of sales literature or other promotional material in which
the Trust or its investment adviser is named, at least ten Business Days prior
to it use. No such material shall be used if the Trust or its designee
reasonably objects to such use within ten Business Days after receipt of such
material.
2.5 The Trust and the Underwriter shall pay no fee or other compensation
to the Company or its Affiliates under this Agreement, except as set forth in
Section 2.7 and except that if the Trust or any Fund adopts and implements a
plan pursuant to Rule 12b-1 to finance distribution expenses, the Underwriter or
the Trust may make payments to the Company in amounts consistent with that 12b-1
plan, subject to review by the trustees of the Trust.
2.6 All expenses incident to performance by the Trust under this Agreement
shall be paid by the Trust. The Trust shall see to it that any offering of its
shares is registered and that all of its shares are authorized for issuance in
accordance with applicable federal law and, if and to the extent deemed
advisable by the Trust, in accordance with applicable state laws prior to their
sale. The Trust shall bear the cost of registration and qualification of the
Trust's shares, preparation and filing of the Trust's prospectus and
registration statement, proxy materials and reports, setting the prospectus in
type, setting in type and printing the proxy materials and reports to
shareholders, the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Trust's
shares.
2.7 The Company bears the responsibility and correlative expense for
administrative and support services for Contract owners. The Adviser recognizes
the Company as the sole shareholder of shares of the Trust issued under this
Agreement.
2.8 The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust or its investment
adviser in connection with the sale of the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Trust shares (as such registration statement and
prospectus may be amended or supplemented from time to time), reports of the
Trust, Trust-sponsored proxy statements, or in sales literature or other
promotional material approved by the Trust or its designee, except as required
by legal process or regulatory authorities or with the written permission of the
Trust or its designee.
<PAGE>
2.9 The Trust shall not give any information or make any representations
or statements on behalf of the Company or its Affiliates or concerning the
Company or its Affiliates, the Accounts or the Contracts other than information
or representations contained in and accurately derived from the registration
statement or prospectus for the Contracts (as such registration statement and
prospectus may be amended or supplemented from time to time), or in materials
approved by the Company or its Affiliates for distribution including sales
literature or other promotional materials, except as required by legal process
or regulatory authorities or with the written permission of the Company or its
Affiliates.
2.10 The phrase "sales literature or other promotional material" includes,
but is not limited to, advertisements (such as material published, or designed
for use in a newspaper, magazine or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards, motion
pictures, or other public media), sales literature (i.e., any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all registered
representatives.
2.11 So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges for
variable policyowners, the Company will provide pass-through voting privileges
to owners of policies whose cash values are invested, through the Accounts, in
shares of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each registered
Account, the Company will vote shares of the Trust held by the Account and for
which no timely voting instructions from policyowners are received as well as
shares its owns that are held by that Account, in the same proportion as those
shares for which voting instructions are received. With respect to unregistered
Accounts, the Company will vote shares in proportion to all other votes cast by
other Accounts. The Company and its agents will in no way recommend or oppose
or interfere with the solicitation of proxies for Trust shares held by Contract
owners without the prior written consent of the Trust, which consent may be
withheld in the Trust's sole discretion.
2.12 The Company shall notify the Trust of any applicable state insurance
laws that restrict the Funds' investments or otherwise affect the operation of
the Trust and shall notify the Trust of any changes in such laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Each Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of Connecticut
and that it has legally and validly established each Account as a segregated
asset account under such law.
<PAGE>
3.2 The Company represents and warrants that each Account (1) has been
registered or, prior to any issuance or sale of the Contracts, will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act or, alternatively (2) has not been registered in proper reliance upon
an exclusion from registration under the 1940 Act.
3.3 The Company represents and warrants that the Contracts or interests in
the Accounts (1) are or, prior to issuance, will be registered as securities
under the 1933 Act or, alternatively (2) are not registered because they are
properly exempt from registration under the 1933 Act or will be offered
exclusively in transactions that are properly exempt from registration under the
1933 Act. The Company further represents and warrants that the Contracts will
be issued and sold in compliance in all material respects with all applicable
federal and state laws; and the sale of the Contracts shall comply in all
material respects with state insurance suitability requirements.
3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Massachusetts.
3.5 The Trust represents and warrants that the Trust shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to any issuance or sale of
such shares. The Trust shall amend its registration statement under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register and qualify its
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Trust.
3.6 The Trust represents and warrants that it is currently qualified as a
Regulated Investment company under Subchapter M of the Code and that the
investments of each Portfolio will comply with the diversification requirements
set forth in Section 817(h) of the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder.
3.7 The Trust may elect to make payments to finance distribution expenses
pursuant to Rule 12b-1 under the 1940 Act. To the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1, the Trust undertakes to
have a board of trustees, a majority of whom are not interested persons of the
trust, formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
3.8 For unregistered Accounts, the Company represents and agrees that:
(1) Hartford Securities Distribution Company or Hartford Equity Sales
Company, as applicable, each is the principal underwriter for the
applicable unregistered Accounts and its subdivisions and a
registered broker-dealer under the Securities Exchange Act of
1934;
(2) the Trust shares are and will continue to be the only investment
securities held by the corresponding Account sub-account; and
<PAGE>
(3) with regard to each Series of the Trust, the Company, on behalf
of the corresponding Account sub-account, will:
(a) vote such shares held by it in the same proportion as the
vote of all other holders of such shares; and
(b) refrain from substituting shares of another security for
such shares unless the Securities and Exchange Commission
has approved such substitution in the manner provided in
Section 26 of the 1940 Act.
3.9 The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
The Trust shall not be responsible, and each Company shall take full
responsibility, for determining any jurisdiction in which any qualification or
registration of Trust shares or the Trust by the Trust may be required in
connection with the sale of the Contracts or the indirect interest of any
Contract in the shares of the Trust and advising the Trust thereof at such time
and in such manner as is necessary to permit the Trust to comply.
ARTICLE IV
POTENTIAL CONFLICTS
4.1 The parties acknowledge that the Trust's shares may be made available
for investment to other Participating Insurance Companies. In such event, the
Trustees will monitor the Trust for the existence of any material irreconcilable
conflict between the interests of the contract owners of all Participating
Insurance Companies. An irreconcilable material conflict may arise for a
variety of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Trustees shall promptly inform the Company if they determine that an
irreconcilable material conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Exemptive Order by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Trustees, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its expense and to the extent reasonably practicable (as determined by
<PAGE>
the Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing
the assets allocable to some or all of the Accounts from the Trust or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Trust, or submitting the
question of whether or not such segregation should be implemented to a vote of
all affected Contract owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
Contract owners the option of making such a change; and (b) establishing a new
registered management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives written
notice that this provision is being implemented. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to such Account within six (6) months after the Trustees inform the
Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Until the end of such six (6) month period, the Trust shall continue
to accept and implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Company be required to establish a new funding medium for the Contracts if
an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within six (6)
months after the Trustees inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
<PAGE>
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonable request so that the
Trustees may fully carry out the duties imposed upon them by the Exemptive
Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Exemptive Order) on terms and conditions materially different
from those contained in the Exemptive Order, then the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent such rules are applicable.
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Trust and each of its Trustees, officers, employees and agents
and each person, if any, who controls the Trust within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Article V) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in a registration statement or
prospectus for the Contracts or in the Contracts themselves or in sales
literature generated or approved by the Company on behalf of the Contracts of
Accounts (or any amendment or supplement to any of the foregoing) (collectively,
"Company Documents" for the purposes of this Article V), or arise out of or are
based upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or omission was
made in reliance upon and was accurately derived from written information
furnished to the Company by or on behalf of the Trust for use in Company
Documents or otherwise for use in connection with the sale of the Contracts or
Trust shares; or
(b) arise out of or result from statements or representations (other than
statements or representations contained in and accurately derived from Trust
Documents as defined in Section 5.2(a) or wrongful conduct of the Company or
persons under its control, with respect to the sale or acquisition of the
Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Trust Documents as defined in Section
5.2(a) or the omission or
<PAGE>
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such statement or
omission was made in reliance upon and accurately derived from written
information furnished to the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to provide the
services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of or
result from any other material breach of this Agreement by the Company.
5.2 INDEMNIFICATION BY THE ADVISER. The Adviser agrees to indemnify and
hold harmless the Company and each of its directors, officers, employees and
agents and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Article V) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Trust) or
expenses (including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal counsel
fees incurred in connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation, or at
common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration statement or
prospectus for the Trust (or any amendment or supplement thereto),
(collectively, "Trust Documents" for the purposes of this Article V), or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and was accurately derived from written
information furnished to the Trust by or on behalf of the Company for use in
Trust Documents or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(b) arise out of or result from statements or representations (other than
statements or representations contained in and accurately derived from Company
Documents) or wrongful conduct of the Trust or persons under its control, with
respect to the sale or acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Company Documents or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such statement or
omission was made in reliance upon and accurately derived from written
information furnished to the Company by or on behalf of the Trust; or
(d) arise out of or result from any failure by the Trust to provide the
services or
<PAGE>
furnish the materials required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by the Trust in this Agreement or arise out of or result
from any other material breach of this Agreement by the Trust.
5.3 Neither the Company nor the Adviser shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified party's willful misfeasance, bad faith or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
5.4 Neither the Company nor the Adviser shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other party in writing within a reasonable time after
the summons, or other first written notification, giving information of the
nature of the claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received notice of
service upon or other notification to any designated agent), but failure to
notify the party against whom indemnification is sought of any such claim shall
not relieve that party from any liability which it may have to the Indemnified
party in the absence of Sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified Parties,
the indemnifying party shall be entitled to participate, at its own expense, in
the defense of such action. The indemnifying party also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the indemnifying party to the
Indemnified Party of an election to assume such defense, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the indemnifying party will not be liable to the Indemnified party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
ARTICLE VI
TERMINATION
6.1 This Agreement may be terminated by either party for any reason on any
day after [DATE], upon one year's advance written notice delivered to the other
party.
6.2 Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional shares of the
Trust (or any Portfolio) pursuant to the terms and conditions of this Agreement
for all Contracts in effect on the effective date of termination of this
Agreement, provided that the Company continues to pay the costs set forth in
Section 2.3.
6.3 The provisions of Article V shall survive the termination of this
Agreement, and
<PAGE>
the provision of Article IV and Section 2.8 shall survive the termination of
this Agreement as long as shares of the Trust are held on behalf of Contract
owners in accordance with Section 6.2.
ARTICLE VII
NOTICES
7.1 Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust:
[FUND] [ADVISOR]
If to the Company:
Hartford Life Insurance Company and Hartford Life and Annuity
200 Hopmeadow Street Insurance Company
Simsbury, CT 06089 200 Hopmeadow Street
Attention: Lynda Godkin Simsbury, CT 06089
General Counsel Attention: Lynda Godkin
General Counsel
ARTICLE VIII
MISCELLANEOUS
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Connecticut.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
<PAGE>
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc., and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with an investigation or inquiry relating
to this Agreement or the transactions contemplated hereby.
8.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
8.8 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect. This Agreement replaces and
supersedes any prior Fund Participation Agreement between the parties.
8.9 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers to
execute this Participation Agreement as of the date and year first above
written.
[FUND] [ADVISOR]
By: By:
-------------------------------- -------------------------------
[NAME] [NAME]
[TITLE] [TITLE]
HARTFORD LIFE AND
ANNUITY INSURANCE
COMPANY HARTFORD LIFE INSURANCE COMPANY
By: By:
-------------------------------- -------------------------------
Peter W. Cummins Peter W. Cummins
Senior Vice President Senior Vice President
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
[NAMES OF SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS]
<PAGE>
EXHIBIT 9
THE [LOGO]
HARTFORD
April 10, 1998 Lynda Godkin, Senior Vice
President, General Counsel &
Secretary Law Department
Board of Directors
Hartford Life and Annuity Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
FILE NO. 33-73572
Dear Sir/Madam:
I have acted as General Counsel to Hartford Life and Annuity Insurance
Company (the "Company"), a Connecticut insurance company, and Hartford Life
and Annuity Insurance Company Putnam Capital Manager Trust Separate Account
Two (the "Account") in connection with the registration of an indefinite
amount of securities in the form of variable annuity contracts (the
"Contracts") with the Securities and Exchange Commission under the Securities
Act of 1933, as amended. I have examined such documents (including the Form
N-4 Registration Statement) and reviewed such questions of law as I
considered necessary and appropriate, and on the basis of such examination
and review, it is my opinion that:
1. The Company is a corporation duly organized and validly existing as a
stock life insurance company under the laws of the State of Connecticut
and is duly authorized by the Insurance Department of the State of
Connecticut to issue the Contracts.
2. The Account is a duly authorized and validly existing separate account
established pursuant to the provisions of Section 38a-433 of the
Connecticut Statutes.
3. To the extent so provided under the Contracts, that portion of the assets
of the Account equal to the reserves and other contract liabilities with
respect to the Account will not be chargeable with liabilities arising out
of any other business that the Company may conduct.
<PAGE>
Board of Directors
Hartford Life and Annuity Insurance Company
April 10, 1998
Page 2
4. The Contracts, when issued as contemplated by the Form N-4 Registration
Statement, will constitute legal, validly issued and binding obligations
of the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form N-4
Registration Statement for the Contracts and the Account.
Sincerely,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
EXHIBIT 10
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included or made a part of this
Registration Statement File No. 33-73572 for Hartford Life and Annuity
Insurance Company Putnam Capital Manager Trust Separate Account Two on Form
N-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 13, 1998
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
POWER OF ATTORNEY
Gregory A. Boyko
Lynda Godkin
Thomas M. Marra
Lowndes A. Smith
David M. Znamierowski
do hereby jointly and severally authorize Lynda Godkin, Marianne O'Doherty,
and Leslie T. Soler to sign as their agent, any Registration Statement,
pre-effective amendment, post-effective amendment and any application for
exemptive relief of the Hartford Life and Annuity Insurance Company under the
Securities Act of 1933 and/or the Investment Company Act of 1940.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
/s/ Gregory A. Boyko Dated as of March 16, 1998
- ------------------------------ --------------------------
Gregory A. Boyko
/s/ Lynda Godkin Dated as of March 16, 1998
- ------------------------------ --------------------------
Lynda Godkin
/s/ Thomas M. Marra Dated as of March 16, 1998
- ------------------------------ --------------------------
Thomas M. Marra
/s/ Lowndes A. Smith Dated as of March 16, 1998
- ------------------------------ --------------------------
Lowndes A. Smith
/s/ David M. Znamierowski Dated as of March 16, 1998
- ------------------------------ --------------------------
David M. Znamierowski
<PAGE>
<TABLE>
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<S> <C>
THE HARTFORD
The Hartford Financial Services Group, Inc.
(Delaware)
|
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Nutmeg Insurance Company The Hartford Investment
(Connecticut) Management Company
| (Delaware)
Hartford Fire Insurance Company |
(Connecticut) Hartford Investment
| Services, Inc.
Hartford Accident and Indemnity Company (Connecticut)
(Connecticut)
|
Hartford Life, Inc.
(Delaware)
|
Hartford Life and Accident Insurance Company
(Connecticut)
|
|
|
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Alpine Life Hartford Financial Hartford Life American Maturity ITT Hartford Canada
Insurance Services Life Insurance Company Life Insurance Holdings, Inc.
Company Insurance Co. (Connecticut) Company (Canada)
(New Jersey) (Connecticut) | (Connecticut) |
| | |
| AML Financial, Inc. |
| (Connecticut) Hartford Life
| Insurance Company
| of Canada
| (Canada)
|
|
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Hartford Life and Annuity ITT Hartford International Hartford Financial Services Royal Life
Insurance Company Life Reassurance Corporation Corporation Insurance
(Connecticut) (Connecticut) (Delaware) Company of
| | America
| | (Connecticut)
| |
ITT Hartford Life, Ltd. |
(Bermuda) |
|
|
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MS Fund HL Funding HL Investment Hartford Hartford Securities Hartford-Comp. Emp.
America Company, Inc. Advisors, Inc. Equity Sales Distribution Benefit Service
1993-K, Inc. (Connecticut) (Connecticut) Company, Inc. Company, Inc. Company
(Delaware) | (Connecticut) (Connecticut) (Connecticut)
|
Hartford Investment
Financial Services
Company
(Delaware)
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