<PAGE>
PUTNAM HARTFORD CAPITAL MANAGER VARIABLE ANNUITY
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.
The following Sub-Accounts are available under the Contract. After each
Sub-Account is the name of the underlying investment for that Sub-Account.
Putnam Asia Pacific Growth Sub-Account -- Shares of Class IA of Putnam VT
Asia Pacific Growth Fund of the Putnam Variable Trust, Putnam Diversified
Income Sub-Account -- Shares of Class IA of Putnam VT Diversified Income Fund
of the Putnam Variable Trust, The George Putnam Fund Sub-Account -- Shares of
Class IA of Putnam VT The George Putnam Fund of Boston of the Putnam Variable
Trust, Putnam Global Asset Allocation Sub-Account -- Shares of Class IA of
Putnam VT Global Asset Allocation Fund of the Putnam Variable Trust, Putnam
Global Growth Sub-Account -- Shares of Class IA of Putnam VT Global Growth
Fund of the Putnam Variable Trust, Putnam Growth and Income Sub-Account --
Shares of Class IA of Putnam VT Growth and Income Fund of the Putnam Variable
Trust, Putnam Health Sciences Sub-Account -- Shares of Class IA of Putnam VT
Health Sciences Fund of the Putnam Variable Trust, Putnam High Yield
Sub-Account -- Shares of Class IA of Putnam VT High Yield Fund of the Putnam
Variable Trust, Putnam International Growth Sub-Account -- Shares of Class IA
of Putnam VT International Growth Fund of the Putnam Variable Trust, Putnam
International Growth and Income Sub-Account -- Shares of Class IA of Putnam
VT International Growth and Income Fund of the Putnam Variable Trust, Putnam
International New Opportunities Sub-Account -- Shares of Class IA of Putnam
VT International New Opportunities Fund of the Putnam Variable Trust, Putnam
Investors Sub-Account -- Shares of Class IA of Putnam VT Investors Fund of
the Putnam Variable Trust, Putnam Money Market Sub-Account -- Shares of Class
IA of Putnam VT Money Market Fund of the Putnam Variable Trust, Putnam New
Opportunities Sub-Account -- Shares of Class IA of Putnam VT New
Opportunities Fund of the Putnam Variable Trust, Putnam New Value Sub-Account
- -- Shares of Class IA of Putnam VT New Value Fund of the Putnam Variable
Trust, Putnam OTC & Emerging Growth Sub-Account -- Shares of Class IA of
Putnam VT OTC & Emerging Growth Fund of the Putnam Variable Trust, Putnam
U.S. Government and High Quality Bond Sub-Account -- Shares of Class IA of
Putnam VT U.S. Government and High Quality Bond Fund of the Putnam Variable
Trust, Putnam Utilities Growth & Income Sub-Account -- Shares of Class IA of
Putnam VT Utilities Growth & Income Fund of the Putnam Variable Trust, Putnam
Vista Sub-Account -- Shares of Class IA of Putnam VT Vista Fund of the Putnam
Variable Trust, Putnam Voyager Sub-Account -- Shares of Class IA of Putnam VT
Voyager Fund of the Putnam Variable Trust.
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
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<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
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<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.
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<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.
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<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.
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<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.
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<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>
Putnam 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>
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<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>
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<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.
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<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.)
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 Contingent Deferred Sales Charge. After the seventh year from each
Premium Payment, also on a non-cumulative basis, the Contract Owner may make
a partial surrender of 10% of Premium Payments made during the seven years
prior to the surrender and 100% of the Contract Value less the Premium
Payments made during the seven years prior to the surrender. (See "Annual
Withdrawal Amount," page 20.)
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
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<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-ACCOUNT
(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.
-24-
<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,
convertible 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 investment advice
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
total number of Accumulation Units credited to your Contract in each
Sub-Account by the then current Accumulation Unit values for the applicable
Sub-Account. The value of the Fixed Account under your Contract will be the
amount allocated to the Fixed Account plus interest credited. You will be
advised at least semi-annually of the number of Accumulation Units credited to
each Sub-Account, the current Accumulation Unit values, the Fixed Account value,
and the total value of your Contract.
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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
submitted on an annual basis by the Contract Owner. Failure to submit accurate
data satisfactory to Hartford will give Hartford the right to terminate this
extension of benefits.
CHARGES UNDER THE CONTRACT
CONTINGENT DEFERRED SALES CHARGES ("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
Gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER
THAN QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC. Section 72 contains provisions
for Contract Owners which are non-natural persons. Non-natural persons
include corporations, trusts, limited liability companies and
partnerships. The annual net increase in the value of the Contract is
currently includable in the gross income of a non-natural person, unless
the non-natural person holds the Contract as an agent for a natural
person. There are additional exceptions from current inclusion for (i)
certain annuities held by
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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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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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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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(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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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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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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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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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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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
