<PAGE>
- -------------------------------------------------------------------------------
As filed with the Securities and Exchange Commission on April 15 , 1999.
File No. 33-60702
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
----
Post-Effective Amendment No. 8 [X]
----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 26 [X]
----
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO
(Exact Name of Registrant)
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Name of Depositor)
P. O. BOX 2999
HARTFORD, CT 06104-2999
(Address of Depositor's Principal Offices)
(860) 843-6733
(Depositor's Telephone Number, Including Area Code)
Marianne O'Doherty, ESQ.
HARTFORD LIFE
P. O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
----
X on May 3, 1999 pursuant to paragraph (b) of Rule 485
----
60 days after filing pursuant to paragraph (a)(1) of Rule 485
----
on ___________, 1998 pursuant to paragraph (a)(1) of Rule 485
----
this post-effective amendment designates a new effective date
---- for a previously
<PAGE>
filed post-effective amendment.
PURSUANT TO RULE 24F-2(a)(1) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 Item No. Prospectus Heading
- ------------------------------------ --------------------------------
1. Cover Page Hartford Life and Annuity
Insurance Company, The Separate
Account
2. Definitions Definitions
3. Synopsis or Highlights Highlights
4. Condensed Financial Accumulation Unit Values
Information
5. General Description of General Contract Information
Registrant
6. Deductions The Contract: Charges and Fees
7. General Description of The Contract
Annuity Contracts
8. Annuity Period Annuity Payouts
9. Death Benefit The Contract: Death Benefit
10. Purchases and Contract Value The Contract
11. Redemptions The Contract: Surrenders
12. Taxes Federal Tax Considerations
13. Legal Proceedings Other Information: Legal Matters
Experts
14. Table of Contents of the Table of Contents to
Statement of Additional Statement of Additional
Information Information Hartford
15. Cover Page Part B; Statement of Additional
Information
<PAGE>
16. Table of Contents Table of Contents
17. General Information and History Description of Hartford Life
and Annuity Insurance Company
18. Services None
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Data Calculation of Yield and Return
22. Annuity Payments Annuity Payouts
23. Financial Statements Financial Statements
24. Financial Statements and Financial Statements and
Exhibits Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Common Control with the Depositor
Depositor or Registrant or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Location of Accounts and Records
Records
31. Management Services Management Services
32. Undertakings Undertakings
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Putnam Capital Manager
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO
P. O. BOX 5085
Hartford, Connecticut 06102-5085
Telephone: 1-800-521-0538
This Prospectus describes information you should know before you purchase Series
III, Series IV of Putnam Capital Manager variable annuity. Please read it
carefully.
Putnam Capital Manager variable annuity is a contract between you and Hartford
Life Insurance Company where you agree to make at least one Premium Payment to
us and we agree to make a series of Annuity Payouts at a later date. This
Annuity is a flexible premium, tax-deferred, variable annuity offered to both
individuals and groups. It is:
- - Flexible, because you may add Premium Payments at any time.
- - Tax-deferred, which means you don't pay taxes until you take money out or
until we start to make Annuity Payouts.
- - Variable, because the value of your Annuity will fluctuate with the
performance of the underlying funds.
At the time you purchase your Annuity, you allocate your Premium Payment to
"Sub-Accounts". These are subdivisions of our Separate Account, an account that
keeps your Annuity assets separate from our company assets. The Sub-Accounts
then purchase shares of mutual funds set up exclusively for variable annuity or
variable life insurance products. These funds are not the same mutual funds that
you buy through your stockbroker or through a retail mutual fund. They may have
similar investment strategies and the same portfolio managers as retail mutual
funds. This Annuity offers you Funds with investment strategies ranging from
conservative to aggressive and you may pick those Funds that meet your
investment goals and risk tolerance. The Sub-Accounts and the Funds are listed
below:
The Sub-Accounts and the Funds are listed below:
- - Putnam Asia Pacific Growth Sub-Account which purchases Class IA shares of
Putnam VT Asia Pacific Growth Fund of Putnam Variable Trust
- - Putnam Diversified Income Sub-Account which purchases Class IA shares of
Putnam VT Diversified Income Fund of Putnam Variable Trust
- - Putnam The George Putnam Fund of Boston Sub-Account which purchases Class
IA shares of Putnam VT The George Putnam Fund of Boston of Putnam Variable
Trust
- - Putnam Global Asset Allocation Sub-Account which purchases Class IA shares
of of Putnam VT Global Asset Allocation Fund of Putnam Variable Trust
1
<PAGE>
- - Putnam Global Growth Sub-Account which purchases Class IA shares of Putnam
VT Global Growth Fund of Putnam Variable Trust
- - Putnam Growth and Income Sub-Account which purchases Class IA shares of
Putnam VT Growth and Income Fund of Putnam Variable Trust
- - Putnam Health Sciences Sub-Account which purchases Class IA shares of
Putnam VT Health Sciences Fund of Putnam Variable Trust
- - Putnam High Yield Sub-Account which purchases Class IA shares of Putnam VT
High Yield Fund of Putnam Variable Trust
- - Putnam Income Sub-Account (formerly Putnam U.S. Government and High Quality
Bond Sub-Account) which purchases Class IA shares of Putnam VT Income Fund
(formerly Putnam VT U.S. Government and High Quality Bond Fund) of Putnam
Variable Trust
- - Putnam International Growth Sub-Account which purchases Class IA shares of
Putnam VT International Growth Fund of Putnam Variable Trust
- - Putnam International Growth and Income Sub-Account which purchases Class IA
shares of Putnam VT International Growth and Income Fund of Putnam Variable
Trust
- - Putnam International New Opportunities Sub-Account which purchases Class IA
shares of Putnam VT International New Opportunities Fund of Putnam Variable
Trust
- - Putnam Investors Sub-Account which purchases Class IA shares of Putnam VT
Investors Fund of Putnam Variable Trust
- - Putnam Money Market Sub-Account which purchases Class IA shares of Putnam
VT Money Market Fund of Putnam Variable Trust
- - Putnam New Opportunities Sub-Account which purchases Class IA shares of
Putnam VT New Opportunities Fund of Putnam Variable Trust
- - Putnam New Value Sub-Account which purchases Class IA shares of Putnam VT
New Value Fund of Putnam Variable Trust
- - Putnam OTC & Emerging Growth Sub-Account which purchases Class IA shares of
Putnam VT OTC & Emerging Growth Fund of Putnam Variable Trust
- - Putnam Research Sub-Account which purchases Class IA shares of Putnam VT
Research Fund of the Putnam Variable Trust
- - Putnam Small Cap Value Sub-Account which purchases Class IA shares of
Putnam VT Small Cap Value Fund of Putnam Variable Trust
- - Putnam Utilities Growth and Income Sub-Account which purchases Class IA
shares of Putnam VT Utilities Growth and Income Fund of Putnam Variable
Trust
- - Putnam Vista Sub-Account which purchases Class IA shares of Putnam VT Vista
Fund of Putnam Variable Trust
- - Putnam Voyager Sub-Account which purchases Class IA shares of Putnam VT
Voyager Fund of Putnam Variable Trust
If you purchase Series III or Series IV, you may also allocate some or all of
your Premium Payment to the "Fixed Accumulation Feature", which pays an interest
rate
2
<PAGE>
guaranteed for a certain time period from the time the Premium Payment is
made. Premium Payments allocated to the Fixed Accumulation Feature are not
segregated from our company assets like the assets of the Separate Account.
If you decide to buy this Annuity, you should keep this prospectus for your
records. You can also call us at 1-800-521-0538 to get a Statement of Additional
Information, free of charge. The Statement of Additional Information contains
more information about this Annuity and, like this prospectus, is filed with the
Securities and Exchange Commission ("SEC"). We have included the Table of
Contents for the Statement of Additional Information at the end of this
prospectus.
Although we file the prospectus and the Statement of Additional information with
the SEC, the SEC doesn't approve or disapprove these securities or determine if
the information is truthful or complete. Anyone who represents that the SEC does
these things may be guilty of a criminal offense. This Prospectus and the
Statement of Additional Information can also be obtained from the SEC's website
(HTTP://WWW.SEC.GOV).
This Annuity IS NOT:
- - A bank deposit or obligation
- - Federally insured
- - Endorsed by any bank or governmental agency
This Annuity may not be available for sale in all states.
Prospectus Dated: May 3, 1999
Statement of Additional Information Dated: May 3, 1999
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Definitions.....................................................................6
Fee Table.................................................................9,13,17
Annual Fund Operating Expenses............................................9,13,17
Accumulation Unit Values.......................................................21
Highlights.....................................................................26
General Contract Information...................................................28
Hartford Life and Annuity Insurance Company...........................28
The Separate Account..................................................29
The Funds.............................................................29
Performance Related Information................................................34
The Fixed Accumulation Feature.................................................35
The Contract...................................................................37
Purchases and Contract Value..........................................37
Charges and Fees......................................................41
Death Benefit.........................................................45
Surrenders............................................................48
Annuity Payouts................................................................50
Other Programs Available.......................................................54
Other Information..............................................................55
Year 2000.............................................................56
4
<PAGE>
Legal Matters and Experts.............................................58
More Information......................................................59
Federal Tax Considerations............................................59
General
Taxation of Hartford and the Separate Account.........................59
Taxation of Annuities -- General Provisions Affecting Purchasers
Other Than Qualified Retirement Plans.................................60
Federal Income Tax Withholding........................................67
General Provisions Affecting Qualified Retirement Plans...............67
Annuity Purchases By Nonresident Aliens and Foreign Corporations......67
Appendix I - Series III of Putnam Capital Manager variable annuity.............68
Appendix II - Series IV of Putnam Capital Manager variable annuity.............70
Appendix III - Information Regarding Tax-Qualified Plans.......................72
Table of Contents to Statement of Additional Information.......................77
</TABLE>
5
<PAGE>
Definitions
These terms are capitalized when used throughout this prospectus. Please refer
to these defined terms if you have any questions as you read your prospectus.
Account: Any of the Sub-Accounts or Fixed Accumulation.
Accumulation Units: If you allocate your Premium Payment to any of the
Sub-Accounts, we will convert those payments into Accumulation Units in the
selected Sub-Accounts. Accumulation Units are valued at the end of each
Valuation Day and are used to calculate the value of your Contract prior to
Annuitization.
Accumulation Unit Value: The daily price of Accumulation Units on any Valuation
Day.
Administrative Office of the Company: Our location and overnight mailing address
is: 200 Hopmeadow Street, Simsbury, Connecticut 06089. Our standard mailing
address is: Investment Product Services, P.O. Box 5085, Hartford, CT 06102-5085.
Anniversary Value: The value equal to the Contract Value as of 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.
Annual Maintenance Fee: An annual $25 charge deducted on a Contract Anniversary
or upon full Surrender if the Contract Value at either of those times is less
than $50,000. The charge is deducted proportionately from each Account in which
you are invested.
Annual Withdrawal Amount: This is the amount you can Surrender per Contract Year
without paying a Contingent Deferred Sales Charge. This amount is
non-cumulative, meaning that it cannot be carried over from one year to the
next.
Annuitant: The person on whose life the Contract is based. The Annuitant may not
be changed after your Contract is issued.
Annuity Commencement Date: The date we start to make Annuity Payouts.
Annuity Payout: The money we pay out after the Annuity Commencement Date for the
duration and frequency you select.
Annuity Payout Option: Any of the options available for payout after the Annuity
Commencement Date or death of the Contract Owner or Annuitant.
Annuity Unit: The unit of measure we use to calculate the value of your Annuity
Payouts under a variable dollar amount Annuity Payout Option.
Annuity Unit Value: The daily price of Annuity Units on any Valuation Day.
6
<PAGE>
Beneficiary: The person(s) entitled to receive a Death Benefit upon the death of
the Contract Owner or Annuitant.
Code: The Internal Revenue Code of 1986, as amended.
Commuted Value: The present value of any remaining guaranteed Annuity Payouts.
Contingent Annuitant: The person you may designate to become the Annuitant if
the original Annuitant dies before the Annuity Commencement Date. You must name
a Contingent Annuitant before the original Annuitant's death.
Contingent Deferred Sales Charge: The deferred sales charge that may apply when
you make a full or partial Surrender.
Contract Anniversary: The anniversary of the date we issued your Contract. If
the Contract Anniversary falls on a Non-Valuation Day, then the Contract
Anniversary will be the next Valuation Day.
Contract Owner or you: The owner or holder of this Annuity. We do not capitalize
"you" in the prospectus.
Contract Value: The total value of the Accounts on any Valuation Day.
Contract Year: Any 12 month period between Contract Anniversaries, beginning
with the date the Contract was issued.
Death Benefit: The amount payable after the Contract Owner or the Annuitant
dies.
Dollar Cost Averaging: A program that allows you to systematically make
transfers between Accounts available in your Contract.
Fixed Accumulation Feature: Part of our General Account, where you may allocate
all or a portion of your Contract Value. In your Contract, this is defined as
the "Fixed Account".
General Account: The General Account includes our company assets and any money
you have invested in the Fixed Accumulation Feature.
Hartford, we or our: Hartford Life and Annuity Insurance Company. Only Hartford
is a capitalized term in the prospectus.
Joint Annuitant: The person on whose life Annuity Payouts are based if the
Annuitant dies after Annuitization. You may name a Joint Annuitant only if your
Annuity Payout Option provides for a survivor. The Joint Annuitant may not be
changed.
7
<PAGE>
Maximum Anniversary Value: This is the highest Anniversary Value prior to the
deceased's 81st birthday or the date of death, if earlier. This is not available
in Series III or Series IV.
Net Investment Factor: This is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next, and is also used to calculate
your Annuity Payout amount.
Non-Valuation Day: Any day the New York Stock Exchange is not open for trading.
Payee: The person or party you designate to receive Annuity Payouts.
Premium Payment: Money sent to us to be invested in your Annuity.
Premium Tax: A tax charged by a state or municipality on Premium Payments.
Required Minimum Distribution: A federal requirement that individuals age 70 1/2
and older must take a distribution from their tax-qualified retirement account
by December 31, each year. For employer sponsored Qualified Contracts, the
individual must begin taking distributions at the age of 70 1/2 or upon
retirement, whichever comes later.
Sub-Account Value: The value on or before the Annuity Calculation Date, which is
determined on any day by multiplying the number of Accumulation Units by the
Accumulation Unit Value for that Sub-Account.
Surrender: A complete or partial withdrawal from your Contract.
Surrender Value: The amount we pay you if you terminate your Contract before the
Annuity Commencement Date. The Surrender Value is equal to the Contract Value
minus any applicable charges.
Valuation Day: Every day the New York Stock Exchange is open for trading. Values
of the Separate Account are determined as of the close of the New York Stock
Exchange, generally 4:00 p.m. Eastern Time.
Valuation Period: The time span between the close of trading on the New York
Stock Exchange from one Valuation Day to the next.
8
<PAGE>
PUTNAM CAPITAL MANAGER III
FEE TABLE
SUMMARY
CONTRACT OWNER TRANSACTION EXPENSES (ALL SUB-ACCOUNTS)
<TABLE>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of Premium Payments)............... None
Exchange Fee........................................................................ $0
Deferred Sales Load (as a percentage of amounts withdrawn)
First Year (1)................................................................ 7%
Second Year................................................................... 6%
Third Year.................................................................... 5%
Fourth Year................................................................... 4%
Fifth Year.................................................................... 3%
Sixth Year.................................................................... 2%
Seventh Year.................................................................. 1%
Eighth Year................................................................... 0%
Annual Maintenance Fee (2).......................................................... $25
Annual Expenses-Separate Account (as percentage of average account value)
Mortality and Expense Risk.................................................... 1.250%
Administration Fees........................................................... 0.150%
Total......................................................................... 1.400%
</TABLE>
(1) Length of time from premium payment.
(2) The Annual Maintenance Fee is a single $25 charge on a Contract. It is
deducted proportionally from the investment options in use at the time of the
charge. Pursuant to requirements of the 1940 Act, the Annual Maintenance Fee has
been reflected in the Examples by a method intended to show the "average" impact
of the Annual Maintenance Fee on an investment in the Separate Account. The
Annual Maintenance Fee is deducted only when the accumulated value is less than
$50,000. In the Example, the Annual Maintenance Fee is approximated as a 0.05%
annual asset charge based on the experience of the Contracts.
The purpose of this table is to assist you in understanding various fees and
charges you will pay directly or indirectly. The table reflects expenses of the
Separate Account and underlying Funds. Premium Taxes, if any, have been taken
into account.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
<S> <C> <C> <C>
Putnam VT Asia Pacific Growth Fund 0.800% 0.320% 1.120%
Putnam VT Diversified Income Fund 0.670% 0.110% 0.780%
Putnam VT The George Putnam Fund of Boston(1)(2) 0.490% 0.360% 0.850%
Putnam VT Global Asset Allocation Fund 0.650% 0.130% 0.780%
Putnam VT Global Growth Fund 0.600% 0.120% 0.720%
Putnam VT Growth and Income Fund 0.460% 0.040% 0.500%
9
<PAGE>
Putnam VT Health Sciences Fund(1)(2) 0.560% 0.340% 0.900%
Putnam VT High Yield Fund 0.640% 0.070% 0.710%
Putnam VT International Growth Fund 0.800% 0.270% 1.070%
Putnam VT International Growth and Income Fund 0.800% 0.190% 0.990%
Putnam VT International New Opportunities Fund(2) 1.180% 0.420% 1.600%
Putnam VT Investors Fund(1)(2) 0.520% 0.330% 0.850%
Putnam VT Money Market Fund 0.450% 0.080% 0.530%
Putnam VT New Opportunities Fund 0.560% 0.050% 0.610%
Putnam VT New Value Fund 0.700% 0.110% 0.810%
Putnam VT OTC & Emerging Growth Fund(1)(2) 0.560% 0.340% 0.900%
Putnam VT Income Fund (formerly Putnam VT U.S. 0.600% 0.070% 0.670%
Government and High Quality Bond Fund)
Putnam VT Utilities Growth and Income Fund 0.650% 0.070% 0.720%
Putnam VT Vista Fund 0.650% 0.120% 0.770%
Putnam VT Voyager Fund 0.540% 0.040% 0.580%
Putnam VT Research Fund(1)(2) 0.370% 0.480% 0.850%
Putnam VT Small Cap Value Fund(1) 0.800% 0.590% 1.390%
</TABLE>
(1) Based on estimated expenses for the first fiscal year.
(2) 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:
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
<S> <C> <C> <C>
Putnam VT The George Putnam Fund of Boston 0.650% 0.360% 1.010%
Putnam VT Health Sciences Fund 0.700% 0.340% 1.040%
Putnam VT International New Opportunities Fund 1.200% 0.420% 1.620%
Putnam VT Investors Fund 0.650% 0.330% 0.980%
Putnam VT OTC & Emerging Growth Fund 0.700% 0.340% 1.040%
Putnam VT Research Fund 0.650% 0.480% 1.130%
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE PCM III
- -------------------- ------------------------------------ ----------------------------------- --------------------------------------
If you surrender your Contract at If you annuitize your Contract at If you do not surrender your Contract,
the end of the applicable time the end of the applicable time you would pay the following expenses
period, you would pay the period, you would pay the on a $1,000 investment, assuming a
following expenses on a $1,000 following expenses on a $1,000 5% annual return on assets:
investment, assuming a 5% annual investment, assuming a 5%
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>
PCM Asia Pacific
Growth Fund $89 $126 $165 $293 $26 $80 $138 $293 $26 $81 $138 $293
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Diversifed
Income Fund 86 115 148 259 22 70 120 258 23 70 121 259
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM The George
Putnam Fund of
Boston 87 118 151 266 23 72 124 265 24 73 124 266
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Global Asset
Allocation Fund 86 115 148 259 22 70 120 258 23 70 121 259
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Global
Growth Fund 85 114 145 252 22 68 117 252 22 69 118 252
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Growth and
Income Fund 83 107 133 229 19 61 106 228 20 62 106 229
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Health
Sciences Fund 87 119 154 271 24 74 126 270 24 74 127 271
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM High
Yield Fund 85 113 144 251 22 68 116 251 22 68 117 251
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM International
Growth Fund 89 124 163 288 25 79 135 288 26 79 136 288
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM International
Growth and
Income Fund 88 122 158 280 24 76 131 280 25 77 131 280
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM International
New Opportunities
Fund 94 141 189 340 31 95 162 340 31 96 162 340
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Investors Fund 87 118 151 266 23 72 124 265 24 73 124 266
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Money
Market Fund 83 108 135 232 20 62 107 232 20 63 108 232
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM New
Opportunities Fund 84 110 139 241 21 65 111 240 21 65 112 241
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM New Value Fund 86 116 149 262 23 71 122 261 23 71 122 262
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM OTC & Emerging
Growth Fund 87 119 154 271 24 74 126 270 24 74 127 271
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
11
<PAGE>
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Income Fund 85 112 142 247 21 67 114 246 22 67 115 247
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Utilities Growth
and Income Fund 85 114 145 252 22 68 117 252 22 69 118 252
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Vista Fund 86 115 147 258 22 70 120 257 23 70 120 258
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Voyager Fund 84 109 137 238 20 64 110 237 21 64 110 238
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Research Fund 87 118 n/a n/a 23 72 n/a n/a 24 73 n/a n/a
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Small Cap
Value Fund 92 134 n/a n/a 29 89 n/a n/a 29 89 n/a n/a
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
</TABLE>
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
12
<PAGE>
PUTNAM CAPITAL MANAGER IV
FEE TABLE
SUMMARY
CONTRACT OWNER TRANSACTION EXPENSES (ALL SUB-ACCOUNTS)
<TABLE>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of Premium Payments)............. None
Exchange Fee...................................................................... $0
Deferred Sales Load (as a percentage of amounts withdrawn)
First Year (1).............................................................. 7%
Second Year................................................................. 6%
Third Year.................................................................. 5%
Fourth Year................................................................. 4%
Fifth Year.................................................................. 3%
Sixth Year.................................................................. 2%
Seventh Year................................................................ 1%
Eighth Year................................................................. 0%
Annual Maintenance Fee (2)........................................................ $25
Annual Expenses-Separate Account (as percentage of average account value)
Mortality and Expense Risk.................................................. 1.250%
Administration Fees......................................................... 0.150%
Total....................................................................... 1.400%
</TABLE>
(1) Length of time from premium payment.
(2) The Annual Maintenance Fee is a single $25 charge on a Contract. It is
deducted proportionally from the investment options in use at the time of the
charge. Pursuant to requirements of the 1940 Act, the Annual Maintenance Fee has
been reflected in the Examples by a method intended to show the "average" impact
of the Annual Maintenance Fee on an investment in the Separate Account. The
Annual Maintenance Fee is deducted only when the accumulated value is less than
$50,000. In the Example, the Annual Maintenance Fee is approximated as a 0.05%
annual asset charge based on the experience of the Contracts.
The purpose of this table is to assist you in understanding various fees and
charges you will pay directly or indirectly. The table reflects expenses of the
Separate Account and underlying Funds. Premium Taxes, if any, have been taken
into account.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
<S> <C> <C> <C>
Putnam VT Asia Pacific Growth Fund 0.800% 0.320% 1.120%
Putnam VT Diversified Income Fund 0.670% 0.110% 0.780%
Putnam VT The George Putnam Fund of Boston(1)(2) 0.490% 0.360% 0.850%
Putnam VT Global Asset Allocation Fund 0.650% 0.130% 0.780%
Putnam VT Global Growth Fund 0.600% 0.120% 0.720%
Putnam VT Growth and Income Fund 0.460% 0.040% 0.500%
Putnam VT Health Sciences Fund(1)(2) 0.560% 0.340% 0.900%
13
<PAGE>
Putnam VT High Yield Fund 0.640% 0.070% 0.710%
Putnam VT International Growth Fund 0.800% 0.270% 1.070%
Putnam VT International Growth and Income Fund 0.800% 0.190% 0.990%
Putnam VT International New Opportunities Fund(2) 1.180% 0.420% 1.600%
Putnam VT Investors Fund(1)(2) 0.520% 0.330% 0.850%
Putnam VT Money Market Fund 0.450% 0.080% 0.530%
Putnam VT New Opportunities Fund 0.560% 0.050% 0.610%
Putnam VT New Value Fund 0.700% 0.110% 0.810%
Putnam VT OTC & Emerging Growth Fund(1)(2) 0.560% 0.340% 0.900%
Putnam VT Income Fund (formerly Putnam VT U.S. 0.600% 0.070% 0.670%
Government and High Quality Bond Fund)
Putnam VT Utilities Growth and Income Fund 0.650% 0.070% 0.720%
Putnam VT Vista Fund 0.650% 0.120% 0.770%
Putnam VT Voyager Fund 0.540% 0.040% 0.580%
Putnam VT Research Fund (1)(2) 0.370% 0.480% 0.850%
Putnam VT Small Cap Value Fund (1) 0.800% 0.590% 1.390%
</TABLE>
(3) Based on estimated expenses for the first fiscal year.
(4) 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:
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
<S> <C> <C> <C>
Putnam VT The George Putnam Fund of Boston 0.650% 0.360% 1.010%
Putnam VT Health Sciences Fund 0.700% 0.340% 1.040%
Putnam VT International New Opportunities Fund 1.200% 0.420% 1.620%
Putnam VT Investors Fund 0.650% 0.330% 0.980%
Putnam VT OTC & Emerging Growth Fund 0.700% 0.340% 1.040%
Putnam VT Research Fund 0.650% 0.480% 1.130%
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE PCM IV
- -------------------- ------------------------------------ ----------------------------------- -------------------------------------
If you surrender your Contract at If you annuitize your Contract at If you do not surrender your Contract,
the end of the applicable time the end of the applicable time you would pay the following expenses
period, you would pay the period, you would pay the on a $1,000 investment, assuming a
following expenses on a $1,000 following expenses on a $1,000 5% annual return on assets:
investment, assuming a 5% annual investment, assuming a 5% 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>
PCM Asia Pacific
Growth Fund $89 $126 $165 $293 $26 $80 $138 $293 $26 $81 $138 $293
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Diversifed
Income Fund 86 115 148 259 22 70 120 258 23 70 121 259
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM The George
Putnam Fund
of Boston 87 118 151 266 23 72 124 265 24 73 124 266
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Global Asset
Allocation Fund 86 115 148 259 22 70 120 258 23 70 121 259
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Global
Growth Fund 85 114 145 252 22 68 117 252 22 69 118 252
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Growth and
Income Fund 83 107 133 229 19 61 106 228 20 62 106 229
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Health
Sciences Fund 87 119 154 271 24 74 126 270 24 74 127 271
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM High
Yield Fund 85 113 144 251 22 68 116 251 22 68 117 251
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM International
Growth Fund 89 124 163 288 25 79 135 288 26 79 136 288
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM International
Growth and
Income Fund 88 122 158 280 24 76 131 280 25 77 131 280
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM International
New Opportunities
Fund 94 141 189 340 31 95 162 340 31 96 162 340
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Investors Fund 87 118 151 266 23 72 124 265 24 73 124 266
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Money
Market Fund 83 108 135 232 20 62 107 232 20 63 108 232
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM New
Opportunities
Fund 84 110 139 241 21 65 111 240 21 65 112 241
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM New
Value Fund 86 116 149 262 23 71 122 261 23 71 122 262
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM OTC & Emerging
Growth Fund 87 119 154 271 24 74 126 270 24 74 127 271
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
15
<PAGE>
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Income Fund 85 112 142 247 21 67 114 246 22 67 115 247
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Utilities
Growth and Income
Fund 85 114 145 252 22 68 117 252 22 69 118 252
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Vista Fund 86 115 147 258 22 70 120 257 23 70 120 258
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Voyager Fund 84 109 137 238 20 64 110 237 21 64 110 238
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Research Fund 87 118 n/a n/a 23 72 n/a n/a 24 73 n/a n/a
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
PCM Small Cap
Value Fund 92 134 n/a n/a 29 89 n/a n/a 29 89 n/a n/a
- -------------------- ------- --------- -------- --------- ------- --------- ------- --------- ------- --------- --------- -------
</TABLE>
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
16
<PAGE>
PUTNAM CAPITAL MANAGER V
FEE TABLE
SUMMARY
<TABLE>
<CAPTION>
CONTRACT OWNER TRANSACTION EXPENSES
<S> <C>
SALES LOAD IMPOSED ON PURCHASES (as a percentage of Premium Payments)................ None
DEFERRED SALES CHARGE (as a percentage of amounts Surrendered)
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
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average Sub-Account Value)
MORTALITY AND EXPENSE RISK CHARGE........................................... 1.25%
ADMINISTRATIVE FEE.......................................................... 0.15%
TOTAL....................................................................... 1.40%
</TABLE>
(1) Length of time from Premium Payment.
(2) An annual $30 charge deducted on a Contract Anniversary or upon full
Surrender if the Contract Value at either of those times is less than
$50,000. The charge is deducted proportionately from each Account in which
you are invested.
The purpose of this table is to assist you in understanding various fees and
charges you will pay directly or indirectly. The table reflects expenses of the
Separate Account and underlying Funds. Premium Taxes, if any, have been taken
into account.
ANNUAL FUND OPERATING EXPENSES
(As a percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OPERATING
FEES EXPENSES
INCLUDING OTHER INCLUDING
WAIVERS EXPENSES WAIVERS
<S> <C> <C> <C>
Putnam VT Asia Pacific Growth Fund 0.800% 0.320% 1.120%
Putnam VT Diversified Income Fund 0.670% 0.110% 0.780%
Putnam VT The George Putnam Fund of Boston(1)(2) 0.490% 0.360% 0.850%
Putnam VT Global Asset Allocation Fund 0.650% 0.130% 0.780%
Putnam VT Global Growth Fund 0.600% 0.120% 0.720%
Putnam VT Growth and Income Fund 0.460% 0.040% 0.500%
Putnam VT Health Sciences Fund(1)(2) 0.560% 0.340% 0.900%
Putnam VT High Yield Fund 0.640% 0.070% 0.710%
Putnam VT Income Fund (formerly Putnam VT U.S. 0.600% 0.070% 0.670%
Government and High Quality Bond Fund)
17
<PAGE>
Putnam VT International Growth Fund 0.800% 0.270% 1.070%
Putnam VT International Growth and Income Fund 0.800% 0.190% 0.990%
Putnam VT International New Opportunities Fund(2) 1.180% 0.420% 1.600%
Putnam VT Investors Fund(1)(2) 0.520% 0.330% 0.850%
Putnam VT Money Market Fund 0.450% 0.080% 0.530%
Putnam VT New Opportunities Fund 0.560% 0.050% 0.610%
Putnam VT New Value Fund 0.700% 0.110% 0.810%
Putnam VT OTC & Emerging Growth Fund(1)(2) 0.560% 0.340% 0.900%
Putnam VT Research Fund(1)(2) 0.370% 0.480% 0.850%
Putnam VT Small Cap Value Fund(1) 0.800% 0.590% 1.390%
Putnam VT Utilities Growth and Income Fund 0.650% 0.070% 0.720%
Putnam VT Vista Fund 0.650% 0.120% 0.770%
Putnam VT Voyager Fund 0.540% 0.040% 0.580%
</TABLE>
(1) Based on estimated expenses for the first fiscal year.
(2) 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:
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
<S> <C> <C> <C>
Putnam VT The George Putnam Fund of Boston 0.650% 0.360% 1.010%
Putnam VT Health Sciences Fund 0.700% 0.340% 1.040%
Putnam VT International New Opportunities Fund 1.200% 0.420% 1.620%
Putnam VT Investors Fund 0.650% 0.330% 0.980%
Putnam VT OTC & Emerging Growth Fund 0.700% 0.340% 1.040%
Putnam VT Research Fund 0.650% 0.480% 1.130%
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE PCM V
- --------------
If you Surrender your Contract at If you annuitize your Contract at the If you do not Surrender your
the end of the applicable time end of the applicable time period you Contract, you would pay the
period you would pay the following would pay the following expenses on a following expenses on a $1,000
expenses on a $1,000 investment, $1,000 investment, assuming a 5% investment, assuming a 5% annual
assuming a 5% annual return on annual return on assets: return on assets:
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
GROWTH $80 $126 $175 $294 $26 $81 $138 $294 $26 $81 $139 $294
PUTNAM
DIVERSIFIED
INCOME 77 116 157 260 22 70 120 259 23 71 121 260
THE GEORGE
PUTNAM
FUND 78 118 161 267 23 72 124 266 24 73 125 267
PUTNAM
GLOBAL
ASSET
ALLOCATION 77 116 157 260 22 70 120 259 23 71 121 260
PUTNAM
GLOBAL
GROWTH 76 114 154 253 22 68 117 253 22 69 118 253
PUTNAM
GROWTH AND
INCOME 74 107 143 230 19 61 106 229 20 62 107 230
PUTNAM
HEALTH
SCIENCES 78 119 163 272 24 74 127 271 24 74 127 272
PUTNAM HIGH
YIELD 76 114 154 252 22 68 117 252 22 69 118 252
PUTNAM
INTERNATIONAL
GROWTH 80 125 172 289 25 79 135 289 26 80 136 289
PUTNAM
INTERNATIONAL
GROWTH AND
INCOME 79 122 168 281 24 77 131 280 25 77 132 281
PUTNAM
INTERNATIONAL
NEW
OPPORTUNITIES 85 141 199 341 31 95 162 341 31 96 163 341
PUTNAM
INVESTORS 78 118 161 267 23 72 124 266 24 73 125 267
PUTNAM
MONEY
MARKET 74 108 144 233 20 62 108 233 20 63 108 233
PUTNAM NEW
OPPORTUNITIES 75 111 148 242 21 65 112 241 21 66 112 242
PUTNAM
NEW VALUE 77 117 159 263 23 71 122 262 23 72 123 263
PUTNAM OTC &
EMERGING GROWTH 78 119 163 272 24 74 127 271 24 74 127 272
19
<PAGE>
PUTNAM
RESEARCH 78 118 N/A N/A 23 72 N/A N/A 24 73 N/A N/A
PUTNAM
SMALL CAP
VALUE 83 134 N/A N/A 29 89 N/A N/A 29 89 N/A N/A
PUTNAM
UTILITIES
GROWTH AND
INCOME 76 114 154 253 22 68 117 253 22 69 118 253
PUTNAM
VISTA 77 115 157 259 22 70 120 258 23 70 121 259
PUTNAM
VOYAGER 75 110 147 239 20 64 110 238 21 65 111 239
</TABLE>
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. The
Annual Maintenance Fee has been reflected in the Example by a method intended
to show the "average" impact of the Annual Maintenance Fee on an investment
in the Separate Account. We do this by approximating an "average" 0.06%
annual charge.
20
<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. No information is shown for the Putnam Small Cap
Value Sub-Account because the Sub-Account had not commenced operation as of
December 31, 1998.
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PUTNAM ASIA PACIFIC
GROWTH SUB-ACCOUNT
(Inception date May 1, 1995)
Accumulation Unit Value at
beginning of period............. $9.176 $10.903 $10.135 $10.000 - -
Accumulation Unit Value at end
of period....................... $8.552 $9.176 $10.903 $10.135 - -
Number Accumulation Units
outstanding at end of period
(in thousands).................. 6,219 7,445 6,980 1,292 - -
PUTNAM DIVERSIFIED INCOME
SUB-ACCOUNT (Inception date
September 15, 1993)
Accumulation Unit Value at
beginning of period............. $12.841 $12.127 $11.302 $9.622 $10.188 $10.000
Accumulation Unit Value at end
of period....................... $12.489 $12.841 $12.127 $11.302 $9.622 $10.188
Number Accumulation Units
outstanding at end of period
(in thousands).................. 23,713 21,017 18,268 11,006 8,609 4,428
THE GEORGE PUTNAM SUB-ACCOUNT
(Inception date May 1, 1998)
Accumulation Unit Value at
beginning of period............. $10.000 - - - - -
Accumulation Unit Value at end
of period....................... $21.492 - - - - -
Number Accumulation Units
outstanding at end of period
(in thousands).................. 16,353 - - - - -
PUTNAM GLOBAL ASSET ALLOCATION
SUB-ACCOUNT
(Inception date February 1,
21
<PAGE>
1988)
Accumulation Unit Value at
beginning of period............. $27.026 $22.902 $20.087 $16.355 $16.988 $14.665
Accumulation Unit Value at end
of period....................... $30.256 $27.026 $22.902 $20.087 $16.355 $16.988
Number Accumulation Units
outstanding at end of period
(in thousands).................. 16,653 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............. $19.497 $17.294 $14.963 $13.119 $13.432 $10.289
Accumulation Unit Value at end
of period....................... $24.940 $19.497 $17.294 $14.963 $13.119 $13.432
Number Accumulation Units
outstanding at end of period
(in thousands).................. 42,487 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............. $40.036 $32.703 $27.201 $20.178 $20.390 $18.096
Accumulation Unit Value at end
of period....................... $45.567 $40.036 $32.703 $27.201 $20.178 $20.390
Accumulation Units
outstanding at end of period
(in thousands).................. 102,727 94,356 73,133 42,420 11,321 15,233
PUTNAM HEALTH SCIENCES
SUB-ACCOUNT
(Inception date May 1, 1998)
Accumulation Unit Value at
beginning of period............. $10.000 - - - - -
Accumulation Unit Value at end
of period....................... $10.849 - - - - -
Number Accumulation Units
outstanding at end of period
(in thousands).................. 7,148 - - - - -
PUTNAM HIGH YIELD SUB-ACCOUNT
(Inception date February 1, 1988)
Accumulation Unit Value at
beginning of period............. $25.575 $22.682 $20.390 $17.476 $17.890 $15.173
Accumulation Unit Value at end
of period....................... $23.742 $25.575 $22.682 $20.390 $17.476 $17.890
Number Accumulation Units
outstanding at end of period
(in thousands).................. 23,582 21,602 17,031 10,603 7,675 5,066
PUTNAM INCOME SUB-ACCOUNT
(Inception date February 1, 1988)
22
<PAGE>
Accumulation Unit Value at
beginning of period............. $19.959 $18.631 $18.448 $15.533 $16.277 14.833
Accumulation Unit Value at end
of period....................... $21.305 $19.959 $18.631 $18.448 $15.533 $16.277
Number Accumulation Units
outstanding at end of period
(in thousands).................. 16,353 11,666 11,110 8,948 7,585 7,254
PUTNAM INTERNATIONAL GROWTH
SUB-ACCOUNT
(Inception date January 2, 1997)
Accumulation Unit Value at end
of period....................... $11.451 $10.000 - - - -
Accumulation Unit Value at end
of period....................... $13.403 $11.451 - - - -
Number Accumulation Units
outstanding at end of period
(in thousands).................. 12,815 6,948 - - - -
PUTNAM INTERNATIONAL GROWTH AND
INCOME SUB-ACCOUNT
(Inception date January 2, 1997)
Accumulation Unit Value at
beginning of period............. $11.776 $10.000 - - - -
Accumulation Unit Value at end
of period....................... $12.922 $11.777 - - - -
Number Accumulation Units
outstanding at end of period
(in thousands).................. 14,002 9,878 - - - -
PUTNAM INTERNATIONAL NEW
OPPORTUNITIES SUB-ACCOUNT
(Inception date January 2, 1997)
Accumulation Unit Value at
beginning of period............. $9.850 $10.000 - - - -
Accumulation Unit Value at end
of period....................... $11.226 $9.850 - - - -
Number Accumulation Units
outstanding at end of period
(in thousands).................. 7,123 6,510 - - - -
PUTNAM INVESTORS SUB-ACCOUNT
(Inception date May 1, 1998)
Accumulation Unit Value at
beginning of period............. $10.000 - - - - -
Accumulation Unit Value at end
of period....................... $11.432 - - - - -
Number Accumulation Units
outstanding at end of period
(in thousands).................. 11,569 - - - - -
PUTNAM MONEY MARKET SUB-ACCOUNT
23
<PAGE>
(Inception date February 1, 1988)
Accumulation Unit Value at
beginning of period............. $1.483 $1.429 $1.379 $1.325 $1.294 $1.277
Accumulation Unit Value at end
of period....................... $1.538 $1.483 $1.429 $1.379 $1.325 $1.294
Number Accumulation Units
outstanding at end of period
(in thousands).................. 177,635 122,079 147,638 66,283 38,819 12,916
PUTNAM NEW OPPORTUNITIES
SUB-ACCOUNT (Inception date
May 2, 1994)
Accumulation Unit Value at
beginning of period............. $20.223 $16.635 $15.312 $10.718 $10.000 -
Accumulation Unit Value at end
of period....................... $24.805 $20.223 $16.635 $15.312 $10.718 -
Number Accumulation Units
outstanding at end of period
(in thousands).................. 62,749 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............. $11.597 $10.000 - - - -
Accumulation Unit Value at end
of period....................... $12.151 11.597 - - - -
Number Accumulation Units
outstanding at end of period
(in thousands).................. 12,727 10,226 - - - -
PUTNAM OTC & EMERGING
SUB-ACCOUNT
(Inception date May 1, 1998)
Accumulation Unit Value at
beginning of period............. $10.000 - - - - -
Accumulation Unit Value at end
of period....................... $9.980 - - - - -
Number Accumulation Units
outstanding at end of period
(in thousands).................. 1,672 - - - - -
PUTNAM RESEARCH SUB-ACCOUNT
(Inception date October 1, 1998)
Accumulation Unit Value at
beginning of period............. $10.000 - - - - -
Accumulation Unit Value at end
of period....................... $12.497 - - - - -
Number Accumulation Units
outstanding at end of period
(in thousands).................. 1,095 - - - - -
PUTNAM UTILITIES GROWTH AND
INCOME SUB-ACCOUNT
(Inception date May 4, 1992)
24
<PAGE>
Accumulation Unit Value at
beginning of period............. $20.143 $16.072 $14.075 $10.889 $11.876 $10.618
Accumulation Unit Value at end
of period....................... $22.826 $20.143 $16.072 $14.075 $10.889 $11.876
Number Accumulation Units
outstanding at end of period
(in thousands).................. 19,598 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............. $12.151 $10.000 - - - -
Accumulation Unit Value at end
of period....................... $14.316 $12.151 - - - -
Number Accumulation Units
outstanding at end of period
(in thousands).................. 12,672 8,062 - - - -
PUTNAM VOYAGER SUB-ACCOUNT
(Inception date February 1, 1988)
Accumulation Unit Value at
beginning of period............. $45.197 $36.227 $32.520 $23.445 $23.530 $20.102
Accumulation Unit Value at end
of period....................... $55.426 $45.197 $36.227 $32.520 $23.445 $23.530
Number Accumulation Units
outstanding at end of period
(in thousands).................. 51,742 48,250 41,121 23,357 13,372 6,509
</TABLE>
25
<PAGE>
HIGHLIGHTS
How do I purchase this Annuity?
You must complete our application or order request and submit it to us for
approval with your first Premium Payment. Your first Premium Payment must be at
least $2,000 and subsequent Premium Payments must be at least $500, unless you
take advantage of our InvestEase Program-Registered Trademark- or are part of
certain retirement plans.
- - For a limited time, usually within ten days after you receive your
Contract, you may cancel your Annuity without paying a Contingent Deferred
Sales Charge. You may bear the investment risk for your Premium Payment
prior to our receipt of your request for cancellation.
What type of sales charge will I pay?
- - You don't pay a sales charge when you purchase your Annuity. We may charge
you a Contingent Deferred Sales Charge when you partially or fully
Surrender your Annuity. The Contingent Deferred Sales Charge will depend on
the length of time the Premium Payment you made has been in your Annuity
and which Series of Putnam Capital Manager you purchased. The Fee Tables
included earlier in this prospectus or the Appendix at the end of this
prospectus will indicate the appropriate sales charge.
You won't be charged a Contingent Deferred Sales Charge on:
- - The Annual Withdrawal Amount
- - Premium Payments or earnings that have been in your Annuity for more than
the Contingent Deferred Sales Charge period.
- - Distributions made due to death
- - Most payments we make to you as part of your Annuity Payout
Is there an Annual Maintenance Fee?
We deduct this $25.00 fee each year on your Contract Anniversary or when you
fully Surrender your Annuity, if, on either of those dates, the value of your
Annuity is less than $50,000. The Annual Maintenance Fee for Series V is
$30.00.
What charges will I pay on an annual basis?
In addition to the Annual Maintenance Fee, you pay three different types of
charges each year. The first type of charge is the fee you pay for insurance.
This charge is:
26
<PAGE>
A mortality and expense risk charge that is subtracted daily and is equal to an
annual charge of 1.25% of your Contract Value invested in the Funds.
The second type of charge is the fee you pay for the Separate Account. This
charge is:
An administrative fee of .15% per year of the Contract Values held in the
Separate Account.
The third type of charge is the fee you pay for the Funds.
Currently, Fund charges range from 0.500% to 1.600% annually of the average
daily value of the amount you have invested in the Funds. See the Annual Fund
Operating Expenses table for more complete information and the Funds'
prospectuses accompanying this prospectus.
Can I take out any of my money?
You may Surrender all or part of the amounts you have invested at any time
before we start making Annuity Payouts, or after Annuity Payouts begin under the
Payment for a Designated Period Annuity Payout Option.
- - You may have to pay income tax on the money you take out and, if you
Surrender before you are age 59 1/2, you may have to pay an income tax
penalty.
- - You may have to pay a Contingent Deferred Sales Charge on the money you
Surrender.
Will Hartford pay a Death Benefit?
There is a Death Benefit if the Contract Owner, joint owner or the Annuitant die
before we begin to make Annuity Payouts. The Death Benefit will be calculated
as of the date we receive a certified death certificate or other legal document
acceptable to us. The Death Benefit will depend on the Series purchased and
Series III, Series IV are described in greater detail in the Appendices at the
end of this prospectus.
For all Series, the calculated Death Benefit will remain invested in the same
Accounts, according to the Contract Owner's last instructions until we receive
complete written settlement instructions from the Beneficiary. Therefore, the
Death Benefit amount will fluctuate with the performance of the underlying
Funds. When there is more than one Beneficiary, we will calculate the
Accumulation Units for each Sub-account and the dollar amount for the Fixed
Accumulation Feature for each Beneficiary's portion of the proceeds.
If you purchased Series V and If death occurs before the Annuity Commencement
Date, the Death Benefit is the greatest of:
- - The Contract Value on the date the death certificate or other legal
document acceptable to us is received; or
- - 100% of all Premium Payments paid into the Contract minus any partial
Surrenders; or
27
<PAGE>
- - The Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, Premium Payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death, whichever is earlier. The
Anniversary Value is equal to the Contract Value as of 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. The Maximum Anniversary Value is equal to the greatest
Anniversary Value attained from this series of calculations.
What Annuity Payout Options are available?
When it comes time for us to make payouts, you may choose one of the following
Annuity Payout Options listed in your Prospectus. We may make other Annuity
Payout Options available at any time.
You must begin to take payouts by the Annuitant's 90th birthday. If you do not
tell us what Annuity Payout Option you want before that time, we will make
payments under Option 2 - Life Annuity with 120 Monthly Payments Certain.
GENERAL CONTRACT INFORMATION
Hartford Life and Annuity Insurance Company
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut. Our offices
are located in Simsbury, Connecticut; however, our mailing address is P.O. Box
2999, Hartford, CT 06104-2999. We are ultimately controlled by The Hartford
Financial Services Group, Inc., one of the largest financial service providers
in the United States.
Hartford's Ratings
- --------------------------------------------------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
- --------------------------------------------------------------------------------
A.M. Best and Company, Inc. 1/1/99 A+ Financial performance
- --------------------------------------------------------------------------------
Standard & Poor's 6/1/98 AA Insurer financial strengeth
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- --------------------------------------------------------------------------------
Duff & Phelps 12/21/98 AA+ Claims paying ability
- --------------------------------------------------------------------------------
The Separate Account
The Separate Account is where we set aside and invest the assets of some of our
annuity contracts, including this Contract. The Separate Account was established
on May 20, 1990 and is registered as a unit investment trust under the
Investment Company Act of 1940. This registration does not involve supervision
by the Commission of the management or the investment practices of the Separate
Account or Hartford. The Separate Account meets the definition of "separate
account" under federal securities law. This Separate Account holds only assets
for variable annuity contracts. The Separate Account:
- - Holds assets for your benefit and the benefit of other Contract Owners, and
the persons entitled to the payouts described in the Contract.
- - Is not subject to the liabilities arising out of any other business
Hartford may conduct.
- - Is not affected by the rate of return of Hartford's General Account or by
the investment performance of any of Hartford's other Separate Accounts.
- - May be subject to liabilities from a Sub-Account of the Separate Account
that holds assets of other variable annuity contracts offered by the
Separate Account, which are not described in this Prospectus.
- - Is credited with income and gains, and takes losses, whether or not
realized, from the assets it holds.
We do not guarantee the investment results of the Separate Account. There is no
assurance that the value of your Annuity will equal the total of the payments
you make to us.
The Funds
The Sub-Accounts purchase shares of Putnam Variable Trust, an open-end series
investment company with multiple portfolios ("Funds"). Putnam Investment
Management, Inc. ("Putnam Management") serves as the investment manager for the
Funds. Putnam Management is ultimately controlled by Marsh & McLennan
Companies, Inc., a publicly owned holding company whose principal businesses are
international insurance brokerage and employee benefit consulting.
We do not guarantee the investment results of any of the underlying Funds.
Since
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each underlying Fund has different investment objectives, each is subject to
different risks. These risks and the Funds' expenses are more fully described
in the accompanying prospectus for the Funds, and the Statement of Additional
Information, which may be ordered from us. The Funds' prospectus should be read
in conjunction with this Prospectus before investing.
The Funds may not be available in all states
The investment goals of each of the Funds are as follows:
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 primarily in common stocks and other
securities of companies in the health sciences industries.
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PUTNAM VT HIGH YIELD FUND
Seeks high current income and, when consistent with this objective, a secondary
objective of capital growth, by investing primarily in high-yielding,
lower-rated fixed income securities, constituting a portfolio which Putnam
Management believes does not involve undue risk to income or principal. See the
special considerations for investments in high yield securities described in the
Fund prospectus.
PUTNAM VT INCOME FUND (formerly Putnam VT U.S. Government and High Quality Bond
Fund)
Seeks high current income consistent with what Putnam Management believes to be
prudent risk. The Fund will normally invest mostly in bonds and other debt
securities, and, to a lesser degree, in preferred stocks.
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 Putnam Management believes offer
potential for capital growth and may, when consistent with its investment
objectives, invest in common stocks that Putnam Management believes 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.
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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
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 RESEARCH FUND
Seeks capital appreciation. The Fund is not intended to be a complete
investment program, and there is no assurance it will achieve its objective.
PUTNAM VT SMALL CAP VALUE FUND
Seeks capital appreciation. The Fund will generally invest in value stocks,
which stocks are those that Putnam Management believes are currently undervalued
compared to their true worth.
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.
The Funds 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.
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Subject to the general oversight of the Trustees of Putnam Variable 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 Funds prospectus for a more
complete description of Putnam Management and the respective fees of the Funds.
Mixed and Shared Funding - Shares of the Funds may be sold to our other separate
accounts and our insurance company affiliates or other unaffiliated insurance
companies to serve as the underlying investment for both variable annuity
contracts and variable life insurance policies, a practice known as "mixed and
shared funding." As a result, there is a possibility that a material conflict
may arise between the interests of Contract Owners, and of owners of other
contracts whose contract values are allocated to one or more of these other
separate accounts investing in any one of the Funds. In the event of any such
material conflicts, we will consider what action may be appropriate, including
removing the Fund from the Separate Account or replacing the Fund with another
underlying fund. There are certain risks associated with mixed and shared
funding, as disclosed in the Funds' prospectus.
Voting Rights - We are the legal owners of all Fund shares held in the Separate
Account and we have the right to vote at the Fund's shareholder meetings. To
the extent required by federal securities laws or regulations, we will:
- - Notify you of any Fund shareholders' meeting if the shares held for your
Contract may be voted.
- - Send proxy materials and a form of instructions that you can use to tell us
how to vote the Fund shares held for your Contract.
- - Arrange for the handling and tallying of proxies received from Contract
Owners.
- - Vote all Fund shares attributable to your Contract according to
instructions received from you, and
- - Vote all Fund shares for which no voting instructions are received in the
same proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present interpretation,
change to permit us to vote Fund shares on our own, we may decide to do so. You
may attend any Shareholder Meeting at which shares held for your Contract may be
voted. After we begin to make Annuity Payouts to you, the number of votes you
have will decrease.
Substitutions, Additions, or Deletions of Funds - We reserve the right, subject
to any applicable law, to make certain changes to the Funds offered under Your
Contract. We
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<PAGE>
may, in our sole discretion, establish new Funds. New Funds will be made
available to existing Contract Owners as we determine appropriate. We may also
close one or more Funds to additional Payments or transfers from existing
Sub-Accounts.
We reserve the right to eliminate the shares of any of the Funds for any reason
and to substitute shares of another registered investment company for the shares
of any Fund already purchased or to be purchased in the future by the Separate
Account. To the extent required by the Investment Company Act of 1940 (the "1940
Act"), substitutions of shares attributable to your interest in a Fund will not
be made until we have the approval of the Commission and we have notified you of
the change.
In the event of any substitution or change, we may, by appropriate endorsement,
make any changes in the Contract necessary or appropriate to reflect the
substitution or change. If we decide that it is in the best interest of
Contracts Owners, the Separate Account may be operated as a management company
under the 1940 Act or any other form permitted by law, may be de-registered
under the 1940 Act in the event such registration is no longer required, or may
be combined with one or more other Separate Accounts.
Performance Related Information
The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
When a Sub-Account advertises its standardized total return, it will usually be
calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period.
The Separate Account may also advertise non-standard total returns that pre-date
the inception date of the Separate Account. These non-standardized total
returns are calculated by assuming that the Sub-Accounts have been in existence
for the same periods as the underlying Funds and by taking deductions for
charges equal to those currently assessed against the Sub-Accounts. These
non-standardized returns must be accompanied by standardized total returns.
If applicable, the Sub-Accounts may advertise yield in addition to total return.
The yield will be computed in the following manner: The net investment income
per unit earned during a recent one month period is divided by the unit value on
the last day of the period. This figure includes the recurring charges at the
Separate Account level including the Annual Maintenance Fee.
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The Money Market Fund Sub-Account may advertise yield and effective yield. The
yield of a Sub-Account is based upon the income earned by the Sub-Account over a
seven-day period and then annualized, i.e. the income earned in the period is
assumed to be earned every seven days over a 52-week period and stated as a
percentage of the investment. Effective yield is calculated similarly but when
annualized, the income earned by the investment is assumed to be reinvested in
Sub-Account units and thus compounded in the course of a 52-week period. Yield
and effective yield include the recurring charges at the Separate Account level
including the Annual Maintenance Fee.
The Separate Account may also disclose yield for periods prior to the date the
Separate Account commenced operations. For these periods, performance
information for the Sub-Accounts will be calculated based on the performance of
the underlying Funds and the assumption that the Sub-Accounts were in existence
for the same periods as those of the underlying Funds, with a level of charges
equal to those currently assessed against the Sub-Accounts. No yield disclosure
for periods prior to the date of the Separate Account will be used without the
yield disclosure for periods as of the inception of the Separate Account.
We may provide information on various topics to Contract Owners and prospective
Contract Owners in advertising, sales literature or other materials. These
topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as systematic investing, Dollar Cost Averaging
and asset allocation), the advantages and disadvantages of investing in
tax-deferred and taxable instruments, customer profiles and hypothetical
purchase scenarios, financial management and tax and retirement planning, and
other investment alternatives, including comparisons between the Contract and
the characteristics of and market for such alternatives.
The Fixed Accumulation Feature
For Series III, Series IV and Series V Contracts Only
Important Information You Should Know: This portion of the Prospectus relating
to the Fixed Accumulation Feature is not registered under the Securities Act of
1933 ("1933 Act") and the Fixed Accumulation Feature is not registered as an
investment company under the 1940 Act. The Fixed Accumulation Feature or any of
its interests are not subject to the provisions or restrictions of the 1933 Act
or the 1940 Act, and the staff of the Securities and Exchange Commission has not
reviewed the disclosure regarding the Fixed Accumulation Feature. The following
disclosure about the Fixed Accumulation Feature may be subject to certain
generally applicable provisions of the federal securities laws regarding the
accuracy and completeness of disclosure.
Premium Payments and Contract Values allocated to the Fixed Accumulation Feature
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<PAGE>
become a part of our General Account assets. We invest the assets of the
General Account according to the laws governing the investments of insurance
company General Accounts.
Currently, if you purchased Series III or Series IV, we guarantee that we will
credit interest at a rate of not less than 4% per year, compounded annually, to
amounts you allocate to the Fixed Accumulation Feature. Currently, if you
purchased Series V, we guarantee that we will credit interest at a rate of not
less than 3% per year, compounded annually, to amounts you allocate to the Fixed
Accumulation Feature. We reserve the right to change the rate subject only to
applicable state insurance law. We may credit interest at a rate in excess of
your guaranteed rate per year. We will periodically publish the Fixed
Accumulation Feature interest rates currently in effect. There is no specific
formula for determining interest rates. Some of the factors that we may consider
in determining whether to credit excess interest are; general economic trends,
rates of return currently available and anticipated on our investments,
regulatory and tax requirements and competitive factors. We will account for any
deductions, Surrenders or transfers from the Fixed Accumulation Feature on a
"first-in first-out" basis. For Contracts issued in the state of New York, the
Fixed Accumulation Feature interest rates may vary from other states.
Important: Any interest credited to amounts you allocate to the Fixed
Accumulation Feature in excess of your guaranteed interest rate per year will be
determined at our sole discretion. You assume the risk that interest credited
to Fixed Accumulation Feature may not exceed the minimum guarantee for any given
year.
From time to time, we may credit increased interest rates under certain programs
established in our sole discretion.
Dollar Cost Averaging ("DCA") Plus Programs: Currently, if you have access to
the Fixed Account, you may enroll in a special pre-authorized transfer program
known as our DCA Plus Program (the "Program"). Under this Program, Contract
Owners who enroll may allocate a minimum of $5,000 of their Premium Payment into
the Program (we 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 from the Program 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. Contract owners
who purchase their Contracts in New York have a different DCA Plus
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Program. Currently, only one DCA Plus Program transfer period is available in
New York, but that period allows transfers to selected Sub-Accounts in 3 to 12
months.
The pre-authorized transfers will begin within 15 days of receipt of the Program
payment provided we receive complete enrollment instructions. If we do not
receive complete Program enrollment instructions within 15 days of receipt of
the initial Program payment, the Program will be voided and the entire balance
in the Program will be transferred to the Accounts designated by you. If you do
not designate an Account, you will receive the Fixed Accumulation Feature's
current effective interest rate. Any subsequent payments we receive within the
Program period selected will be allocated to the Sub-Accounts over the remainder
of that Program transfer period.
You may elect to terminate the pre-authorized transfers by calling or writing us
of your intent to cancel enrollment in the Program. Upon cancellation, you will
no longer receive the Program interest rate and unless we receive instructions
to the contrary, the amounts remaining in the Program may accrue the interest
rate currently in effect for the Fixed Accumulation Feature.
We reserve the right to discontinue, modify or amend the Program or any other
interest rate program we establish. 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 us to determine if it is available in
your state.
You may only have one DCA program in place at one time. The Fixed Accumulation
Feature and Dollar Cost Averaging Plus Program are not available in Oregon.
The Contract
Purchases and Contract Value
What types of Contracts are available?
The Contract is an individual or group tax-deferred variable annuity contract.
It is designed for retirement planning purposes and may be purchased by any
individual, group or trust, including:
- - Any trustee or custodian for a retirement plan qualified under Sections
401(a) or 403(a) of the Code;
- - Annuity purchase plans adopted by public school systems and certain
tax-exempt organizations according to Section 403(b) of the Code;
- - Individual Retirement Annuities adopted according to Section 408 of the
Code;
- - Employee pension plans established for employees by a state, a political
subdivision of a state, or an agency of either a state or a political
subdivision of a state, and
- - Certain eligible deferred compensation plans as defined in Section 457 of
the Code.
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The examples above represent Qualified Contracts, as defined by the Code. In
addition, individuals and trusts can also purchase Contracts that are not part
of a tax qualified retirement plan. These are known as Non-Qualified Contracts.
How do I purchase a Contract?
You may purchase a Contract by completing and submitting an application or an
order request along with an initial Premium Payment. For most Contracts, the
minimum Premium Payment is $2,000. For additional Premium Payments, the minimum
Premium Payment is $500. Under certain situations, we may allow smaller Premium
Payments, for example, if you enroll in our InvestEase Program or are part of
certain tax qualified retirement plans. Prior approval is required for Premium
Payments of $1,000,000 or more.
You and your Annuitant must not be older than age 85 on the date that your
Contract is issued. You must be of legal age in the state where the Contract is
being purchased or a guardian must act on your behalf.
How are Premium Payments applied to my Contract?
Your initial Premium Payment will be invested within two Valuation Days of our
receipt of a properly completed application or an order request and the Premium
Payment. If we receive your subsequent Premium Payment before the close of the
New York Stock Exchange, it will be priced on the same Valuation Day. If we
receive your Premium Payment after the close of the New York Stock Exchange, it
will be processed on the next Valuation Day. If we receive your Premium Payment
on a Non-Valuation Day, the amount will be invested on the next Valuation Day.
Unless we receive new instructions, we will invest the Premium Payment based on
your last allocation instructions. We will send you a confirmation when we
invest your Premium Payment.
If the request or other information accompanying the Premium Payment is
incomplete when received, we will hold the money in a non-interest bearing
account for up to five Valuation Days while we try to obtain complete
information. If we cannot obtain the information within five Valuation Days, we
will either return the Premium Payment and explain why the Premium Payment could
not be processed or keep the Premium Payment if you authorize us to keep it
until your provide the necessary information.
Can I cancel my Contract after I purchase it?
We want you to be satisfied with the Contract you have purchased. We urge you
to closely examine its provisions. If for any reason you are not satisfied with
your Contract, simply return it within ten days after you receive it with a
written request for
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cancellation that indicates your tax-withholding instructions. In some states,
you may be allowed more time to cancel your Contract. We will not deduct any
Contingent Deferred Sales Charges during this time. We may require additional
information, including a signature guarantee, before we can cancel your
Contract.
You bear the investment risk from the time the Contract is issued until we
receive your complete cancellation request.
The amount we pay you upon cancellation depends on the requirements of the state
where you purchased your Contract, the method of purchase, the type of Contract
you purchased and your age.
How is the value of my Contract calculated before the Annuity Commencement Date?
The Contract Value is the sum of all Accounts. There are two things that affect
your Sub-Account value: (1) the number of Accumulation Units and (2) the
Accumulation Unit Value. The Sub-Account value is determined by multiplying the
number of Accumulation Units by the Accumulation Unit Value. Therefore, on any
Valuation Day your Contract Value reflects the investment performance of the
Sub-Accounts and will fluctuate with the performance of the underlying Funds.
When Premium Payments are credited to your Sub-Accounts, they are converted into
Accumulation Units by dividing the amount of your Premium Payments, minus any
Premium Taxes, by the Accumulation Unit Value for that day. The more Premium
Payments you put into your Contract, the more Accumulation Units you will own.
You decrease the number of Accumulation Units you have by requesting Surrenders,
transferring money out of an Account, settling a Death Benefit claim or by
annuitizing your Contract.
To determine the current Accumulation Unit Value, we take the prior Valuation
Day's Accumulation Unit Value and multiply it by the Net Investment Factor for
the current Valuation Day.
The Net Investment Factor is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next. The Net Investment Factor for
each Sub-Account equals:
- - The net asset value per share of each Fund held in the Sub-Account at the
end of the current Valuation Day divided by
- - The net asset value per share of each Fund held in the Sub-Account at the
end of the prior Valuation Day; minus
- - The daily mortality and expense risk charge adjusted for the number of days
in the period, and any other applicable charge.
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We will send you a statement in each calendar quarter, which tells you how many
Accumulation Units you have, their value and your total Contract Value.
Can I transfer from one Sub-Account to another?
Transfers between Sub-Accounts - You may transfer from one Sub-Account to
another before and after the Annuity Commencement Date at no extra charge.
Your transfer request will be processed on the day that it is received as
long as it is received on a Valuation Day before the close of the New York
Stock Exchange. Otherwise, your request will be processed on the following
Valuation Day. We will send you a confirmation when we process your
transfer. You are responsible for verifying transfer confirmations and
promptly advising us of any errors within 30 days of receiving the
confirmation.
Sub-Account Transfer Restrictions - The transfer restrictions that apply to your
Contract depend on which series of the Contract you purchased. Series III and
Series IV Contract Owners have the restrictions as part of their Contract. If
restrictions apply, we reserve the right to limit the number of transfers to 12
per Contract Year, with no transfers occurring on consecutive Valuation Days. We
also have the right to restrict transfers if we believe that the transfers could
have an adverse effect on other Contract Owners. In all states except New York,
Florida, Maryland and Oregon, we may:
- - Require a minimum time period between each transfer,
- - Limit the dollar amount that may be transferred on any one Valuation Day,
and
- - Not accept transfer requests from an agent acting under a power of attorney
for more than one Contract Owner.
We also have a restriction in place for all Contract Owners that involves
individuals who act under a power of attorney for multiple Contract Owners. If
the value of the Contract Owners' Accounts add up to more than $2 million, we
will not accept transfer instructions from the power of attorney unless the
power of attorney has entered into a Third Party Transfer Services Agreement
with us.
Some states may have different restrictions.
Fixed Accumulation Feature Transfers: During each Contract Year, you may make
transfers out of the Fixed Accumulation Feature to Sub-Accounts. All transfer
allocations must be in whole numbers (e.g., 1%). You may transfer the greater
of:
- - Up to 30% of your total amount in the Fixed Accumulation Feature, or
- - An amount equal to the largest previous transfer.
These transfer limits do not include transfers done through Dollar Cost
Averaging or the DCA Bonus Program.
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If your interest rate renews at a rate at least 1% lower than your prior
interest rate, you may transfer an amount equal to up to 100% of the amount to
be invested at the renewal rate. You must make this transfer request within 60
days of being notified of the renewal rate.
Fixed Accumulation Feature Transfer Restrictions - We reserve the right to defer
transfers from the Fixed Accumulation Feature for up to 6 months from the date
of your request. After any transfer, you must wait six months before moving
Sub-Account Values back to the Fixed Accumulation Feature.
Telephone Transfers - In most states, you can make transfers by calling us at
(800) 862-6668. Hartford, our agents or our affiliates are not responsible for
losses resulting from telephone requests that we believe are genuine. We will
use reasonable procedures to confirm that telephone instructions are genuine,
including requiring that callers provide certain identification information and
recording all telephone transfer instructions.
Power of Attorney - You may authorize another person to make transfers on your
behalf by submitting a completed Power of Attorney form. Once we have the
completed form on file, we will accept transfer instructions from your
designated third party, subject to our transfer restrictions, until we receive
new instructions in writing from you. You will not be able to make transfers or
other changes to your Contract if you have authorized someone else to act under
a Power of Attorney.
Charges and Fees
There are 5 charges and fees associated with the Contract:
1. The Contingent Deferred Sales Charge
The Contingent Deferred Sales Charge covers some of the expenses relating to the
sale and distribution of the Contract, including commissions paid to registered
representatives and the cost of preparing sales literature and other promotional
activities.
We assess a Contingent Deferred Sales Charge when you request a full or partial
Surrender. The percentage of the Contingent Deferred Sales Charge is based on
how long your Premium Payments have been in the Contract. The Contingent
Deferred Sales Charge will not exceed the total amount of the Premium Payments
made. Each Premium Payment has its own Contingent Deferred Sales Charge
schedule. Premium Payments are Surrendered in the order in which they were
received. The longer you leave your Premium Payments in the Contract, the lower
the Contingent Deferred Sales Charge will be when you Surrender.
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The Contingent Deferred Sales Charge is a percentage of the amount Surrendered
and is equal to for Series V:
<TABLE>
<CAPTION>
Number of Contingent
years from Deferred
Premium Sales Charge
Payment
<S> <C>
1 6%
2 6%
3 5%
4 5%
5 4%
6 3%
7 2%
8 or more 0%
</TABLE>
The Contingent Deferred Sales Charges for Series III, and Series IV are
described in the Appendices.
The following Surrenders are NOT subject to a Contingent Deferred Sales Charge:
- - Annual Withdrawal Amount: During the Contingent Deferred Sales Charge
period for each Premium Payment, you may, each Contract Year, take partial
Surrenders up to 10% of the total Premium Payments. If you do not take 10%
one year, you may not take more than 10% the next year. These amounts are
different for group unallocated Contracts.
- - Surrenders made from Premium Payments invested for more than the Contingent
Deferred Sales Charge period. After the Contingent Deferred Sales Charge
period, you may take the total of: (a) all of your earnings, and (b) all
Premium Payments held in your Contract for more than the Contingent
Deferred Sales Charge period, and (c) 10% of Premium Payments made during
the Contingent Deferred Sales Charge period.
Under the following situations, the Contingent Deferred Sales Charge is WAIVED:
- - For Required Minimum Distributions. This allows Annuitants who are age
70 1/2 or older, 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 Contract without a Contingent Deferred Sales
Charge. All requests for Required Minimum Distributions must be in writing.
- - On or after the Annuitant's 90th birthday.
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- - For disabled participants enrolled in a group unallocated, tax qualified
retirement plan. With our approval and under certain conditions,
participants who become disabled can receive Surrenders free of Contingent
Deferred Sales Charge.
The following situations are NOT subject to a Contingent Deferred Sales Charge:
- - Upon death of the Annuitant or Contract Owner.
- - Upon Annuitization. The Contingent Deferred Sales Charge is not deducted
when you annuitize the Contract. We will charge a Contingent Deferred
Sales Charge if the Contract is fully Surrendered during the Contingent
Deferred Sales Charge period under an Annuity Payout Option which allows
Surrenders.
- - Upon cancellation during the Right to Cancel Period
2. Mortality and expense risk charge
For assuming mortality and expense risks under the Contract, we deduct a daily
charge at the rate of 1.25% per year of Sub-Account Value (estimated at .90% for
mortality and .35% for expenses). The mortality and expense risk charge is
broken into charges for mortality risks and for an expense risk:
- - Mortality Risk - There are two types of mortality risks that we assume,
those made while your Premium Payments are accumulating and those made once
Annuity Payouts have begun
During the period your Premium Payments are accumulating, we are required
to cover any difference between the Death Benefit paid and the Surrender
Value. These differences may occur during periods of declining value or in
periods where the Contingent Deferred Sales Charges would have been
applicable. The risk that we bear during this period is that actual
mortality rates, in aggregate, may exceed expected mortality rates.
Once Annuity Payouts have begun, we may be required to make Annuity Payouts
as long as the Annuitant is living, regardless of how long the Annuitant
lives. We would be required to make these payments if the Payout Option
chosen is the Life Annuity, Life Annuity With Payments for a Period Certain
or Joint and Last Survivor Life Annuity Payout Option. The risk that we
bear during this period is that the actual mortality rates, in aggregate,
may be lower than the expected mortality rates.
- - Expense Risk - We also bear an expense risk that the Contingent Deferred
Sales Charges and the Annual Maintenance Fee collected before the Annuity
Commencement Date may not be enough to cover the actual cost of selling,
distributing and administering the Contract.
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Although variable Annuity Payouts will fluctuate with the performance of the
underlying Fund selected, your Annuity Payouts will not be affected by (a) the
actual mortality experience of our Annuitants, or (b) our actual expenses if
they are greater than the deductions stated in the Contract. Because we cannot
be certain how long our Annuitants will live, we charge this percentage fee
based on the mortality tables currently in use. The mortality and expense risk
charge enables us to keep our commitments and to pay you as planned.
3. Annual Maintenance Fee
The Annual Maintenance Fee is a flat fee that is deducted from your Contract
Value to reimburse us for expenses relating to the administrative maintenance of
the Contract and the Accounts. The annual $25 charge is deducted on a Contract
Anniversary or when the Contract is fully Surrendered if the Contract Value at
either of those times is less than $50,000. The charge is deducted
proportionately from each Account in which you are invested. This fee is $30.00
for Series V.
When is the Annual Maintenance Fee Waived?
If you purchased Series IV or Series V, we will waive the Annual Maintenance Fee
if your Contract Value is $50,000 or more on your Contract Anniversary or when
you fully Surrender your Contract. In addition, we will waive one Annual
Maintenance Fee for Contract Owners who own more than one Contract with a
combined Contract Value between $50,000 and $100,000. If you have multiple
Contracts with a combined Contract Value of $100,000 or greater, we will waive
the Annual Maintenance Fee on all Contracts. However, we reserve the right to
limit the number of waivers to a total of six Contracts. This is not available
for Series III.
We also reserve the right to waive the Annual Maintenance Fee under certain
other conditions.
4. Administrative Charge
For administration, we apply 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.
5. Premium Taxes
We deduct Premium Taxes, if required, by a state or other government agency.
Some states collect the taxes when Premium Payments are made, some when the
Contract is Surrendered and others collect at Annuitization. Since we pay
Premium Taxes when they are required by applicable law, we may deduct them from
your Contract when we pay the taxes, upon Surrender, or on the Annuity
Commencement Date. The Premium Tax rate varies by state or municipality.
Currently, the maximum rate charged by any state is 3.5% and 4% in Puerto Rico.
Charges against the Funds - The Separate Account purchases shares of the Funds
at
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net asset value. The net asset value of the Fund shares reflects investment
advisory fees and administrative expenses already deducted from the assets of
the Funds. These charges are described in the Funds' prospectuses accompanying
this Prospectus.
We may offer, in our discretion, reduced fees and charges including, but not
limited to Contingent Deferred Sales Charges, the mortality and expense risk
charge, and the Annual Maintenance Fee, for certain Contracts (including
employer sponsored savings plans) which may result in decreased costs and
expenses. Reductions in these fees and charges will not be unfairly
discriminatory against any Contract Owner.
Death Benefit
What is the Death Benefit and how is it calculated?
The Death Benefit is the amount we will pay upon the death of the Contract Owner
or the Annuitant. The Death Benefit is calculated when we receive a certified
death certificate or other legal document acceptable to us.
The calculated Death Benefit will remain invested in the same Accounts,
according to the Contract Owner's last instructions until we receive complete
written settlement instructions from the Beneficiary. Therefore, the Death
Benefit amount will fluctuate with the performance of the underlying Funds.
When there is more than one Beneficiary, we will calculate the Accumulation
Units for each Sub-account and the dollar amount for the Fixed Accumulation
Feature for each Beneficiary's portion of the proceeds.
The Death Benefit calculation depends on the Series purchased. The Death
Benefit for Series III, and Series IV are described in the Appendices in the
back of this prospectus. The Death Benefit for Series V will be the greater of:
- - The total Premium Payments you have made to us minus any amounts you have
Surrendered, or
- - The Contract Value of your Annuity, or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, Premium Payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death, whichever is earlier. The
Anniversary Value is equal to the Contract Value as of 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. The Maximum Anniversary Value is
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equal to the greatest Anniversary Value attained from this series of
calculations.
For all Series, the Death Benefit amount will remain invested in the
Sub-Accounts according to your last instructions and will fluctuate with the
performance of the underlying Funds.
How is the Death Benefit paid?
The Death Benefit may be taken in one lump sum or under any of the Annuity
Payout Options then being offered by us. On the date we receive complete
instructions from the Beneficiary, we will compute the Death Benefit amount to
be paid out or applied to a selected Annuity Payout Option. When there is more
than one Beneficiary, we will calculate the Death Benefit amount for each
Beneficiary's portion of the proceeds and then pay it out or apply it to a
selected Annuity Payout Option according to each Beneficiary's instructions. If
we receive the complete instructions on a Non-Valuation Day, computations will
take place on the next Valuation Day.
Required Distributions: If the Contract Owner dies before the Annuity
Commencement Date, the Death Benefit must be distributed within five years after
death. The Beneficiary can choose any Annuity Payout Option that results in
complete Annuity Payout within five years.
If the Contract Owner dies on or after the Annuity Commencement Date under an
Annuity Payout Option with a Death Benefit, any remaining value must be
distributed at least as rapidly as under the payment method being used as of the
Contract Owner's death.
If the Contract Owner is not an individual (e.g. a trust), then the original
Annuitant will be treated as the Contract Owner in the situations described
above and any change in the original Annuitant will be treated as the death of
the Contract Owner.
Who will receive the Death Benefit?
The distribution of the Death Benefit is based on whether death is before, on or
after the Annuity Commencement Date.
If death occurs before the Annuity Commencement Date:
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
If the deceased is the... and... and... then the...
Contract Owner There is a The Annuitant is Joint Contract
surviving joint living or deceased Owner receives the
Contract Owner Death Benefit.
Contract Owner There is no The Annuitant is Designated
surviving joint living or deceased Beneficiary
- ----------------------------------------------------------------------------------------------
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- ----------------------------------------------------------------------------------------------
Contract Owner receives the Death
Benefit.
Contract Owner There is no The Annuitant is Contract Owner's
surviving joint living or deceased estate receives
Contract Owner and the Death Benefit.
the Beneficiary
predeceases the
Contract Owner
Annuitant The Contract Owner There is no named Death Benefit is
is living Contingent paid to the
Annuitant Contract Owner and
not the designated
Beneficiary.
However, if you
purchased Series
III, or Series IV
the Death Benefit
is paid to the
Beneficiary
Annuitant The Contract Owner The Contingent Contingent
is living Annuitant is Annuitant becomes
living the Annuitant, and
the Contract
continues.
- ----------------------------------------------------------------------------------------------
</TABLE>
If death occurs on or after the Annuity Commencement Date:
- --------------------------------------------------------------------------------
If the deceased is and... then the...
the...
Contract Owner The Annuitant is living Designated Beneficiary
becomes the Contract Owner
Annuitant The Contract Owner is Contract Owner receives the
living Death Benefit.
Annuitant The Annuitant is also the Designated Beneficiary
Contract Owner receives the Death Benefit.
- --------------------------------------------------------------------------------
These are the most common Death Benefit scenarios, however, there are others.
Some of the Annuity Payout Options may not result in a Death Benefit payout. If
you have questions about these and any other scenarios, please contact your
registered representative or us.
What should the Beneficiary consider?
Alternatives to the Required Distributions: The selection of an Annuity Payout
Option
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and the timing of the selection will have an impact on the tax treatment of the
Death Benefit. To receive favorable tax treatment, the Annuity Payout Option
selected: (a) cannot extend beyond the Beneficiary's life or life expectancy,
and (b) must begin within one year of the date of death.
If these conditions are not met, the Death Benefit will be treated as a lump sum
payment for tax purposes. This sum will be taxable in the year in which it is
considered received.
Spousal contract continuation - If the Beneficiary is the Contract Owner's
spouse, the Beneficiary may elect to continue the Contract as the contract
owner, receive the death benefit in one lump sum payment or elect an Annuity
Payout Option. The spousal continuation is available only once for each
Contract.
Surrenders
What kinds of Surrenders are available?
Full Surrenders before the Annuity Commencement Date: When you Surrender your
Contract before the Annuity Commencement Date, the Surrender Value of the
Contract will be made in a lump sum payment. The Surrender Value is the
Contract Value minus any applicable Premium Taxes, Contingent Deferred Sales
Charges and the Annual Maintenance Fee. The Surrender Value may be more or less
than the amount of the Premium Payments made to a Contract.
Partial Surrenders before the Annuity Commencement Date: You may request a
partial Surrender of Contract Values at any time before the Annuity Commencement
Date. There are two restrictions:
- - The partial Surrender amount must be at least equal to $100, our current
minimum for partial Surrenders, and
- - The Contract must have a minimum Contract Value of $500 after the
Surrender. The minimum Contract Value in New York must be $1000 after the
Surrender. We reserve the right to close your Contract and pay the full
Surrender Value if the Contract Value is under the minimum after the
Surrender. If your Contract was issued in Texas, a remaining value of $500
is not required to continue the Contract if Premium Payments were made in
the last two Contract Years.
Full Surrenders after the Annuity Commencement Date: You may Surrender your
Contract on or after the Annuity Commencement Date only if you selected the
Payment For a Period Certain Annuity Payout Option. Under this option, we pay
you the Commuted Value of your Contract minus any applicable Contingent Deferred
Sales Charges. The Commuted Value is determined on the day we receive your
written request for Surrender.
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Partial Surrenders are allowed after the Annuity Commencement Date if you elect
Payments for a Designated Period. You should check with your tax advisor
because there may be adverse tax consequences.
How do I request a Surrender?
Requests for full Surrenders must be in writing. Requests for partial
Surrenders can be made in writing or by telephone. We will send your money
within seven days of receiving complete instructions. However, we may postpone
payment of Surrenders whenever: (a) the New York Stock Exchange is closed, (b)
trading on the New York Stock Exchange is restricted by the SEC, (b) the SEC
permits and orders postponement or (c) the SEC determines that an emergency
exists to restrict valuation.
Written Requests - To request a full or partial Surrender, complete a Surrender
Form or send us a letter, signed by you, stating:
- the dollar amount that you want to receive, either before or after we
withhold taxes and deduct for any applicable charges,
- your tax withholding amount or percentage, if any, and
- your mailing address.
If there are joint Contract Owners, both must authorize all Surrenders. For a
partial Surrender, specify the Accounts that you want your Surrender to come
from, otherwise, the Surrender will be taken in proportion to the value in each
Account.
Telephone Requests: To request a partial Surrender by telephone, we must have
received your completed Telephone Redemption Program Enrollment Form. If there
are joint Contract Owners, both must sign this form. By signing the form, you
authorize us to accept telephone instructions for partial Surrenders from either
Contract Owner. Telephone authorization will remain in effect until we receive a
written cancellation notice from you or your joint Contract Owner, we
discontinue the program; or you are no longer the owner of the Contract. There
are some restrictions on telephone surrenders, please call us with any
questions.
We may record telephone calls and use other procedures to verify information and
confirm that instructions are genuine. We will not be liable for losses or
expenses arising from telephone instructions reasonably believed to be genuine.
We may modify the requirements for telephone redemptions at any time.
Telephone Surrender instructions received before the close of the New York Stock
Exchange will be processed on that Valuation Day. Otherwise, your request will
be processed on the next Valuation Day.
Completing a Power of Attorney form for another person to act on your behalf may
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prevent you from making Surrenders via telephone.
What should be considered about taxes?
There are certain tax consequences associated with Surrenders:
Prior to age 59 1/2: If you make a Surrender prior to age 59 1/2, there may be
adverse tax consequences including a 10% federal income tax penalty on the
taxable portion of the Surrender payment. Surrendering before age 59 1/2 may
also affect the continuing tax-qualified status of some Contracts.
We do not monitor Surrender requests. To determine whether a Surrender is
permissible, with or without federal income tax penalty, please consult your
personal tax adviser.
More than one Contract issued in the same calendar year:
If you own more than one contract issued by us or our affiliates in the same
calendar year, then these contracts may be treated as one contract for the
purpose of determining the taxation of distributions prior to the Annuity
Commencement Date. Please consult your tax adviser for additional information.
Internal Revenue Code section 403(b) annuities - As of December 31, 1988, all
section 403(b) annuities have limits on full and partial Surrenders.
Contributions to your Contract made after December 31, 1988 and any increases in
cash value after December 31, 1988 may not be distributed unless you are: (a)
age 59 1/2, (b) no longer employed, (c) deceased, (d) disabled, or (e)
experiencing a financial hardship (cash value increases may not be distributed
for hardships prior to age 59 1/2). Distributions prior to age 59 1/2 due to
financial hardship; unemployment or retirement may still be subject to a penalty
tax of 10%.
We encourage you to consult with your tax adviser before making any Surrenders.
Please see the "Federal Tax Considerations" section for more information.
ANNUITY PAYOUTS
This section describes what happens when we begin to make regular Annuity
Payouts from your Contract. You, as the Contract Owner, should answer five
questions:
1. When do you want Annuity Payouts to begin?
2. What Annuity Payout Option do you want to use?
3. How often do you want to receive Annuity Payouts?
4. What is the Assumed Investment Return?
5. Do you want Annuity Payouts to be fixed or variable or a combination?
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Please check with your financial advisor to select the Annuity Payout Option
that best meets your income needs.
1. When do you want Annuity Payouts to begin?
You select an Annuity Commencement Date when you purchase your Contract or at
any time before you begin receiving Annuity Payouts. You may change the Annuity
Commencement Date by notifying us within thirty days prior to the date. The
Annuity Commencement Date cannot be deferred beyond the month of the Annuitant's
90th birthday.
The Annuity Calculation Date is when the amount of your Annuity Payout is
determined. This occurs within five Valuation Days before your selected Annuity
Commencement Date.
All Annuity Payouts, regardless of frequency, will occur on the same day of the
month as the Annuity Commencement Date. After the initial payout, if an Annuity
Payout date falls on a Non-Valuation Day, the Annuity Payout is computed on the
prior Valuation Day. If the Annuity Payout date does not occur in a given month
due to a leap year or months with only 28 days (i.e. the 31st), the Annuity
Payout will be computed on the last Valuation Day of the month.
2. Which Annuity Payout Option do you want to use?
Your Contract contains the Annuity Payout Options described below. We may make
other Annuity Payout Options available.
Option 1: Life Annuity - We make Annuity Payouts as long as the Annuitant is
living. When the Annuitant dies, we stop making Annuity Payouts. A Payee would
receive only one Annuity Payout if the Annuitant dies after the first payout,
two Annuity Payouts if the Annuitant dies after the second payout, and so forth.
Option 2 - Life Annuity with 120, 180 or 240 Monthly Payments Certain - We make
monthly Annuity Payouts during the lifetime of the Annuitant but Annuity Payouts
are at least guaranteed for a minimum of 120, 180 or 240 months, as you elect.
If, at the death of the Annuitant, Annuity Payouts have been made for less than
the minimum elected number of months, then the Commuted Value as of the date of
the Annuitant's death will be paid in one sum to the Beneficiary or the
Beneficiary may continue the Annuity Payouts.
Option 3- Joint and Last Survivor Life Annuity - We will make Annuity Payouts as
long as the Annuitant and Joint Annuitant are living. When one Annuitant dies,
we continue
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to make Annuity Payouts to the other Annuitant until that second Annuitant dies.
When choosing this option, you must decide what will happen to the Annuity
Payouts after the first Annuitant dies. You must select Annuity Payouts that:
- Remain the same at 100%, or
- Decrease to 66.67%, or
- Decrease to 50%.
For variable Annuity Payouts, these percentages represent Annuity Units; for
fixed Annuity Payouts, they represent actual dollar amounts. The percentage will
also impact the Annuity Payout amount we pay while both Annuitants are living.
If you pick a lower percentage, your original Annuity Payouts will be higher
while both Annuitants are alive.
Option 4 - Payments For a Designated Period - We will make Annuity Payouts for
the number of years that you select. You can select between 5 years and 30
years.
Important Information:
- You cannot Surrender your Contract once Annuity Payouts begin, unless
you have selected the Payments For a Designated Period Annuity Payout
Option. A Contingent Deferred Sales Charge may be deducted.
- For Non-Qualified Contracts, if you do not elect an Annuity Payout
Option, fixed Annuity Payouts will automatically begin on the Annuity
Commencement Date under the Life Annuity with 120 Monthly Payments
Certain Annuity Payout Option.
- For Qualified Contracts and Contracts issued in Texas, if you do not
elect an Annuity Payout Option, fixed Annuity Payouts will begin
automatically on the Annuity Commencement Date, under the Annuity
Payout Option 1 - Life Annuity.
3. How often do you want the Payee to receive Annuity Payouts?
In addition to selecting an Annuity Commencement Date and an Annuity Payout
Option, you must also decide how often you want the Payee to receive Annuity
Payouts. You may choose to receive Annuity Payouts:
- monthly,
- quarterly,
- semi-annually, or
- annually.
Once you select a frequency, it cannot be changed. If you do not make a
selection, the Payee will receive monthly Annuity Payouts. You must select a
frequency that results in an Annuity Payout of at least $50. If the amount
falls below $50, we have the right to change the frequency to bring the Annuity
Payout up to at least $50. For Contracts
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issued in New York, the minimum monthly Annuity Payout is $20.
4. What is the Assumed Investment Return?
The Assumed Investment Return is the investment return used to calculate
variable Annuity Payouts. The Assumed Investment Return for your Annuity if you
purchased Series V is 5%, Series III, and Series IV have a 4% Assumed
Investment Return. The first Annuity Payout will be based on the Assumed
Investment Return. The remaining Annuity Payouts will fluctuate based on the
actual investment results of the Sub-Accounts.
5. Do you want Annuity Payouts to be fixed or variable or a combination?
You may choose an Annuity Payout Option with fixed-dollar amounts,
variable-dollar amounts or a combination depending on your income needs.
Fixed-Dollar Amount Annuity Payouts - Once a fixed-dollar amount Annuity Payout
begins, you cannot change your selection to receive variable-dollar amount
Annuity Payout. You will receive equal fixed-dollar amount Annuity Payouts
throughout the Annuity Payout period. Fixed-dollar amount Annuity Payout
amounts are determined by multiplying the Contract Value, minus any applicable
Premium Taxes, by an Annuity rate. The annuity rate is set by us and is not less
than the rate specified in the fixed-dollar amount Annuity Payout Option tables
in your Contract.
Variable-Dollar Amount Annuity Payouts - A variable-dollar amount Annuity Payout
is based on the investment performance of the Sub-Accounts. The variable-dollar
amount Annuity Payouts may fluctuate with the performance of the underlying
Funds. To begin making variable-dollar amount Annuity Payouts, we convert the
first Annuity Payout amount to a set number of Annuity Units and then price
those units to determine the Annuity Payout amount. The number of Annuity Units
that determines the Annuity Payout amount remains fixed unless you transfer
units between Sub-Accounts.
The dollar amount of the first variable Annuity Payout depends on:
- the Annuity Payout Option chosen,
- the Annuitant's attained age and gender (if applicable),and,
- the applicable annuity purchase rates based on the 1983a Individual
Annuity Mortality table
- the Assumed Investment Return
The total amount of the first variable-dollar amount Annuity Payout is
determined by dividing the Contract Value minus any applicable Premium Taxes, by
$1,000 and multiplying the result by the payment factor defined in the Contract
for the selected Annuity Payout Option.
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The dollar amount of each subsequent variable-dollar amount Annuity Payout is
equal to the total of:
Annuity Units for each Sub-Account multiplied by Annuity Unit Value of each
Sub-Account.
The Annuity Unit Value of each Sub-Account for any Valuation Period is equal to
the Accumulation Unit Value Net Investment Factor for the current Valuation
Period multiplied by the Annuity Unit factor, multiplied by the Annuity Unit
Value for the preceding Valuation Period.
Transfer of Annuity Units: Depending on which Series you purchased, you may be
able to transfer dollar amounts of Annuity Units from one Sub-Account to another
after the Annuity Calculation Date. On the day you make a transfer, the dollar
amounts are equal for both Sub-Accounts and the number of Annuity Units will be
different. We will transfer the dollar amount of your Annuity Units the day we
receive your written request if received before the close of the New York Stock
Exchange. Otherwise, the transfer will be made on the next Valuation Day.
Please check your Contract to see if these transfers are available.
OTHER PROGRAMS AVAILABLE
InvestEase Program - InvestEase is an electronic transfer program that allows
you to have money automatically transferred from your checking or savings
account, and invested in your Contract. It is available for Premium Payments
made after your initial Premium Payment. The minimum amount for each transfer
is $50. You can elect to have transfers occur either monthly or quarterly, and
they can be made into any Account available in your Contract.
Automatic Income Program - The Automatic Income Program allows you to Surrender
up to 10% of your total Premium Payments each Contract Year. We can Surrender
from the Accounts you select systematically on a monthly, quarterly, semiannual,
or annual basis. The Automatic Income Program may change based on your
instructions after your seventh Contract Year.
Asset Allocation Program - Asset Allocation is a program that allows you to
choose an allocation for your Sub-Accounts to help you reach your investment
goals. Some Contracts offer model allocations with pre-selected Sub-Accounts
and percentages that have been established for each type of investor - ranging
from conservative to aggressive. Over time, Sub-Account performance may cause
your Contract's allocation percentages to change, but under the Asset Allocation
Program, your Sub-Account allocations are rebalanced to the percentages in the
current model you have chosen.
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You can transfer freely between allocation models up to twelve times per year.
You can also allocate a portion of your investment to Sub-Accounts that may not
be part of the model. You can only participate in one asset allocation model at
a time.
Asset Rebalancing - Asset Rebalancing is another type of asset allocation
program in which you customize your Sub-Accounts to meet your investment needs.
You select the Sub-Accounts and the percentages you want allocated to each
Sub-Account. Based on the frequency you select, your model will automatically
rebalance to the original percentages chosen. You can transfer freely between
models up to twelve times per year. You can also allocate a portion of your
investment to Sub-Accounts that are not part of the model. You can only
participate in one asset rebalancing model at a time.
OTHER INFORMATION
Assignment - Ownership of this Contract is generally assignable. However, if the
Contract is issued to a tax qualified retirement plan, it is possible that the
ownership of the Contract may not be transferred or assigned. An assignment of
a Non-Qualified Contract may subject the Contract Values or Surrender Value to
income taxes and certain penalty taxes.
Contract Modification - The Annuitant may not be changed. However, if the
Annuitant is still living, the Contingent Annuitant may be changed at any time
prior to the Annuity Commencement Date by sending us written notice. We may
modify the Contract, but no modification will effect the amount or term of any
Contract unless a modification is required to conform the Contract to applicable
Federal or State law. No modification will effect the method by which Contract
Values are determined.
How Contracts Are Sold: Hartford Securities Distribution Company, Inc. ("HSD")
serves as Principal Underwriter for the securities issued with respect to the
Separate Account. HSD is registered with the Securities and Exchange Commission
under the Securities Exchange Act of 1934 as a Broker-Dealer and is a member of
the National Association of Securities Dealers, Inc. HSD is an affiliate of
Hartfords Both HSD and Hartford are ultimately controlled by The Hartford
Financial Services Group Inc. The principal business address of HSD is the same
as ours. The securities will be sold by individuals who represent us as
insurance agents and who are registered representatives of Broker-Dealers that
have entered into distribution agreements with HSD.
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
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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.
YEAR 2000
IN GENERAL - The Year 2000 issue relates to the ability or inability of computer
hardware, software and other information technology (IT) systems, as well as
non-IT systems, such as equipment and machinery with imbedded chips and
microprocessors, to properly process information and data containing or related
to dates beginning with the year 2000 and beyond. The Year 2000 issue exists
because, historically, many IT and non-IT systems that are in use today were
developed years ago when a year was identified using a two-digit date field
rather than a four-digit date field. As information and data containing or
related to the century date are introduced to date sensitive systems, these
systems may recognize the year 2000 as "1900", or not at all, which may result
in systems processing information incorrectly. This, in turn, may significantly
and adversely affect the integrity and reliability of information databases of
IT systems, may cause the malfunctioning of certain non-IT systems, and may
result in a wide variety of adverse consequences to a company. In addition,
Year 2000 problems that occur with third parties with which a company does
business, such as suppliers, computer vendors, distributors and others, may also
adversely affect any given company.
The integrity and reliability of Hartford's IT systems, as well as the
reliability of its non-IT systems, are integral aspects of Hartford's business.
Hartford issues insurance policies, annuities, mutual funds and other financial
products to individual and business customers, nearly all of which contain date
sensitive data, such as policy expiration dates, birth dates and premium payment
dates. In addition, various IT systems support communications and other systems
that integrate Hartford's various business segments and field offices. Hartford
also has business relationships with numerous third parties that affect
virtually all aspects of Hartford's business, including, without limitation,
suppliers, computer hardware and software vendors, insurance agents and brokers,
securities broker-dealers and other distributors of financial products, many of
which
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provide date sensitive data to Hartford, and whose operations are important to
Hartford's business.
INTERNAL YEAR 2000 EFFORTS AND TIMETABLE - Beginning in 1990, Hartford began
working on making its IT systems Year 2000 ready, either through installing new
programs or replacing systems. Since January 1998, Hartford's Year 2000 efforts
have focused on the remaining Year 2000 issues related to IT and non-IT systems
in all of Hartford's business segments. These Year 2000 efforts include the
following five main initiatives: (1) identifying and assessing Year 2000 issues;
(2) taking actions to remediate IT and non-IT systems so that they are Year 2000
ready; (3) testing IT and non-IT systems for Year 2000 readiness; (4) deploying
such remediated and tested systems back into their respective production
environments; and (5) conducting internal and external integrated testing of
such systems. As of December 31, 1998, Hartford substantially completed
initiatives (1) through (4) of its internal Year 2000 efforts. Hartford has
begun initiative (5) and management currently anticipates that such activity
will continue into the fourth quarter of 1999.
THIRD PARTY YEAR 2000 EFFORTS AND TIMETABLE - Hartford's Year 2000 efforts
include assessing the potential impact on Hartford of third parties' Year 2000
readiness. Hartford's third party Year 2000 efforts include the following three
main initiatives: (1) identifying third parties which have significant business
relationships with Hartford, including, without limitation, insurance agents,
brokers, third party administrators, banks and other distributors and servicers
of financial products, and inquiring of such third parties regarding their Year
2000 readiness; (2) evaluating such third parties' responses to Hartford's
inquiries; and (3) based on the evaluation of third party responses (or a third
party's failure to respond) and the significance of the business relationship,
conducting additional activities with respect to third parties as determined to
be necessary in each case. These activities may include conducting additional
inquiries, more in-depth evaluations of Year 2000 readiness and plans, and
integrated IT systems testing. Hartford has completed the first third party
initiative and, as of early 1999, had substantially completed evaluating third
party responses received. Hartford has begun conducting the additional
activities described in initiative (3) and management currently anticipates that
it will continue to do so through the end of 1999. However, notwithstanding
these third party Year 2000 efforts, Hartford does not have control over these
third parties and, as a result, Hartford cannot currently determine to what
extent future operating results may be adversely affected by the failure of
these third parties to adequately address their Year 2000 issues.
YEAR 2000 COSTS - The costs of Hartford's Year 2000 program that were incurred
through the year ended December 31, 1997 were not material to Hartford's
financial condition or results of operations. The after-tax costs of Hartford's
Year 2000 efforts for the year ended December 31, 1998 were approximately $3
million. Management currently estimates that after-tax costs related to the Year
2000 program to be incurred
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in 1999 will be less than $10 million. These costs are being expensed as
incurred.
RISKS AND CONTINGENCY PLANS - If significant Year 2000 problems arise,
including problems arising with third parties, failures of IT and non-IT
systems could occur, which in turn could result in substantial interruptions in
Hartford's business. In addition, Hartford's investing activities are an
important aspect of its business and Hartford may be exposed to the risk that
issuers of investments held by it will be adversely impacted by Year 2000
issues. Given the uncertain nature of Year 2000 problems that may arise,
especially those related to the readiness of third parties discussed above,
management cannot determine at this time whether the consequences of Year 2000
related problems that could arise will have a material impact on Hartford's
financial condition or results of operations.
Hartford is in the process of developing certain contingency plans so that if,
despite its Year 2000 efforts, Year 2000 problems ultimately arise, the impact
of such problems may be avoided or minimized. These contingency plans are being
developed based on, among other things, known or reasonably anticipated
circumstances and potential vulnerabilities. The contingency planning also
includes assessing the dependency of Hartford's business on third parties and
their Year 2000 readiness. Hartford currently anticipates that internal and
external contingency plans will be substantially complete by the end of the
second quarter of 1999. However, in many contexts, Year 2000 issues are dynamic,
and ongoing assessments of business functions, vulnerabilities and risks must be
made. As such, new contingency plans may be needed in the future and/or
existing plans may need to be modified as circumstances warrant.
Legal Matters and Experts
There are no material legal proceedings pending to which the Separate Account is
a party.
Counsel with respect to federal laws and regulations applicable to the issue and
sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
Senior Vice President, General Counsel and Corporate Secretary, Hartford Life
Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance
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Commissioners and the State of Connecticut Insurance Department, and are not
presented in accordance with generally accepted accounting principles. The
principal business address of Arthur Andersen LLP is One Financial Plaza,
Hartford, Connecticut 06103.
More Information
You may call your Representative if you have any questions or write or call us
at the address below:
Hartford Life Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, Connecticut 06102-5085.
Telephone: (800) 862-6668 (Contract Owners)
(800) 862-7155 (Investment Consultants)
FEDERAL TAX CONSIDERATIONS
What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
Since federal tax law is complex, the tax consequences of purchasing this
contract will vary depending on your situation. You may need tax or legal advice
to help you determine whether purchasing this contract is right for you.
Our general discussion of the tax treatment of this contract is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed description of all federal income tax consequences regarding the
purchase of this contract cannot be made in the prospectus. We also do not
discuss state, municipal or other tax laws that may apply to this contract. For
detailed information, you should consult with a qualified tax adviser familiar
with your situation.
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
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reinvested and are taken into account in determining the value of the
Accumulation and Annuity Units (See "Value of Accumulation Units"). As a
result, such investment income and realized capital gains are automatically
applied to increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
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. Code Section 72 contains provisions
for contract owners which are not natural persons. Non-natural persons
include corporations, trusts, limited liability companies, partnerships and
other types of legal entities. The tax rules for contracts owned by
non-natural persons are different from the rules for contracts owned by
individuals. For example, the annual net increase in the value of the
contract is currently includible in the gross income of a non-natural
person, unless the non-natural person holds the contract as an agent for a
natural person. There are additional exceptions from current inclusion
for:
- certain annuities held by structured settlement companies,
- certain annuities held by an employer with respect to a terminated
qualified retirement plan and
- certain immediate annuities.
A non-natural person which is a tax-exempt entity for federal tax purposes
will not be subject to income tax as a result of this provision.
If the contract owner is a non-natural person, the primary annuitant is
treated as the contract owner in applying mandatory distribution rules.
These rules require that certain distributions be made upon the death of
the contract owner. A change in the primary annuitant is also treated as
the death of the contract owner.
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.
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The provisions of Section 72 of the Code concerning distributions are
summarized briefly below. Also summarized are special rules affecting
distributions from Contracts obtained in a tax-free exchange for other
annuity contracts or life insurance contracts which were purchased prior to
August 14, 1982.
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not
includable in gross income equal the "investment in the contract"
under Section 72 of the Code.
ii. To the extent that the value of the Contract (ignoring any
surrender charges except on a full surrender) exceeds the
"investment in the contract," such excess constitutes the "income
on the contract."
iii. Any amount received or deemed received prior to the Annuity
Commencement Date (e.g., upon a partial surrender) is deemed to
come first from any such "income on the contract" and then from
"investment in the contract," and for these purposes such "income
on the contract" shall be computed by reference to any
aggregation rule in subparagraph 2.c. below. As a result, any
such amount received or deemed received (1) shall be includable
in gross income to the extent that such amount does not exceed
any such "income on the contract," and (2) shall not be
includable in gross income to the extent that such amount does
exceed any such "income on the contract." If at the time that
any amount is received or deemed received there is no "income on
the contract" (e.g., because the gross value of the Contract does
not exceed the "investment in the contract" and no aggregation
rule applies), then such amount received or deemed received will
not be includable in gross income, and will simply reduce the
"investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the
assignment or pledge of any portion of the value of the Contract
shall be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b.
v. In general, the transfer of the Contract, without full and
adequate consideration, will be treated as an amount received for
purposes of this subparagraph a. and the next subparagraph b.
This transfer rule does not apply, however, to certain transfers
of property between spouses or incident to divorce.
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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 will first be treated as withdrawals of income until all
of the income from all such Contracts is withdrawn. As of the date of
this Prospectus, there are no regulations interpreting this provision.
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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 (not less frequently
than annually) for the life (or life expectancy) of the
recipient (or the joint lives or life expectancies of the
recipient and the recipient's designated Beneficiary).
5. Distributions of amounts which are allocable to the
"investment in the contract" prior to August 14, 1982
(see next subparagraph e.).
e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A
TAX-FREE EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS
PURCHASED PRIOR TO AUGUST 14, 1982. If the Contract was
obtained by a tax-free exchange of a life insurance or annuity
Contract purchased prior to August 14, 1982, then any amount
received or deemed received prior to the Annuity Commencement
Date shall be deemed to come (1) first from the amount of the
"investment in the contract" prior to August 14, 1982
("pre-8/14/82 investment") carried over from the prior Contract,
(2) then from the portion of the "income on the contract"
(carried over to, as well as accumulating in, the successor
Contract) that is attributable to such pre-8/14/82 investment,
(3) then from the remaining "income on the contract" and (4) last
from the remaining "investment in the contract." As a result,
to the extent that such amount received or deemed received does
not exceed such pre-8/14/82 investment, such amount is not
includable in gross income. In addition, to the extent that
such amount received or deemed received does not exceed the sum
of (a) such pre-8/14/82 investment and (b) the "income on the
contract" attributable thereto, such amount is not subject to the
10% penalty tax. In all other respects, amounts received or
deemed received from such
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post-exchange Contracts are generally subject to the rules described
in this subparagraph 3.
f. REQUIRED DISTRIBUTIONS
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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 must be made
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. This spousal continuation shall apply only once for this
contract.
3. DIVERSIFICATION REQUIREMENTS. The Code requires that investments
supporting your contract be adequately diversified. Code Section 817
provides that a variable annuity contract will not be treated as an
annuity contract for any period during which the investments made by
the separate account or underlying fund are not adequately
diversified. If a contract is not treated as an annuity contract, the
contract owner will be subject to income tax on annual increases in
cash value.
The Treasury Department's diversification regulations require, among other
things, that:
- no more than 55% of the value of the total assets of the segregated
asset account underlying a variable contract is represented by any one
investment,
- no more than 70% is represented by any two investments,
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- no more than 80% is represented by any three investments and
- no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all
securities of the same issuer, all interests in the same real property
project, and all interests in the same commodity are each treated as a
single investment. In the case of government securities, each government
agency or instrumentality is treated as a separate issuer.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the
quarter ends. If an insurance company inadvertently fails to meet the
diversification requirements, the company may still comply within a
reasonable period and avoid the taxation of contract income on an ongoing
basis. However, either the company or the contract owner must agree to pay
the tax due for the period during which the diversification requirements
were not met.
We monitor the diversification of investments in the separate accounts and
test for diversification as required by the Code. We intend to administer
all contracts subject to the diversification requirements in a manner that
will maintain adequate diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT. In order for a variable
annuity contract to qualify for tax deferral, assets in the separate
accounts supporting the contract must be considered to be owned by the
insurance company and not by the contract owner. It is unclear under what
circumstances an investor is considered to have enough control over the
assets in the separate account to be considered the owner of the assets for
tax purposes.
The IRS has issued several rulings discussing investor control. These
rulings say that certain incidents of ownership by the contract owner, such
as the ability to select and control investments in a separate account,
will cause the contract owner to be treated as the owner of the assets for
tax purposes.
In its explanation of the diversification regulations, the Treasury
Department recognized that the temporary regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary regulations
provide that in appropriate cases a segregated asset account may include
multiple sub-accounts, but do not specify the extent to which policyholders
may direct their investments to particular sub-accounts without being
treated as the owners of the underlying assets. Guidance on this and other
issues will be provided in regulations or revenue rulings under Section
817(d), relating to the definition of variable contract."
The final regulations issued under Section 817 did not provide guidance
regarding investor control, and as of the date of this prospectus, guidance
has yet to be issued. We do not know if additional guidance will be
issued. If guidance is issued, we do not know if it will have a
retroactive effect.
Due to the lack of specific guidance on investor control, there is some
uncertainty about when
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a contract owner is considered the owner of the assets for tax purposes.
We reserve the right to modify the contract, as necessary, to prevent you
from being considered the owner of assets in the separate account.
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 there is no election to waive withholding, 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 for information relative to the types of plans
for which it may be used and the general explanation of the tax features of such
plans.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to annuity purchasers that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal income tax and withholding on annuity distributions at a 30% rate,
unless a lower treaty rate applies. In addition, purchasers may be subject to
state premium tax, other state and/or municipal taxes, and taxes that may be
imposed by the purchaser's country of citizenship or residence. Prospective
purchasers are advised to consult with a qualified tax adviser regarding U.S.,
state, and foreign taxation with respect to an annuity purchase.
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Appendix I
Series III of Putnam Capital Manager variable annuity
Series III of Putnam Capital Manager variable annuity was sold from May 1, 1990
through May 1, 1992. Almost all of the provisions detailed in the prospectus
apply to you except for the following changes:
Contingent Deferred Sales Charges:
<TABLE>
<CAPTION>
Deferred Sales Charge (as a percentage of amounts Surrendered)
<S> <C>
First Year (1) 7%
Second Year 6%
Third Year 5%
Fourth Year 4%
Fifth Year 3%
Sixth Year 2%
Seventh Year 1%
Eighth Year 0%
</TABLE>
Death Benefit:
The death benefit payable is equal to the greater of:
- - the Contract Value determined as of the day written proof of death is
received; or
- - 100% of the total Premium Payments made, reduced by any surrenders; or
- - the Contract Value on the Specified Contract Anniversary immediately
preceding the date of death, increased by any Premium Payments made and
decreased by any Surrenders since the preceding Specified Contract
Anniversary.
The Specified Contract Anniversary is every seventh Contact Anniversary (i.e,
the 7th, 14th etc.)
Death Benefit Remaining with the Company:
The Beneficiary may elect under the Annuity Payout Option "Death Benefit
Remaining with the Company" to leave proceeds from the Death Benefit with us for
up to five years from the date of the Contract Owner's death if the Contract
Owner died before the Annuity Commencement Date. Once we receive a certified
death certificate or other legal documents acceptable to us, the Beneficiary
can: (a) make Sub-Account transfers and (b) take Surrenders without paying
Contingent Deferred Sales Charges.
The Annuity Options under this Series are:
OPTION 1: LIFE ANNUITY - We make Annuity Payouts as long as the Annuitant is
living. When the Annuitant dies, we stop making Annuity Payouts. A Payee would
receive only one Annuity Payout if the Annuitant dies after the first payout,
two Annuity Payouts if the Annuitant dies after the second payout, and so forth.
OPTION 2 - LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN - We make
monthly Annuity Payouts during the lifetime of the Annuitant but Annuity Payouts
are at least guaranteed for a minimum
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of 120, 180 or 240 months, as you elect. If, at the death of the Annuitant,
Annuity Payouts have been made for less than the minimum elected number of
months, then the Commuted Value as of the date of the Annuitant's death will be
paid in one sum to the Beneficiary.
OPTION 3- JOINT AND LAST SURVIVOR LIFE ANNUITY - We will make Annuity Payouts as
long as the Annuitant and Joint Annuitant are living. When one Annuitant dies,
we continue to make Annuity Payouts to the other Annuitant until that second
Annuitant dies. When choosing this option, you must decide what will happen to
the Annuity Payouts after the first Annuitant dies. You must select Annuity
Payouts that:
- Remain the same at 100%, or
- Decrease to 66.67%, or
- Decrease to 50%.
For variable Annuity Payouts, these percentages represent Annuity Units; for
fixed Annuity Payouts, they represent actual dollar amounts. The percentage will
also impact the Annuity Payout amount we pay while both Annuitants are living.
If you pick a lower percentage, your original Annuity Payouts will be higher
while both Annuitants are alive.
OPTION 4 - PAYMENTS FOR A DESIGNATED PERIOD - We will make Annuity Payouts for
the number of years that you select. You can select between 5 years and 30
years.
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Appendix II
Series IV of Putnam Capital Manager variable annuity
Series IV of Putnam Capital Manager variable annuity was sold from May 1, 1992
through June 22, 1994. Almost all of the provisions detailed in the prospectus
apply to you except for the following changes:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charges:
<S> <C>
First Year (1) 7%
Second Year 6%
Third Year 5%
Fourth Year 4%
Fifth Year 3%
Sixth Year 2%
Seventh Year 1%
Eighth Year 0%
</TABLE>
Death Benefit:
The death benefit payable is equal to the greater of:
- - the Contract Value determined as of the day written proof of death is
received; or
- - 100% of the total Premium Payments made, reduced by any surrenders; or
- - the Contract Value on the Specified Contract Anniversary immediately
preceding the date of death, increased by any Premium Payments made and
decreased by any Surrenders since the preceding Specified Contract
Anniversary.
The Specified Contract Anniversary is every seventh Contact Anniversary (i.e,
the 7th, 14th etc.)
Death Benefit Remaining with the Company:
The Beneficiary may elect under the Annuity Payout Option "Death Benefit
Remaining with the Company" to leave proceeds from the Death Benefit with us for
up to five years from the date of the Contract Owner's death if the Contract
Owner died before the Annuity Commencement Date. Once we receive a certified
death certificate or other legal documents acceptable to us, the Beneficiary
can: (a) make Sub-Account transfers and (b) take Surrenders without paying
Contingent Deferred Sales Charges.
The Annuity Options under this Series are:
OPTION 1: LIFE ANNUITY - We make Annuity Payouts as long as the Annuitant is
living. When the Annuitant dies, we stop making Annuity Payouts. A Payee would
receive only one Annuity Payout if the Annuitant dies after the first payout,
two Annuity Payouts if the Annuitant dies after the second payout, and so forth.
OPTION 2 - LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN - We make
monthly Annuity
70
<PAGE>
Payouts during the lifetime of the Annuitant but Annuity Payouts are at least
guaranteed for a minimum of 120, 180 or 240 months, as you elect. If, at the
death of the Annuitant, Annuity Payouts have been made for less than the minimum
elected number of months, then the Commuted Value as of the date of the
Annuitant's death will be paid in one sum to the Beneficiary.
OPTION 3- JOINT AND LAST SURVIVOR LIFE ANNUITY - We will make Annuity Payouts as
long as the Annuitant and Joint Annuitant are living. When one Annuitant dies,
we continue to make Annuity Payouts to the other Annuitant until that second
Annuitant dies. When choosing this option, you must decide what will happen to
the Annuity Payouts after the first Annuitant dies. You must select Annuity
Payouts that:
- Remain the same at 100%, or
- Decrease to 66.67%, or
- Decrease to 50%.
For variable Annuity Payouts, these percentages represent Annuity Units; for
fixed Annuity Payouts, they represent actual dollar amounts. The percentage will
also impact the Annuity Payout amount we pay while both Annuitants are living.
If you pick a lower percentage, your original Annuity Payouts will be higher
while both Annuitants are alive.
OPTION 4 - PAYMENTS FOR A DESIGNATED PERIOD - We will make Annuity Payouts for
the number of years that you select. You can select between 5 years and 30
years.
71
<PAGE>
APPENDIX III - INFORMATION REGARDING TAX-QUALIFIED PLANS
This summary does not attempt to provide more than general information about the
federal income tax rules associated with use of a Contract by a tax-qualified
retirement plan. Because of the complexity of the federal tax rules, owners,
participants and beneficiaries are encouraged to consult their own tax advisors
as to specific tax consequences.
The federal tax rules applicable to owners of Contracts under tax-qualified
retirement plans vary according to the type of plan as well as the terms and
conditions of the plan itself. Contract owners, plan participants and
beneficiaries are cautioned that the rights and benefits of any person may be
controlled by the terms and conditions of the tax-qualified retirement plan
itself, regardless of the terms and conditions of a Contract. We are not bound
by the terms and conditions of such plans to the extent such terms conflict with
a Contract, unless we specifically consent to be bound.
Some tax-qualified retirement plans are subject to distribution and other
requirements that are not incorporated into our administrative procedures.
Contract owners, participants and beneficiaries are responsible for determining
that contributions, distributions and other transactions comply with applicable
law. Tax penalties may apply to transactions with respect to tax-qualified
retirement plans if applicable federal income tax rules and restrictions are not
carefully observed.
We do not currently offer the Contracts in connection with all of the types of
tax-qualified retirement plans discussed below and may not offer the Contracts
for all types of tax-qualified retirement plans in the future.
1. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS Eligible employers can
establish certain tax-qualified pension and profit-sharing plans under
section 401 of the Code. Rules under section 401(k) of the Code govern
certain "cash or deferred arrangements" under such plans. Rules under
section 408(k) govern "simplified employee pensions". Tax-qualified
pension and profit-sharing plans are subject to limitations on the amount
that may be contributed, the persons who may be eligible to participate and
the time when distributions must commence. Employers intending to use the
Contracts in connection with tax-qualified pension or profit-sharing plans
should seek competent tax and other legal advice.
2. TAX SHELTERED ANNUITIES UNDER SECTION 403(b) Public schools and certain
types of charitable, educational and scientific organizations, as specified
in section 501(c)(3) of the Code, can purchase tax-sheltered annuity
contracts for their employees. Tax-deferred contributions can be made to
tax-sheltered annuity contracts under section 403(b) of the Code, subject
to certain limitations. Generally, such contributions may not exceed the
lesser of $10,000 (indexed) or 20% of the employee's "includable
compensation" for such employee's most recent full year of employment,
subject to other adjustments. Special provisions under the Code may allow
some employees to elect a different overall limitation.
Tax-sheltered annuity programs under section 403(b) are subject to a
PROHIBITION AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO
CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT, unless such
distribution is made:
72
<PAGE>
- after the participating employee attains age 59 1/2;
- upon separation from service;
- upon death or disability; or
- in the case of hardship (and in the case of hardship, any income
attributable to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions
attributable to cash values or other amounts held under a section 403(b)
contract as of December 31, 1988.
3. DEFERRED COMPENSATION PLANS UNDER SECTION 457 A governmental employer or
a tax-exempt employer other than a governmental unit can establish a
Deferred Compensation Plan under section 457 of the Code. For these
purposes, a "governmental employer" is a State, a political subdivision of
a State, or an agency or an instrumentality of a State or political
subdivision of a State. Employees and independent contractors performing
services for a governmental or tax-exempt employer can elect to have
contributions made to a Deferred Compensation Plan of their employer in
accordance with the employer's plan and section 457 of the Code.
Deferred Compensation Plans that meet the requirements of section 457(b) of
the Code are called "eligible" Deferred Compensation Plans. Section 457(b)
limits the amount of contributions that can be made to an eligible Deferred
Compensation Plan on behalf of a participant. Generally, the limitation on
contributions is 33 1/3% of a participant's includable compensation
(typically 25% of gross compensation) or, for 1999, $8,000 (indexed),
whichever is less. The plan may provide for additional "catch-up"
contributions during the three taxable years ending before the year in
which the participant attains normal retirement age.
All of the assets and income of an eligible Deferred Compensation Plan
established by a governmental employer after August 20, 1996, must be held
in trust for the exclusive benefit of participants and their beneficiaries.
For this purpose, custodial accounts and certain annuity contracts are
treated as trusts. Eligible Deferred Compensation Plans that were in
existence on August 20, 1996 may be amended to satisfy the trust and
exclusive benefit requirements any time prior to January 1, 1999, and must
be amended not later than that date to continue to receive favorable tax
treatment. The requirement of a trust does not apply to amounts under a
Deferred Compensation Plan of a tax-exempt (non-governmental) employer. In
addition, the requirement of a trust does not apply to amounts under a
Deferred Compensation Plan of a governmental employer if the Deferred
Compensation Plan is not an eligible plan within the meaning of section
457(b) of the Code. In the absence of such a trust, amounts under the plan
will be subject to the claims of the employer's general creditors.
In general, distributions from an eligible Deferred Compensation Plan are
prohibited under section 457 of the Code unless made after the
participating employee:
- attains age 70 1/2,
- separates from service,
73
<PAGE>
- dies, or
- suffers an unforeseeable financial emergency as defined in the
Code.
Under present federal tax law, amounts accumulated in a Deferred
Compensation Plan under section 457 of the Code cannot be transferred or
rolled over on a tax-deferred basis except for certain transfers to other
Deferred Compensation Plans under section 457 in limited cases.
4. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS") UNDER SECTION 408
TRADITIONAL IRAS. Eligible individuals can establish individual retirement
programs under section 408 of the Code through the purchase of an IRA.
Section 408 imposes limits with respect to IRAs, including limits on the
amount that may be contributed to an IRA, the amount of such contributions
that may be deducted from taxable income, the persons who may be eligible
to contribute to an IRA, and the time when distributions commence from an
IRA. Distributions from certain tax-qualified retirement plans may be
"rolled-over" to an IRA on a tax-deferred basis.
SIMPLE IRAS. Eligible employees may establish SIMPLE IRAs in connection
with a SIMPLE IRA plan of an employer under section 408(p) of the Code.
Special rollover rules apply to SIMPLE IRAs. Amounts can be rolled over
from one SIMPLE IRA to another SIMPLE IRA. However, amounts can be rolled
over from a SIMPLE IRA to a Traditional IRA only after two years have
expired since the employee first commenced participation in the employer's
SIMPLE IRA plan. Amounts cannot be rolled over to a SIMPLE IRA from a
qualified plan or a Traditional IRA. Hartford is a non-designated
financial institution for purposes of the SIMPLE IRA rules.
ROTH IRAS. Eligible individuals may establish Roth IRAs under section 408A
of the Code. Contributions to a Roth IRA are not deductible. Subject to
special limitations, a Traditional IRA may be converted into a Roth IRA or
a distribution from a Traditional IRA may be rolled over to a Roth IRA.
However, a conversion or a rollover from a Traditional IRA to a Roth IRA is
not excludable from gross income. If certain conditions are met, qualified
distributions from a Roth IRA are tax-free.
5. FEDERAL TAX PENALTIES AND WITHHOLDING Distributions from tax-qualified
retirement plans are generally taxed as ordinary income under section 72 of
the Code. Under these rules, a portion of each distribution may be
excludable from income. The excludable amount is the portion of the
distribution that bears the same ratio as the after-tax contributions bear
to the expected return.
(a) PENALTY TAX ON EARLY DISTRIBUTIONS Section 72(t) of the Code imposes
an additional penalty tax equal to 10% of the taxable portion of a
distribution from certain tax-qualified retirement plans. However,
the 10% penalty tax does not apply to a distributions that is:
- Made on or after the date on which the employee reaches age 59
1/2;
- Made to a beneficiary (or to the estate of the employee) on or
after the death of the employee;
- Attributable to the employee's becoming disabled (as defined in
the Code);
- Part of a series of substantially equal periodic payments (not
less frequently than
74
<PAGE>
annually) made for the life (or life expectancy) of the employee
or the joint lives (or joint life expectancies) of the employee
and his or her designated beneficiary;
- Except in the case of an IRA, made to an employee after
separation from service after reaching age 55; or
- Not greater than the amount allowable as a deduction to the
employee for eligible medical expenses during the taxable year.
In addition, the 10% penalty tax does not apply to a distribution from an
IRA that is:
- Made after separation from employment to an unemployed IRA owner
for health insurance premiums, if certain conditions are met;
- Not in excess of the amount of certain qualifying higher
education expenses, as defined by section 72(t)(7) of the Code;
or
- A qualified first-time homebuyer distribution meeting the
requirements specified at section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware
that the 10% penalty tax is increased to 25% with respect to
non-exempt early distributions made from your SIMPLE IRA during the
first two years following the date you first commenced participation
in any SIMPLE IRA plan of your employer.
(b) MINIMUM DISTRIBUTION PENALTY TAX If the amount distributed is less
than the minimum required distribution for the year, the Participant
is subject to a 50% penalty tax on the amount that was not properly
distributed. An individual's interest in a tax-qualified retirement
plan generally must be distributed, or begin to be distributed, not
later than the Required Beginning Date. Generally, the Required
Beginning Date is April 1 of the calendar year following the later of:
- the calendar year in which the individual attains age 70
1/2; or
- the calendar year in which the individual retires from
service with the employer sponsoring the plan.
The Required Beginning Date for an individual who is a five (5)
percent owner (as defined in the Code), or who is the owner of an IRA,
is April 1 of the calendar year following the calendar year in which
the individual attains age 70 1/2.
The entire interest of the Participant must be distributed beginning
no later than the Required Beginning Date over:
- the life of the Participant or the lives of the Participant
and the Participant's designated beneficiary, or
- over a period not extending beyond the life expectancy of
the Participant or the joint life expectancy of the
Participant and the Participant's designated beneficiary.
75
<PAGE>
Each annual distribution must equal or exceed a "minimum distribution
amount" which is determined by dividing the account balance by the
applicable life expectancy. This account balance is generally based
upon the account value as of the close of business on the last day of
the previous calendar year. In addition, minimum distribution
incidental benefit rules may require a larger annual distribution.
If an individual dies before reaching his or her Required Beginning
Date, the individual's entire interest must generally be distributed
within five years of the individual's death. However, this rule will
be deemed satisfied, if distributions begin before the close of the
calendar year following the individual's death to a designated
beneficiary and distribution is over the life of such designated
beneficiary (or over a period not extending beyond the life expectancy
of the beneficiary). If the beneficiary is the individual's surviving
spouse, distributions may be delayed until the individual would have
attained age 70 1/2.
If an individual dies after reaching his or her Required Beginning
Date or after distributions have commenced, the individual's interest
must generally be distributed at least as rapidly as under the method
of distribution in effect at the time of the individual's death.
(c) WITHHOLDING In general, regular wage withholding rules apply to
distributions from IRAs and plans described in section 457 of the
Code. Periodic distributions from other tax-qualified retirement
plans that are made for a specified period of 10 or more years or for
the life or life expectancy of the participant (or the joint lives or
life expectancies of the participant and beneficiary) are generally
subject to federal income tax withholding as if the recipient were
married claiming three exemptions. The recipient of periodic
distributions may generally elect not to have withholding apply or to
have income taxes withheld at a different rate by providing a
completed election form.
Mandatory federal income tax withholding at a flat rate of 20% will
generally apply to other distributions from such other tax-qualified
retirement plans unless such distributions are:
- the non-taxable portion of the distribution;
- required minimum distributions; or
- direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to
another eligible retirement plan under Code section 401(a)(31).
Certain states require withholding of state taxes when federal income tax
is withheld.
76
<PAGE>
Table of Contents
to
Statement of Additional Information
Section Page
Description of Hartford Life and Annuity Insurance Company
Safekeeping of Assets
Independent Public Accountants
Distribution of Contracts
Calculation of Yield and Return
Performance Comparisons
Financial Statements
77
<PAGE>
This form must be completed for all tax-sheltered annuities.
Section 403(b)(11) Acknowledgment Form
The Hartford Variable Annuity Contract that you have recently purchased is
subject to certain restrictions imposed by the Tax Reform Act of 1986.
Contributions to the Contract after December 31, 1988 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:
a. Attained age 59 1/2,
b. Separated from service,
c. Died, or
d. Become disabled.
Distributions of post December 31, 1988 contributions (excluding any income
thereon) may also be made if you have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made prior to age 59 1/2
because of financial hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Hartford Variable Annuity. Please refer to your
Plan.
Please complete the following and return to:
Hartford Life Insurance Company
Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
- ----------------------------------------
Name of Contract Owner/Participant
Address
City or Plan/School District
Date:
Contract No:
Signature:
78
<PAGE>
--------------------
To obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Please send a Statement of Additional Information to me at the following
address:
Name
Address
City/State Zip Code
--------------------
79
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO
This Statement of Additional Information is not a Prospectus. The information
contained herein should be read in conjunction with the Prospectus.
To obtain a Prospectus, send a written request to Hartford Life and Annuity
Insurance Company, Attn: Individual Annuity Operations, P.O. Box 5085,
Hartford, CT 06102-5085.
Date of Prospectus: May 3, 1999
Date of Statement of Additional Information: May 3, 1999
33-60702
<PAGE>
-2-
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
DESCRIPTION OF HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SAFEKEEPING OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INDEPENDENT PUBLIC ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . . 3
DISTRIBUTION OF CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . 4
CALCULATION OF YIELD AND RETURN . . . . . . . . . . . . . . . . . . . . . 4
PERFORMANCE COMPARISONS . . . . . . . . . . . . . . . . . . . . . . . . . 8
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
-3-
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut. Our offices
are located in Simsbury, Connecticut; however, our mailing address is P.O. Box
2999, Hartford, CT 06104-2999. We are ultimately controlled by The Hartford
Financial Services Group, Inc., one of the largest financial service providers
in the United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 1/1/99 A+ Financial performance
- --------------------------------------------------------------------------------
Standard & Poor's 6/1/98 AA Insurer financial strength
- --------------------------------------------------------------------------------
Duff & Phelps 12/21/98 AA+ Claims paying ability
- --------------------------------------------------------------------------------
</TABLE>
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. These assets
are kept physically segregated and are held separate and apart from Hartford's
general corporate assets. Records are maintained of all purchases and
redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal
business address of Arthur Andersen LLP is One Financial Plaza, Hartford,
Connecticut 06103.
<PAGE>
-4-
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account, and
will offer the Contracts on a continuous basis.
HSD is a wholly-owned subsidiary of Hartford Life Insurance Company. The
principal business address of HSD is the same as Hartford.
The securities will be sold by salespersons of HSD who represent Hartford as
insurance and Variable Annuity agents and who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934 as a Broker-Dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD").
Hartford currently pays HDS underwriting commissions for its role as Principal
Underwriter of all variable annuities associated with this Separate Account.
For the past three years, the aggregate dollar amount of underwriting
commissions paid to and retained by HSD in its role as Principal Underwriter has
been: 1998: $67,003,507, 1997: $97,513,541 and 1996: $154,325,791.
CALCULATION OF YIELD AND RETURN
YIELD OF THE PUTNAM MONEY MARKET SUB-ACCOUNT. As summarized in the Prospectus
under the heading "Performance Related Information," the yield of the
Sub-Account for a seven day period (the "base period") will be computed by
determining the "net change in value" of a hypothetical account having a balance
of one unit at the beginning of the period, dividing the net change in account
value by the value of the account at the beginning of the base period to obtain
the base period return, and multiplying the base period return by 365/7 with the
resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include net investment income of
the account (accrued dividends as declared by the underlying funds, less expense
and Contract charges of the account) for the period, but will not include
realized gains or losses or unrealized appreciation or depreciation on the
underlying fund shares.
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from the
result, according to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
<PAGE>
-5-
The Putnam Money Market Sub-Account's yield and effective yield will vary in
response to fluctuations in interest rates and in the expenses of the
Sub-Account.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
- --------------------------------------------------------------------------------
<S> <C> <C>
Putnam Money Market * 3.50% 3.56%
- --------------------------------------------------------------------------------
</TABLE>
* Yield and effective yield for the seven day period ending December 31, 1998.
The Putnam Diversified Income Fund, Putnam Global Asset Allocation Fund, Putnam
Growth and Income Fund, Putnam High Yield Fund, Putnam Utilities Growth and
Income Fund, and Putnam Income Fund Sub-Accounts' yields will vary from time to
time depending upon market conditions and, the composition of the underlying
funds' portfolios. Yield should also be considered relative to changes in the
value of the Sub-Accounts' shares and to the relative risks associated with the
investment objectives and policies of the Funds.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUB-ACCOUNT YIELD
- --------------------------------------------------------------------------------
<S> <C>
Putnam Growth and Income ** 0.16%
- --------------------------------------------------------------------------------
Putnam Global Asset Allocation ** 0.72%
- --------------------------------------------------------------------------------
Putnam High Yield ** 9.09%
- --------------------------------------------------------------------------------
Putnam Utilities Growth and Income ** 1.45%
- --------------------------------------------------------------------------------
Putnam Income ** 4.53%
- --------------------------------------------------------------------------------
Putnam Diversified Income ** 6.03%
- --------------------------------------------------------------------------------
</TABLE>
** Yield quotation based on a 30 day period ended December 31, 1998.
CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the heading
"Performance Related Information", total return is a measure of the change in
value of an investment in a Sub-Account over the period covered. The formula
for total return used herein includes three steps: (1) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of units owned at the end of the period by the unit
value per unit on the last trading day of the period; (2) assuming redemption at
the end of the period and deducting any applicable contingent deferred sales
charge and (3) dividing this account value for the hypothetical investor by the
initial $1,000 investment and annualizing the result for periods of less than
one year. Total return will be calculated for one year, five years, and ten
years or some other relevant periods if a Sub-Account has not been in existence
for at least ten years.
At any time in the future, yields and total return may be higher or lower
than past yieldsand there can be no assurance that any historical results
will continue.
<PAGE>
-6-
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUB-ACCOUNT INCEPTION 1 YEAR 5 YEAR 10 YEAR SINCE
DATE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Putnam Asia Pacific 5/1/95 -15.82% N/A N/A -8.02%
Growth
- --------------------------------------------------------------------------------
Putnam Diversified 9/15/93 -12.05% 1.18% N/A 1.23%
Income
- --------------------------------------------------------------------------------
The George Putnam Fund 5/1/98 N/A N/A N/A -7.08%
- --------------------------------------------------------------------------------
Putnam Global Asset 2/1/88 2.45% 9.59% N/A 9.83%
Allocation
- --------------------------------------------------------------------------------
Putnam Global Growth 5/1/90 18.41% 10.46% N/A 10.71%
- --------------------------------------------------------------------------------
Putnam Growth and 2/1/88 4.31% 15.08% N/A 13.12%
Income
- --------------------------------------------------------------------------------
Putnam Health Sciences 5/1/98 N/A N/A N/A -1.01%
- --------------------------------------------------------------------------------
Putnam High Yield 2/1/88 -16.16% 3.01% N/A 8.70%
- --------------------------------------------------------------------------------
Putnam International 1/2/97 7.55% N/A N/A 10.76%
Growth
- --------------------------------------------------------------------------------
Putnam International 1/2/97 0.23% N/A N/A 8.64%
Growth and Income
- --------------------------------------------------------------------------------
Putnam International 1/2/97 4.47% N/A N/A 0.45%
New Opportunities
- --------------------------------------------------------------------------------
Putnam Investors 5/1/98 N/A N/A N/A 4.82%
- --------------------------------------------------------------------------------
Putnam New 2/1/88 13.15% N/A N/A 19.21%
Opportunities
- --------------------------------------------------------------------------------
Putnam New Value 5/2/94 -4.72% N/A N/A 5.08%
- --------------------------------------------------------------------------------
Putnam OTC & Emerging 1/2/97 N/A N/A N/A -9.69%
Growth
- --------------------------------------------------------------------------------
Putnam Research 5/1/98 N/A N/A N/A 15.47%
- --------------------------------------------------------------------------------
Putnam Income 10/1/98 -1.82% 2.76% N/A 5.13%
- --------------------------------------------------------------------------------
Putnam Utilities 2/1/88 3.82% 11.33% N/A 10.91%
Growth and Income Bond
- --------------------------------------------------------------------------------
Putnam Vista Fund 5/1/92 8.32% N/A N/A 14.81%
- --------------------------------------------------------------------------------
Putnam Voyager 1/2/97 13.13% 16.33% N/A 17.18%
- --------------------------------------------------------------------------------
Putnam Money Market 2/1/88 -5.76% 0.47% N/A 0.49%
- --------------------------------------------------------------------------------
</TABLE>
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated for one
year, five years, and ten years or other periods. Non-standardized total return
is measured in the same manner as the standardized total return described above,
except that the contingent deferred sales charge and the Annual Maintenance Fee
are not deducted and the time periods used to calculate return are based on
the inception date of the underlying Funds. Therefore, non-standardized
total return for a Sub-Account is higher than standardized total return for
a Sub-Account.
<PAGE>
-7-
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE
INCEPTION DATE OF THE SEPARATE ACCOUNT FOR YEAR ENDED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUB-ACCOUNT INCEPTION 1 YEAR 5 YEAR 10 YEAR SINCE
DATE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Putnam Asia Pacific 5/1/95 -6.80% N/A N/A -4.17%
Growth
- --------------------------------------------------------------------------------
Putnam Diversified 9/15/93 -2.74% 4.16% N/A 4.29%
Income
- --------------------------------------------------------------------------------
The George Putnam Fund 5/1/98 N/A N/A N/A 2.42%
- --------------------------------------------------------------------------------
Putnam Global Asset 2/1/88 11.95% 12.24% 11.12% 10.67%
Allocation
- --------------------------------------------------------------------------------
Putnam Global Growth 5/1/90 27.91% 13.17% N/A 11.11%
- --------------------------------------------------------------------------------
Putnam Growth and 2/1/88 13.81% 17.45% 14.42% 14.90%
Income
- --------------------------------------------------------------------------------
Putnam Health Sciences 5/1/98 N/A N/A N/A 8.49%
- --------------------------------------------------------------------------------
Putnam High Yield 2/1/88 -7.17% 5.82% 8.37% 8.24%
- --------------------------------------------------------------------------------
Putnam International 1/2/97 17.05% N/A N/A 15.82%
Growth
- --------------------------------------------------------------------------------
Putnam International 1/2/97 9.73% N/A N/A 13.72%
Growth and Income
- --------------------------------------------------------------------------------
Putnam International 1/2/97 13.97% N/A N/A 5.97%
New Opportunities
- --------------------------------------------------------------------------------
Putnam Investors 5/1/98 N/A N/A N/A 14.32%
- --------------------------------------------------------------------------------
Putnam New 2/1/88 22.65% N/A N/A 21.48%
Opportunities
- --------------------------------------------------------------------------------
Putnam New Value 5/2/94 4.78% N/A N/A 10.26%
- --------------------------------------------------------------------------------
Putnam OTC & Emerging 1/2/97 N/A N/A N/A -0.20%
Growth
- --------------------------------------------------------------------------------
Putnam Research 5/1/98 N/A N/A N/A 24.97%
- --------------------------------------------------------------------------------
Putnam Income 10/1/98 7.68% 5.72% 7.79% 7.26%
- --------------------------------------------------------------------------------
Putnam Utilities 2/1/88 13.32% 13.96% N/A 13.17%
Growth and Income Bond
- --------------------------------------------------------------------------------
Putnam Vista Fund 5/1/92 17.82% N/A N/A 19.71%
- --------------------------------------------------------------------------------
Putnam Voyager 1/2/97 22.63% 18.69% 18.48% 16.98%
- --------------------------------------------------------------------------------
Putnam Money Market 2/1/88 3.74% 3.51% 3.94% 4.02%
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
-8-
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. The total return and yield may also be used to compare
the performance of the Sub-Accounts against certain widely acknowledged outside
standards or indices for stock and bond market performance. Index performance
is not representative of the performance of the Putnam Sub-Account to which it
is compared and is not adjusted for commissions and other costs. Portfolio
holdings of the Putnam Sub-Account will differ from those of the index to which
it is compared. Performance comparison indices include the following:
The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics, is
a commonly used measure of the rate of inflation. The index shows the
average change in the cost of selected consumer goods and services and does
not represent a return on an investment vehicle.
The Dow Jones Industrial Average is an unmanaged list of 30 common stocks
frequently used as a general measure of stock market performance. Its
performance figures reflect changes of market prices and reinvestment of all
distributions.
Lehman Brothers Corporate Bond Index is an unmanaged list of publicly issued,
fixed-rate, non-convertible investment-grade domestic corporate debt securities
frequently used as a general measure of the performance of fixed-income
securities. The average quality of bonds included in the index may be higher
than the average quality of those bonds in which Putnam High Yield Fund
customarily invests. The index does not include bonds in certain of the lower
rating classifications in which the Fund may invest. The performance figures
the index reflect changes in market prices and reinvestment of all interest
payments.
The Lehman Brothers Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
The Lehman Brothers Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency. The index does not include bonds in certain of the lower-rating
classifications in which PCM High Yield Fund invests. Its performance figures
reflect changes in market prices and reinvestment of all interest payments.
Morgan Stanley Capital International World Index is an unmanaged list of
approximately 1,450 equity securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand and the Far East, with all
values expressed in U.S. dollars. Performance figures reflect changes in market
prices and reinvestment of distributions net of withholding taxes. The
securities in the index change over time to maintain representativeness.
The NASDAQ-OTC Industrial Average (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
<PAGE>
-9-
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded. Its performance figures reflect changes of market prices but do not
reflect reinvestment of cash dividends.
Salomon Brothers Long-Term High-Grade Corporate Bond Index is an unmanaged list
of publicly traded corporate bonds having a rating of at least AA by Standard &
Poors's or Aa by Moody's and is frequently used as general measure of the
performance of fixed-income securities. The average quality of bonds included
in the index may be higher than the average quality of those bonds in which
Putnam High Yield customarily invests. The index does not include bonds in
certain of the lower rating classifications in which the Fund may invest.
Performance figures for the index reflect changes of market prices and
reinvestment of all distributions.
The Salomon Brothers 7-10 Year Government Bond Index is an unmanaged list of
U.S. Government and government agency securities with maturities of 7 to 10
years. Performance figures for the index reflect changes of market prices and
reinvestment of all interest payments.
The Standard & Poor's Composite Index of 500 stocks (the "S&P 500") a market
value-weighted and unmanaged index showing changes in the aggregate market value
of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40 financial services
concerns. The S&P 500 represents about 80% of the market value of all issues
traded on the New York Stock Exchange. Its performance figures reflect changes
of market prices and reinvestment of all regular cash dividends.
The Standard & Poor's 40 Utilities Index is unmanaged list of 40 utility stocks.
The Index assumes reinvestment of all distributions and reflects changes in
market prices but does not take into account brokerage commissions or other
fees. Putnam Utilities Growth and Income Fund's telephone and electric utility
stocks are generally held in the same proportion as the telephone and electric
stocks in the S&P Utilities Index. However, there are some utility stocks held
by the Fund that are not part of the Index.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life and Annuity Insurance Company Putnam Capital Manager Trust
Separate Account Two and to the Owners of Units of Interest therein:
We have audited the accompanying statements of assets and liabilities of
Hartford Life and Annuity Insurance Company Putnam Capital Manager Trust
Separate Account (Asia Pacific Growth, Diversified Income, The George Putnam
Fund of Boston, Global Asset Allocation, Global Growth, Growth and Income,
Health Sciences, High Yield, International Growth, International Growth and
Income, International New Opportunities, Investors, Money Market, New
Opportunities, New Value, OTC & Emerging Growth, Research, U.S. Government
and High Quality Bond, Utilities Growth and Income, Vista, and Voyager),
(collectively, the Account) as of December 31, 1998, and the related
statements of operations and the statements of changes in net assets for the
periods presented. These financial statements are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1998, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 15, 1999
SA-1 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES
- ---------------------------------------------------------------------------------------------------------------------------------
December 31, 1998 Asia Pacific Diversified The Global Asset Global Growth
Growth Income George Putnam Allocation Growth and Income
Sub-Account Sub-Account Fund of Boston Sub-Account Sub-Account Sub-Account
ASSETS Sub-Account
Investments:
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PUTNAM VT ASIA PACIFIC GROWTH FUND
CLASS IA
Shares 6,388,057
Cost $66,631,023
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: $53,212,517 $ -- $ -- $ -- $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 12,087
Cost $96,019
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: 100,683 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT DIVERSIFIED INCOME FUND
CLASS IA
Shares 28,261,627
Cost $297,722,682
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 296,464,466 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 107,801
Cost $1,112,875
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 1,128,676 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT THE GEORGE PUTNAM FUND
OF BOSTON
CLASS IA
Shares 6,225,164
Cost $61,223,385
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 63,994,682 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 180,343
Cost $1,782,294
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 1,853,926 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL ASSET ALLOCATION FUND
CLASS IA
Shares 26,622,033
Cost $412,181,624
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- 504,487,535 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 65,033
Cost $1,127,359
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- 1,233,028 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL GROWTH FUND
CLASS IA
Shares 52,404,540
Cost $788,976,723
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- 1,062,764,073 --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 33,238
Cost $602,630
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- 674,077 --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GROWTH AND INCOME FUND
CLASS IA
Shares 163,058,940
Cost $3,675,227,316
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- -- 4,691,205,714
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 234,290
Cost $6,296,495
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- -- 6,735,843
- ---------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company -- -- 208,685 14,907 -- 33,597
- ---------------------------------------------------------------------------------------------------------------------------------
Receivable from fund shares sold 18,448 69,660 -- 85,714 144,954 459,285
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 53,331,648 297,662,802 66,057,293 505,821,184 1,063,583,104 4,698,434,439
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to Hartford Life Insurance Company 17,857 69,906 -- 86,015 145,390 461,290
- ---------------------------------------------------------------------------------------------------------------------------------
Payable for fund shares purchased -- -- 208,708 11,377 -- 35,147
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 17,857 69,906 208,708 97,392 145,390 496,437
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE ANNUITY
CONTRACT LIABILITIES) $53,313,791 $297,592,896 $65,848,585 $505,723,792 $1,063,437,714 $4,697,938,002
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-2 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
December 31, 1998 Health High Yield International International International Investors
Sciences Sub-Account Growth Growth New Sub-Account
Sub-Account Sub-Account and Income Opportunities
ASSETS Sub-Account Sub-Account
Investments:
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PUTNAM VT HEALTH SCIENCES FUND
CLASS IA
Shares 7,089,304
Cost $70,110,307
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: $77,556,988 $ -- $ -- $ -- $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 190,319
Cost $1,920,565
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: 2,080,191 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT HIGH YIELD FUND
CLASS IA
Shares 47,903,751
Cost $591,093,786
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 560,473,888 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 139,867
Cost $1,629,910
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 1,636,444 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH FUND
CLASS IA
Shares 12,722,293
Cost $153,692,188
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 172,005,403 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 77,197
Cost $957,995
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 1,042,938 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH
AND INCOME FUND
CLASS IA
Shares 14,827,216
Cost $173,516,087
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- 181,485,123 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 60,689
Cost $715,953
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- 742,829 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL NEW
OPPORTUNITIES FUND
CLASS IA
Shares 6,959,903
Cost $73,370,833
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- 79,969,286 --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 6,194
Cost $66,057
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- 71,104 --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INVESTORS FUND
CLASS IA
Shares 11,392,509
Cost $116,633,839
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- -- 132,722,732
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 213,684
Cost $2,149,684
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- -- 2,487,279
- ---------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company 225,602 6,941 289,019 512 -- 638,943
- ---------------------------------------------------------------------------------------------------------------------------------
Receivable from fund shares sold -- 58,888 -- 83,387 35,170 --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 79,862,781 562,176,161 173,337,360 182,311,851 80,075,560 135,848,954
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to Hartford Life Insurance
Company -- 53,922 -- 80,257 35,154 --
- ---------------------------------------------------------------------------------------------------------------------------------
Payable for fund shares purchased 225,088 6,927 287,184 -- -- 638,446
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 225,088 60,849 287,184 80,257 35,154 638,446
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE ANNUITY
CONTRACT LIABILITIES) $79,637,693 $562,115,312 $173,050,176 $182,231,594 $80,040,406 $135,210,508
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-3 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
December 31, 1998 Money New New OTC & Research U.S.Government
Market Opportunities Value Emerging Growth Sub-Account and High
Sub-Account Sub-Account Sub-Account Sub-Account Quality Bond
ASSETS Sub-Account
Investments:
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PUTNAM VT MONEY MARKET FUND
CLASS IA
Shares 273,373,599
Cost $273,373,599
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: $273,373,599 $ -- $ -- $ -- $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 12,656,586
Cost $12,656,586
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: 12,656,585 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT NEW OPPORTUNITIES FUND
CLASS IA
Shares 59,816,632
Cost $992,113,291
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 1,558,821,427 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 43,318
Cost $936,589
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 1,128,002 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT NEW VALUE FUND
CLASS IA
Shares 12,887,644
Cost $143,502,659
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 155,038,358 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 18,657
Cost $206,967
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 224,252 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT OTC & EMERGING GROWTH FUND
CLASS IA
Shares 1,653,462
Cost $14,748,695
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- 16,683,430 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 48,916
Cost $415,544
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- 493,560 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM RESEARCH FUND
CLASS IA
Shares 1,147,289
Cost $12,355,706
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- 13,687,159 --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 18,821
Cost $204,746
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- 224,341 --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT U.S. GOVERNMENT AND HIGH
QUALITY BOND FUND
CLASS IA
Shares 25,420,057
Cost $336,197,989
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- -- 349,017,376
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 137,993
Cost $1,873,096
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- -- 1,894,644
- ---------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company -- 1,568 -- 41,307 115,842 945,695
- ---------------------------------------------------------------------------------------------------------------------------------
Receivable from fund shares sold 2,035,322 6,807 167,595 20 -- 79
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 288,065,506 1,559,957,804 155,430,205 17,218,317 14,027,342 351,857,794
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to Hartford Life Insurance
Company 2,035,119 5,286 167,457 73 -- 62
- ---------------------------------------------------------------------------------------------------------------------------------
Payable for fund shares purchased -- 1,545 -- 41,516 115,821 946,239
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,035,119 6,831 167,457 41,589 115,821 946,301
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE ANNUITY
CONTRACT LIABILITIES) $286,030,387 $1,559,950,973 $155,262,748 $17,176,728 $13,911,521 $350,911,493
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-4 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
December 31, 1998 Utilities Vista Voyager
Growth Sub-Account Sub-Account
and Income
ASSETS Sub-Account
Investments:
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PUTNAM VT UTILITIES GROWTH AND
INCOME FUND
CLASS IA
Shares 24,618,304
Cost $320,807,135
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: $447,806,941 $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 89,840
Cost $1,562,625
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: 1,634,191 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT VISTA FUND
CLASS IA
Shares 12,339,530
Cost $146,197,300
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 181,637,888 --
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 42,513
Cost $522,139
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 626,213 --
- ---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT VOYAGER FUND
CLASS IA
Shares 62,720,082
Cost $1,876,228,270
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 2,875,715,767
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 63,839
Cost $2,526,164
- ---------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 2,924,462
- ---------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company 277,116 11,311 431,404
- ---------------------------------------------------------------------------------------------------------------------------------
Receivable from fund shares sold -- 74,875 --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 449,718,248 182,350,287 2,879,071,633
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to Hartford Life Insurance Company -- 74,909 --
- ---------------------------------------------------------------------------------------------------------------------------------
Payable for fund shares purchased 284,203 11,403 426,808
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 284,203 86,312 426,808
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE ANNUITY
CONTRACT LIABILITIES) $449,434,045 $182,263,975 $2,878,644,825
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-5 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- ---------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
December 31, 1998 Units Unit Contract
Owned by Price Liability
Participants
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred annuity contracts in the accumulation period:
- ---------------------------------------------------------------------------------------------------------------------------------
Asia Pacific Growth Fund Class IA 6,219,008 $ 8.552078 $ 53,185,441
- ---------------------------------------------------------------------------------------------------------------------------------
Asia Pacific Growth Fund Class IB 9,503 10.544040 100,199
- ---------------------------------------------------------------------------------------------------------------------------------
Diversified Income Fund Class IA 23,713,424 12.488636 296,148,326
- ---------------------------------------------------------------------------------------------------------------------------------
Diversified Income Fund Class IB 119,009 9.483976 1,128,676
- ---------------------------------------------------------------------------------------------------------------------------------
George Putnam Fund Class IA 6,246,649 10.242185 63,979,337
- ---------------------------------------------------------------------------------------------------------------------------------
George Putnam Fund Class IB 178,303 10.397822 1,853,967
- ---------------------------------------------------------------------------------------------------------------------------------
Global Asset Allocation Class IA 16,653,005 30.255566 503,846,085
- ---------------------------------------------------------------------------------------------------------------------------------
Global Asset Allocation Class IB 121,343 10.190632 1,236,558
- ---------------------------------------------------------------------------------------------------------------------------------
Global Growth Fund Class IA 42,487,420 24.939571 1,059,618,022
- ---------------------------------------------------------------------------------------------------------------------------------
Global Growth Fund Class IB 64,555 10.425449 673,010
- ---------------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund Class IA 102,727,427 45.567032 4,680,983,975
- ---------------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund Class IB 644,858 10.443057 6,734,293
- ---------------------------------------------------------------------------------------------------------------------------------
Health Sciences Fund Class IA 7,148,320 10.848771 77,550,485
- ---------------------------------------------------------------------------------------------------------------------------------
Health Sciences Fund Class IB 192,842 10.784889 2,079,778
- ---------------------------------------------------------------------------------------------------------------------------------
High Yield Fund Class IA 23,582,095 23.742124 559,889,015
- ---------------------------------------------------------------------------------------------------------------------------------
High Yield Fund Class IB 183,968 8.895343 1,636,458
- ---------------------------------------------------------------------------------------------------------------------------------
International Growth Fund Class IA 12,814,996 13.402515 171,753,170
- ---------------------------------------------------------------------------------------------------------------------------------
International Growth Fund Class IB 109,559 9.510657 1,041,975
- ---------------------------------------------------------------------------------------------------------------------------------
International Growth and Income Fund Class IA 14,001,923 12.922223 180,935,970
- ---------------------------------------------------------------------------------------------------------------------------------
International Growth and Income Fund Class IB 78,056 9.523514 743,371
- ---------------------------------------------------------------------------------------------------------------------------------
International New Opportunities Fund Class IA 7,123,179 11.225771 79,963,182
- ---------------------------------------------------------------------------------------------------------------------------------
International New Opportunities Fund Class IB 7,437 9.530122 70,874
- ---------------------------------------------------------------------------------------------------------------------------------
Investors Fund Class IA 11,569,190 11.431551 132,253,787
- ---------------------------------------------------------------------------------------------------------------------------------
Investors Fund Class IB 229,527 10.837505 2,487,495
- ---------------------------------------------------------------------------------------------------------------------------------
Money Market Fund Class IA 177,635,093 1.538127 273,225,333
- ---------------------------------------------------------------------------------------------------------------------------------
Money Market Fund Class IB 12,479,981 1.014151 12,656,585
- ---------------------------------------------------------------------------------------------------------------------------------
New Opportunities Fund Class IA 62,748,813 24.804633 1,556,461,288
- ---------------------------------------------------------------------------------------------------------------------------------
New Opportunities Fund Class IB 106,695 10.572464 1,128,025
- ---------------------------------------------------------------------------------------------------------------------------------
New Value Fund Class IA 12,726,607 12.151266 154,644,382
- ---------------------------------------------------------------------------------------------------------------------------------
New Value Fund Class IB 21,769 10.301448 224,249
- ---------------------------------------------------------------------------------------------------------------------------------
OTC & Emerging Fund Class IA 1,671,708 9.979745 16,683,221
- ---------------------------------------------------------------------------------------------------------------------------------
OTC & Emerging Fund Class IB 48,025 10.276087 493,507
- ---------------------------------------------------------------------------------------------------------------------------------
Research Fund Class IA 1,095,266 12.496667 13,687,180
- ---------------------------------------------------------------------------------------------------------------------------------
Research Fund Class IB 17,975 12.480896 224,341
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Government and High Quality Bond Fund Class IA 16,353,442 21.305270 348,414,599
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Government and High Quality Bond Fund Class IB 184,000 10.297077 1,894,658
- ---------------------------------------------------------------------------------------------------------------------------------
Utilities Growth and Income Fund Class IA 19,597,995 22.825900 447,341,870
- ---------------------------------------------------------------------------------------------------------------------------------
Utilities Growth and Income Fund Class IB 147,712 11.063684 1,634,241
- ---------------------------------------------------------------------------------------------------------------------------------
Vista Fund Class IA 12,672,159 14.316454 181,420,383
- ---------------------------------------------------------------------------------------------------------------------------------
Vista Fund Class IB 61,101 10.247290 626,121
- ---------------------------------------------------------------------------------------------------------------------------------
Voyager Fund Class IA 51,741,607 55.426380 2,867,849,956
- ---------------------------------------------------------------------------------------------------------------------------------
Voyager Fund Class IB 272,289 10.741598 2,924,820
- ---------------------------------------------------------------------------------------------------------------------------------
Sub-total 13,761,428,208
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-6 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- ---------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
December 31, 1998 Units Unit Contract
Owned by Price Liability
Participants
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Annuity contracts in the annuity period:
- ---------------------------------------------------------------------------------------------------------------------------------
Asia Pacific Growth Fund Class IA 3,292 $ 8.552078 $ 28,151
- ---------------------------------------------------------------------------------------------------------------------------------
Diversified Income Fund Class IA 25,294 12.488636 315,894
- ---------------------------------------------------------------------------------------------------------------------------------
George Putnam Fund Class IA 1,492 10.242185 15,281
- ---------------------------------------------------------------------------------------------------------------------------------
Global Asset Allocation Class IA 21,191 30.255566 641,149
- ---------------------------------------------------------------------------------------------------------------------------------
Global Growth Fund Class IA 126,172 24.939571 3,146,682
- ---------------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund Class IA 224,279 45.567032 10,219,734
- ---------------------------------------------------------------------------------------------------------------------------------
Health Sciences Fund Class IA 685 10.848771 7,430
- ---------------------------------------------------------------------------------------------------------------------------------
High Yield Fund Class IA 24,844 23.742124 589,839
- ---------------------------------------------------------------------------------------------------------------------------------
International Growth Fund Class IA 19,029 13.402515 255,031
- ---------------------------------------------------------------------------------------------------------------------------------
International Growth and Income Fund Class IA 42,737 12.922223 552,253
- ---------------------------------------------------------------------------------------------------------------------------------
International New Opportunities Fund Class IA 566 11.225771 6,350
- ---------------------------------------------------------------------------------------------------------------------------------
Investors Fund Class IA 41,047 11.431551 469,226
- ---------------------------------------------------------------------------------------------------------------------------------
Money Market Fund Class IA 96,526 1.538127 148,469
- ---------------------------------------------------------------------------------------------------------------------------------
New Opportunities Fund Class IA 95,210 24.804633 2,361,660
- ---------------------------------------------------------------------------------------------------------------------------------
New Value Fund Class IA 32,434 12.151266 394,117
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Government and High Quality Bond Fund Class IA 28,267 21.305270 602,236
- ---------------------------------------------------------------------------------------------------------------------------------
Utilities Growth and Income Fund Class IA 20,062 22.825900 457,934
- ---------------------------------------------------------------------------------------------------------------------------------
Vista Fund Class IA 15,190 14.316454 217,471
- ---------------------------------------------------------------------------------------------------------------------------------
Voyager Fund Class IA 141,991 55.426380 7,870,049
- ---------------------------------------------------------------------------------------------------------------------------------
Sub-total: 28,298,956
- ---------------------------------------------------------------------------------------------------------------------------------
GRAND TOTAL: $13,789,727,164
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-7 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
For the Year Ended Asia Pacific Diversified The Global Asset Global Growth Health
December 31, 1998 Growth Income George Putnam Allocation Growth and Income Science Fund
Sub-Account Sub-Account Fund of Boston Sub-Account Sub-Account Sub-Account Sub-Account*
Sub-Account*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 2,790,742 $ 11,792,328 $ 530,716 $ 10,393,787 $ 23,916,125 $ 68,860,353 $ 68,282
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Mortality and expense
undertakings (806,888) (4,018,646) (240,323) (6,736,188) (13,255,293) (59,271,918) (334,254)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital gains income -- 5,008,700 -- 44,644,942 119,580,624 449,520,386 --
- ------------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on security transactions (2,643,384) (10,560) (77) (1,101,556) (2,048,000) (2,692,306) (40,455)
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
during the period (4,019,185) (21,217,526) 2,842,929 5,910,330 103,901,524 87,694,015 7,606,308
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments (6,662,569) (21,228,086) 2,842,852 4,808,774 101,853,524 85,001,709 7,565,853
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $(4,678,715) $ (8,445,704) $3,133,245 $53,111,315 $232,094,980 $544,110,530 $7,299,881
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*From inception, April 30, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-8 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
For the Year Ended High Yield International International International Investors Money New
December 31, 1998 Sub-Account Growth Growth New Sub-Account* Market Opportunities
Sub-Account and Income Opportunities Sub-Account Sub-Account
Sub-Account Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 45,592,119 $ 580,162 $ 2,337,743 $ 137,187 $ 160,987 $11,677,659 $ --
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Mortality and expense
undertakings (8,201,543) (1,795,827) (2,213,903) (1,022,200) (490,875) (3,234,132) (18,820,230)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital gains income 7,154,195 -- 6,025,944 -- -- -- 18,663,729
- ------------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on security transactions (441,473) 925,343 1,131,061 643,101 9,797 -- (5,582,249)
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
during the period (87,363,215) 16,747,707 4,828,897 10,000,358 16,426,490 -- 284,218,314
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments (87,804,688) 17,673,050 5,959,958 10,643,459 16,436,287 -- 278,636,065
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $(43,259,917) $16,457,385 $12,109,742 $ 9,758,446 $16,106,399 $ 8,443,527 $278,479,564
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*From inception, April 30, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-9 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
For the Year Ended New OTC & Research U.S.Government Utilities Vista Voyager
December 31, 1998 Value Emerging Growth Sub-Account** and High Growth Sub-Account Sub-Account
Sub-Account Sub-Account* Quality Bond and Income
Sub-Account Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 2,744,638 $ 6,377 $ 19,993 $13,027,436 $10,871,792 $ -- $ 5,723,028
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Mortality and expense
undertakings (1,965,660) (69,884) (24,098) (3,919,589) (5,415,814) (1,899,386) (34,285,802)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital gains income 2,710,447 -- 1,054 339,070 18,737,853 -- 139,641,873
- ------------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on security transactions (77,945) (5,586) (25) (333) (18,444) (244,730) (6,215,151)
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
during the period 3,462,804 2,012,751 1,351,047 8,314,527 26,881,495 24,961,915 407,773,124
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 3,384,859 2,007,165 1,351,022 8,314,194 26,863,051 24,717,185 401,557,973
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $ 6,874,284 $1,943,658 $1,347,971 $17,761,111 $51,056,882 $22,817,799 $512,637,072
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*From inception, April 30, 1998, to December 31, 1998.
**From inception, October 1, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-10 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
For the Year Ended Asia Pacific Diversified The Global Asset Global Growth Health
December 31, 1998 Growth Income George Putnam Allocation Growth and Income Sciences
Sub-Account Sub-Account Fund of Boston Sub-Account Sub-Account Sub-Account Sub-Account*
Sub-Account*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss) $ 1,983,854 $ 7,773,682 $ 290,393 $ 3,657,599 $ 10,660,832 $ 9,588,435 $ (265,972)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital gains income -- 5,008,700 -- 44,644,942 119,580,624 449,520,386 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on security transactions (2,643,384) (10,560) (77) (1,101,556) (2,048,000) (2,692,306) (40,455)
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of
investments during the
period (4,019,185) (21,217,526) 2,842,929 5,910,330 103,901,524 87,694,015 7,606,308
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations (4,678,715) (8,445,704) 3,133,245 53,111,315 232,094,980 544,110,530 7,299,881
- ------------------------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 3,701,343 33,956,636 22,958,516 24,919,757 40,146,277 391,563,606 26,776,582
- ------------------------------------------------------------------------------------------------------------------------------------
Net transfers (11,415,291) 17,449,089 40,402,664 (3,015,745) (16,693,380) 178,476,225 46,345,740
- ------------------------------------------------------------------------------------------------------------------------------------
Surrenders (2,634,973) (15,560,109) (660,976) (20,755,078) (42,527,743) (203,033,706) (791,265)
- ------------------------------------------------------------------------------------------------------------------------------------
Net annuity transactions 7,452 108,092 15,136 38,867 780,680 3,076,200 6,755
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from unit transactions (10,341,469) 35,953,708 62,715,340 1,187,801 (18,294,166) 370,082,325 72,337,812
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease)
in net assets (15,020,184) 27,508,004 65,848,585 54,299,116 213,800,814 914,192,855 79,637,693
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 68,333,975 270,084,892 -- 451,424,676 849,636,900 3,783,745,147 --
- ------------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $ 53,313,791 $297,592,896 $65,848,585 $505,723,792 $1,063,437,714 $4,697,938,002 $79,637,693
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*From inception, April 30, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-11 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
For the Year Ended High Yield International International International Investors Money New
December 31, 1998 Sub-Account Growth Growth New Sub-Account* Market Opportunities
Sub-Account and Income Opportunities Sub-Account Sub-Account
Sub-Account Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss) $ 37,390,576 $ (1,215,665) $ 123,840 $ (885,013) $ (329,888) $ 8,443,527 $ (18,820,230)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital gains income 7,154,195 -- 6,025,944 -- -- -- 18,663,729
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on security transactions (441,473) 925,343 1,131,061 643,101 9,797 -- (5,582,249)
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of
investments during the
period (87,363,215) 16,747,707 4,828,897 10,000,358 16,426,490 -- 284,218,314
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations (43,259,917) 16,457,385 12,109,742 9,758,446 16,106,399 8,443,527 278,479,564
- ------------------------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 72,624,888 33,867,169 28,578,698 8,986,296 36,748,793 69,440,184 100,408,112
- ------------------------------------------------------------------------------------------------------------------------------------
Net transfers 12,770,669 46,801,653 30,062,010 22 83,171,689 84,802,844 18,404,946
- ------------------------------------------------------------------------------------------------------------------------------------
Surrenders (33,136,210) (3,887,820) (5,364,128) (2,835,620) (1,228,854) (57,809,657) (50,246,741)
- ------------------------------------------------------------------------------------------------------------------------------------
Net annuity transactions 51,619 185,497 110,000 5,654 412,481 105,102 103,931
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from unit transactions 52,310,966 76,966,499 53,386,580 6,156,352 119,104,109 96,538,473 68,670,248
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease)
in net assets 9,051,049 93,423,884 65,496,322 15,914,798 135,210,508 104,982,000 347,149,812
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 553,064,263 79,626,292 116,735,272 64,125,608 -- 181,048,387 1,212,801,161
- ------------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $562,115,312 $173,050,176 $182,231,594 $80,040,406 $135,210,508 $286,030,387 $1,559,950,973
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*From inception, April 30, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-12 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
For the Year Ended New OTC & Research U.S.Government Utilities Vista Voyager
December 31, 1998 Value Emerging Growth Sub-Account** and High Growth Sub-Account Sub-Account
Sub-Account Sub-Account* Quality Bond and Income
Sub-Account Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss) $ 778,978 $ (63,507) $ (4,105) $ 9,107,847 $ 5,455,978 $ (1,899,386) $ (28,562,774)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital gains income 2,710,447 -- 1,054 339,070 18,737,853 -- 139,641,873
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on security transactions (77,945) (5,586) (25) (333) (18,444) (244,730) (6,215,151)
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized
appreciation
(depreciation) of
investments during the
period 3,462,804 2,012,751 1,351,047 8,314,527 26,881,495 24,961,915 407,773,124
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 6,874,284 1,943,658 1,347,971 17,761,111 51,056,882 22,817,799 512,637,072
- ------------------------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 24,038,360 4,950,556 1,647,789 37,202,879 35,162,888 35,890,384 199,996,300
- ------------------------------------------------------------------------------------------------------------------------------------
Net transfers 11,223,213 10,400,668 10,968,597 83,756,988 29,486,383 30,156,192 84,727,443
- ------------------------------------------------------------------------------------------------------------------------------------
Surrenders (5,866,336) (118,154) (52,836) (21,228,886) (20,582,321) (4,767,016) (106,034,590)
- ------------------------------------------------------------------------------------------------------------------------------------
Net annuity transactions 42,793 -- -- 379,477 138,914 171,740 1,865,032
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from unit transactions 29,438,030 15,233,070 12,563,550 100,110,458 44,205,864 61,451,300 180,554,185
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease)
in net assets 36,312,314 17,176,728 13,911,521 117,871,569 95,262,746 84,269,099 693,191,257
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 118,950,434 -- -- 233,039,924 354,171,299 97,994,876 2,185,453,568
- ------------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $155,262,748 $17,176,728 $13,911,521 $350,911,493 $449,434,045 $182,263,975 $2,878,644,825
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*From inception, April 30, 1998, to December 31, 1998.
**From inception, October 1, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-13 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
For the Year Ended Asia Pacific Diversified Global Asset Global Growth High Yield
December 31, 1997 Growth Income Allocation Growth and Income Sub-Account
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss) $ 459,948 $ 9,555,318 $ 6,371,232 $ 6,003,571 $ 11,159,629 $ 23,677,407
- ----------------------------------------------------------------------------------------------------------------------------
Capital gains income -- 2,048,961 20,499,937 18,664,210 135,341,577 3,515,165
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on security transactions 381,797 4,201 42,533 (70,313) (14,039) (4,814)
- ----------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
during the period (13,132,923) 2,897,636 36,929,311 66,628,239 464,399,235 30,275,390
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations (12,291,178) 14,506,116 63,843,013 91,225,707 610,886,402 57,463,148
- ----------------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 15,296,904 55,905,675 53,215,802 94,655,178 653,735,175 119,907,763
- ----------------------------------------------------------------------------------------------------------------------------
Net transfers (8,269,677) (9,769,014) 23,676,122 8,639,167 243,532,477 11,079,099
- ----------------------------------------------------------------------------------------------------------------------------
Surrenders (2,530,242) (12,309,013) (18,260,579) (29,632,010) (121,451,891) (22,220,046)
- ----------------------------------------------------------------------------------------------------------------------------
Net annuity transactions 8,025 146,954 145,121 886,113 3,412,370 452,320
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from unit transactions 4,505,010 33,974,602 58,776,466 74,548,448 779,228,131 109,219,136
- ----------------------------------------------------------------------------------------------------------------------------
Total increase (decrease)
in net assets (7,786,168) 48,480,718 122,619,479 165,774,155 1,390,114,533 166,682,284
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 76,120,143 221,604,174 328,805,196 683,862,745 2,393,630,614 386,381,979
- ----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $ 68,333,975 $270,084,892 $451,424,675 $849,636,900 $3,783,745,147 $553,064,263
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------
For the Year Ended International International
December 31, 1997 Growth Growth
Sub-Account* and Income
Sub-Account*
- ---------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss) $ 647,298 $ 3,014,762
- ---------------------------------------------------------------
Capital gains income -- --
- ---------------------------------------------------------------
Net realized gain (loss)
on security transactions 112,426 254,024
- ---------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
during the period 1,650,451 3,167,015
- ---------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 2,410,175 6,435,801
- ---------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 42,465,632 60,593,915
- ---------------------------------------------------------------
Net transfers 35,605,842 50,937,686
- ---------------------------------------------------------------
Surrenders (916,342) (1,623,364)
- ---------------------------------------------------------------
Net annuity transactions 60,985 391,234
- ---------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from unit transactions 77,216,117 110,299,471
- ---------------------------------------------------------------
Total increase (decrease)
in net assets 79,626,292 116,735,272
- ---------------------------------------------------------------
NET ASSETS:
Beginning of period -- --
- ---------------------------------------------------------------
END OF PERIOD $79,626,292 $116,735,272
- ---------------------------------------------------------------
</TABLE>
*From inception, January 2, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-14 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
For the Year Ended International Money New New U.S. Government Utilities
December 31, 1997 New Market Opportunities Value and High Growth
Opportunities Sub-Account Sub-Account Sub-Account* Quality Bond and Income
Sub-Account* Sub-Account Sub-Account
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (428,750) $ 7,935,793 $ (14,288,485) $ (930,950) $ 10,317,213 $ 6,148,884
- -----------------------------------------------------------------------------------------------------------------------------------
Capital gains income -- -- -- -- -- 14,052,925
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on security transactions 93,448 -- (674,928) (53,025) 92,811 316,145
- -----------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
during the period (3,396,856) -- 216,776,192 8,090,180 4,496,793 50,135,725
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations (3,732,158) 7,935,793 201,812,779 7,106,205 14,906,817 70,653,679
- -----------------------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 35,294,318 159,829,719 173,232,758 55,890,696 30,608,860 30,748,249
- -----------------------------------------------------------------------------------------------------------------------------------
Net transfers 33,818,005 (163,808,043) 23,002,452 58,041,788 (7,633,402) (8,439,229)
- -----------------------------------------------------------------------------------------------------------------------------------
Surrenders (1,254,557) (33,923,982) (34,774,552) (2,436,634) (12,023,717) (12,334,942)
- -----------------------------------------------------------------------------------------------------------------------------------
Net annuity transactions -- (59,424) 525,040 348,379 87,519 116,058
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from unit transactions 67,857,766 (37,961,730) 161,985,698 111,844,229 11,039,260 10,090,136
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease)
in net assets 64,125,608 (30,025,937) 363,798,477 118,950,434 25,946,077 80,743,815
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period -- 211,074,324 849,002,685 -- 207,093,847 273,427,484
- -----------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $64,125,608 $ 181,048,387 $1,212,801,162 $118,950,434 $233,039,924 $354,171,299
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------
For the Year Ended Vista Voyager
December 31, 1997 Sub-Account* Sub-Account
- -------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (718,048) $ (22,244,283)
- -------------------------------------------------------------------
Capital gains income -- 71,707,177
- -------------------------------------------------------------------
Net realized gain (loss)
on security transactions (41,487) (808,610)
- -------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
during the period 10,582,747 357,032,488
- -------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 9,823,212 405,686,772
- -------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 48,980,888 288,568,056
- -------------------------------------------------------------------
Net transfers 40,279,408 63,585,706
- -------------------------------------------------------------------
Surrenders (1,114,398) (65,966,528)
- -------------------------------------------------------------------
Net annuity transactions 25,767 1,321,830
- -------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from unit transactions 88,171,665 287,509,064
- -------------------------------------------------------------------
Total increase (decrease)
in net assets 97,994,877 693,195,836
- -------------------------------------------------------------------
NET ASSETS:
Beginning of period -- 1,492,257,732
- -------------------------------------------------------------------
END OF PERIOD $97,994,877 $2,185,453,568
- -------------------------------------------------------------------
</TABLE>
*From inception, January 2, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-15 PROSPECTUS
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO -- HARTFORD LIFE AND
ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. ORGANIZATION:
Putnam Capital Manager Trust Separate Account Two (the Account) is a separate
investment account within Hartford Life and Annuity Insurance Company (the
Company) and is registered with the Securities and Exchange Commission (SEC)
as a unit investment trust under the Investment Company Act of 1940, as
amended. Both the Company and the Account are subject to supervision and
regulation by the Department of Insurance of the State of Connecticut and the
SEC. The Account invests deposits by variable annuity contractholders of the
Company in the various mutual funds (the Funds) as directed by the
contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the Account,
which are in accordance with generally accepted accounting principles in the
investment company industry:
A) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments sold is
determined on the basis of identified cost. Dividend and capital gains income
is accrued as of the ex-dividend date. Capital gains income represents
dividends from the Funds which are characterized as capital gains under tax
regulations.
B) SECURITY VALUATION -- The investments in shares of the Funds are valued at
the closing net asset value per share as determined by the appropriate Fund
as of December 31, 1998.
C) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no
federal income taxes are payable with respect to the operations of the
Account.
D) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the period. Operating results in the
future could vary from the amounts derived from management's estimates.
SA-16 PROSPECTUS
<PAGE>
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
A) MORTALITY AND EXPENSE UNDERTAKINGS -- The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and, with
respect to the Account, receives a maximum annual fee of 1.50% of the
Account's average daily net assets.
B) DEDUCTION OF ANNUAL MAINTENANCE FEES -- Annual maintenance fees are
deducted through termination of units of interest from applicable contract
owners' accounts, in accordance with the terms of the contracts. These
expenses are reflected in surrenders on the accompanying statements of
changes in net assets.
SA-17 PROSPECTUS
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-1
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory balance sheets of Hartford Life and
Annuity Insurance Company (a Connecticut Corporation and wholly owned subsidiary
of Hartford Life Insurance Company) (the Company) as of December 31, 1998 and
1997, and the related statutory statements of operations, changes in capital and
surplus, and cash flows for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these statutory
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 1 of notes to statutory financial
statements. When statutory financial statements are presented for purposes other
than for filing with a regulatory agency, generally accepted auditing standards
require that an auditors' report on them state whether they are presented in
conformity with generally accepted accounting principles. The accounting
practices used by the Company vary from generally accepted accounting principles
as explained and quantified in Note 1.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the statutory financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of the Company as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998.
However, in our opinion, the statutory financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998 in
conformity with statutory accounting practices as described in Note 1.
/s/ Arthur Andersen LLP
Hartford, Connecticut
January 26, 1999
<PAGE>
F-2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
BALANCE SHEETS
(STATUTORY BASIS)
($000)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Assets
Bonds........................................... $ 1,453,792 $ 1,501,311
Common stocks................................... 40,650 64,408
Mortgage loans.................................. 59,548 85,103
Policy loans.................................... 47,212 36,533
Cash and short-term investments................. 469,955 309,432
Other invested assets........................... 2,188 20,942
----------- -----------
Total cash and invested assets................ 2,073,345 2,017,729
Investment income due and accrued............... 20,126 15,878
Premium balances receivable..................... 333 389
Receivables from affiliates..................... -- 1,269
Other assets.................................... 45,358 22,788
Separate account assets......................... 32,876,278 23,208,728
----------- -----------
Total Assets.................................. $35,015,440 $25,266,781
----------- -----------
----------- -----------
Liabilities
Aggregate reserves for future benefits.......... $ 579,140 $ 605,183
Policy and contract claims...................... 5,667 5,672
Liability for premium and other deposit funds... 2,011,672 1,795,149
Asset valuation reserve......................... 21,782 13,670
Payable to affiliates........................... 19,271 20,972
Other liabilities............................... (974,882) (754,393)
Separate account liabilities.................... 32,876,278 23,208,728
----------- -----------
Total liabilities............................. 34,538,928 24,894,981
----------- -----------
Capital and Surplus
Common stock.................................... 2,500 2,500
Gross paid-in and contributed surplus........... 226,043 226,043
Unassigned funds................................ 247,969 143,257
----------- -----------
Total capital and surplus..................... 476,512 371,800
----------- -----------
Total liabilities, capital and surplus............ $35,015,440 $25,266,781
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of
these statutory basis financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-3
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
(STATUTORY BASIS)
($000)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Premiums and annuity considerations............. $ 469,343 $ 296,645 $ 250,244
Annuity and other fund deposits................. 2,051,251 1,981,246 1,897,347
Net investment income........................... 129,982 102,285 98,441
Commissions and expense allowances on
reinsurance ceded.............................. 444,241 396,921 370,637
Reserve adjustment on reinsurance ceded......... 3,185,590 3,672,076 3,864,395
Other revenues.................................. 458,190 288,632 161,906
----------- ----------- -----------
Total revenues................................ 6,738,597 6,737,805 6,642,970
----------- ----------- -----------
Benefits and expenses
Death and annuity benefits...................... 43,390 66,176 60,194
Disability and other benefit payments........... 6,114 7,316 6,555
Surrenders...................................... 739,663 454,417 270,165
Commissions and other expenses.................. 666,515 564,077 491,637
Increase (Decrease) in aggregate reserves for
future benefits................................ (26,043) 33,213 27,351
Increase in liability for premium and other
deposit funds.................................. 216,523 640,006 207,156
Net transfers to separate accounts.............. 4,956,007 4,914,980 5,492,964
----------- ----------- -----------
Total benefits and expenses................... 6,602,169 6,680,185 6,556,022
----------- ----------- -----------
Net gain from operations
Before federal income tax (benefit) expense..... 136,428 57,620 86,948
Federal income tax (benefit) expense............ 35,887 (14,878) 19,360
----------- ----------- -----------
Net gain from operations.......................... 100,541 72,498 67,588
Net realized capital gains, after tax........... 2,085 1,544 407
----------- ----------- -----------
Net income........................................ $ 102,626 $ 74,042 $ 67,995
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of
these statutory basis financial statements.
<PAGE>
F-4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
(STATUTORY BASIS)
($000)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Common stock,
Beginning and end of year....................... $ 2,500 $ 2,500 $ 2,500
----------- ----------- -----------
Gross paid-in and contributed surplus,
Beginning and end of year....................... $ 226,043 $ 226,043 $ 226,043
----------- ----------- -----------
Unassigned funds
Balance, beginning of year...................... $ 143,257 $ 74,570 $ 9,791
Net income...................................... 102,626 74,042 67,995
Change in net unrealized capital gains (losses)
on common stocks and other invested assets..... 1,688 2,186 (5,171)
Change in asset valuation reserve............... (8,112) (6,228) 568
Change in non-admitted assets................... (1,277) (1,313) 1,387
Credit on reinsurance ceded..................... 9,787 -- --
----------- ----------- -----------
Balance, end of year............................ $ 247,969 $ 143,257 $ 74,570
----------- ----------- -----------
Capital and surplus,
End of year..................................... $ 476,512 $ 371,800 $ 303,113
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of
these statutory basis financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-5
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
(STATUTORY BASIS)
($000)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Operations
Premiums and annuity considerations............. $ 2,520,655 $ 2,277,874 $ 2,147,627
Investment income............................... 127,425 101,991 106,178
Other income.................................... 4,092,964 4,381,718 4,396,892
----------- ----------- -----------
Total income.................................. 6,741,044 6,761,583 6,650,697
----------- ----------- -----------
Benefits paid................................... 790,051 529,733 338,998
Federal income taxes (received) paid on
operations..................................... 25,780 (14,499) 28,857
Other expenses.................................. 5,859,063 5,754,725 6,254,139
----------- ----------- -----------
Total benefits and expenses................... 6,674,894 6,269,959 6,621,994
----------- ----------- -----------
Net cash from operations...................... 66,150 491,624 28,703
----------- ----------- -----------
Proceeds from investments
Bonds........................................... 633,926 614,413 871,019
Common stocks................................... 34,010 11,481 72,100
Mortgage loans.................................. 85,275 -- --
Other........................................... 127 152 10
----------- ----------- -----------
Net investment proceeds....................... 753,338 626,046 943,129
----------- ----------- -----------
Taxes paid on capital gains..................... -- -- 936
Other cash provided............................. 1,269 -- 41,998
----------- ----------- -----------
Total proceeds................................ 820,757 1,117,670 1,012,894
----------- ----------- -----------
Cost of investments acquired
Bonds........................................... 586,913 848,267 914,523
Common stocks................................... 7,012 28,302 82,495
Mortgage loans.................................. 59,702 85,103 --
Other........................................... 1,168 18,548 130
----------- ----------- -----------
Total investments acquired.................... 654,795 980,220 997,148
----------- ----------- -----------
Other cash applied
Other........................................... 5,439 4,848 12,220
----------- ----------- -----------
Total other cash applied...................... 5,439 4,848 12,220
----------- ----------- -----------
Total applications............................ 660,234 985,068 1,009,368
----------- ----------- -----------
Net change in cash and short-term investments..... 160,523 132,602 3,526
Cash and short-term investments, beginning of
year............................................. 309,432 176,830 173,304
----------- ----------- -----------
Cash and short-term investments, end of year...... $ 469,955 $ 309,432 $ 176,830
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of
these statutory basis financial statements.
<PAGE>
F-6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(STATUTORY BASIS)
DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Hartford Life and Annuity Insurance Company ("ILA" or "the Company"),
formerly known as ITT Hartford Life and Annuity Insurance Company, is a wholly
owned subsidiary of Hartford Life Insurance Company ("HLIC"), which is an
indirect subsidiary of Hartford Life, Inc. ("HLI"), which is majority owned by
The Hartford Financial Services Group, Inc. ("The Hartford"), formerly a wholly
owned subsidiary of ITT Corporation ("ITT"). On February 10, 1997, HLI filed a
registration statement, as amended, with the Securities and Exchange Commission
relating to the initial public offering of HLI Class A Common Stock (the
"Offering"). Pursuant to the Offering on May 22, 1997, HLI sold to the public 26
million shares, representing 18.6% of the equity ownership of HLI. On December
19, 1995, ITT Corporation distributed all the outstanding shares of The Hartford
to ITT shareholders of record in an action known herein as the "Distribution".
As a result of the Distribution, The Hartford became an independent, publicly
traded company. During 1996, ILA re-domesticated from the State of Wisconsin to
the State of Connecticut.
ILA offers a complete line of ordinary and universal life insurance,
individual annuities and certain supplemental accident and health benefit
coverages.
BASIS OF PRESENTATION
The accompanying ILA statutory basis financial statements were prepared in
conformity with statutory accounting practices prescribed or permitted by the
National Association of Insurance Commissioners ("NAIC"), the State of
Connecticut Department of Insurance and the State of Wisconsin for the 1996
period, as applicable. Certain prior year amounts and balances have been
reclassified to conform with current year presentation.
Current prescribed statutory accounting practices include accounting
publications of the National Association of Insurance Commissioners ("NAIC"), as
well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass accounting practices approved by State
Insurance Departments. The Company does not follow any permitted statutory
accounting practices that have a material effect on statutory surplus, statutory
net income or risk-based capital.
Final approval of the NAIC's proposed "Comprehensive Guide" on statutory
accounting principles was distributed in 1998. The requirements are effective
January 1, 2001, and are not expected to have a material impact on statutory
surplus of the Company.
The preparation of financial statements in conformity with statutory
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates. The most significant estimates
include those used in determining the liability for aggregate reserves for
future benefits and the liability for premium and other deposit funds. Although
some variability is inherent in these estimates, management believes the amounts
provided are adequate.
Statutory accounting practices and generally accepted accounting principles
("GAAP") differ in certain significant respects. These differences principally
involve:
(1) treatment of policy acquisition costs (commissions, underwriting and selling
expenses, premium taxes, etc.) which are charged to expense when incurred
for statutory purposes rather than on a pro-rata basis over the expected
life of the policy for GAAP purposes;
(2) recognition of premium revenues, which for statutory purposes are generally
recorded as collected or when due during the premium paying period of the
contract and which for GAAP purposes, for universal life policies and
investment products, generally, are only recorded for policy charges for the
cost of insurance, policy administration and surrender charges assessed to
policy account balances. Also, for GAAP purposes, premiums for traditional
life insurance policies are recognized as revenues when they are due from
policyholders and the retrospective deposit method is used in accounting for
universal life and other types of contracts where the payment pattern is
irregular or surrender charges are a significant source of profit. The
prospective deposit method is used for GAAP purposes where investment
margins are the primary source of profit;
(3) development of liabilities for future policy benefits, which for statutory
purposes predominantly use interest rate and mortality assumptions
prescribed by the NAIC which may vary considerably from interest and
mortality assumptions used for GAAP financial reporting;
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-7
- --------------------------------------------------------------------------------
(4) providing for income taxes based on current taxable income (tax return) only
for statutory purposes, rather than establishing additional assets or
liabilities for deferred Federal income taxes to recognize the tax effect
related to reporting revenues and expenses in different periods for
financial reporting and tax return purposes;
(5) excluding certain GAAP assets designated as non-admitted assets (e.g.,
negative Interest Maintenance Reserve, past due agents' balances and
furniture and equipment) from the balance sheet for statutory purposes by
directly charging surplus;
(6) establishing accruals for post-retirement and post-employment health care
benefits currently, or using a twenty year phase-in approach, whereas GAAP
liabilities are recorded upon adoption of the applicable standard;
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve); as well as the deferral and amortization of realized
gains and losses, motivated by changes in interest rates during the period
the asset is held, into income over the remaining life to maturity of the
asset sold (Interest Maintenance Reserve); whereas on a GAAP basis, no such
formula reserve is required and realized gains and losses are recognized in
the period the asset is sold;
(8) the reporting of reserves and benefits net of reinsurance ceded, where risk
transfer has taken place, whereas on a GAAP basis, reserves are reported
gross of reinsurance with reserve credits presented as recoverable assets;
as well as, the accounting for retroactive reinsurance which is immediately
charged to surplus for statutory accounting purposes whereas GAAP precludes
immediate gain recognition unless the ceding enterprise's liability to its
policyholders is extinguished; as well as reinsurance ceded that fails to
meet GAAP risk transfer guidelines would result in deposit accounting for
GAAP where as for statutory, reserves ceded and assumed would be reflected
in the statutory basis statements of operations;
(9) the reporting of fixed maturities at amortized cost, whereas GAAP requires
that fixed maturities be classified as "held-to-maturity",
"available-for-sale" or "trading", based on the Company's intentions with
respect to the ultimate disposition of the security and its ability to
affect those intentions. The Company's bonds were classified on a GAAP basis
as "available-for-sale" and accordingly, those investments and common stocks
were reflected at fair value with the corresponding impact included as a
component of Stockholder's Equity designated as "Net unrealized capital
gains (losses) on securities net of tax". For statutory reporting purposes,
Change in Net Unrealized Capital Gains (Losses) on Common Stocks and Other
Invested Assets includes the change in unrealized gains (losses) on common
stock reported at fair value; and
(10) separate account liabilities are valued on the Commissioner's Annuity
Reserve Valuation Method ("CARVM"), with the surplus generated recorded as a
liability to the general account (and a contra liability on the balance
sheet of the general account), whereas GAAP liabilities are valued at
account value.
As of and for the years ended December 31, the significant differences
between Statutory and GAAP basis net income and capital and surplus for the
Company are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
GAAP Net Income.................... $ 74,525 $ 58,050 $ 41,202
Amortization and deferral of policy
acquisition costs, net............ (331,882) (345,657) (341,571)
Change in unearned revenue
reserve........................... 22,131 4,641 55,504
Deferred taxes..................... 2,476 47,092 2,090
Separate accounts.................. 259,287 282,818 306,978
Asset impairments and
write-downs....................... 17,250 -- --
Benefit reserve adjustment......... 32,759 24,666 (1,013)
Deposit accounting for Lyndon
reinsurance (Note 3).............. 24,627 -- --
Other, net......................... 1,453 2,432 4,805
------------ ------------ ------------
Statutory Net Income............... $ 102,626 $ 74,042 $ 67,995
------------ ------------ ------------
------------ ------------ ------------
GAAP Capital and Surplus........... $ 648,097 $ 570,469 $ 503,887
Deferred policy acquisition
costs............................. (1,615,653) (1,283,771) (938,114)
Unearned revenue reserve........... 156,920 134,789 130,148
Deferred taxes..................... 68,936 64,522 12,823
Separate accounts.................. 1,183,642 924,355 640,101
Asset impairments and
write-downs....................... 17,250 -- --
Unrealized gains on bonds.......... (26,119) (21,451) (7,978)
Benefit reserve adjustment......... 65,029 16,378 7,035
Asset valuation reserve............ (21,782) (13,670) (7,442)
Adjustment relating to Lyndon
contribution (Note 3)............. -- (23,671) (36,126)
Other, net......................... 192 3,850 (1,221)
------------ ------------ ------------
Statutory Capital and Surplus...... $ 476,512 $ 371,800 $ 303,113
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
As more fully described in Note 3, Lyndon Insurance Company (Lyndon) was
contributed to the Company on June 30, 1995. The GAAP net assets contributed
exceeded the statutory basis net assets by $41,277 as of December 31, 1995,
relating primarily to statutory reserves for future
<PAGE>
F-8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
benefits, GAAP deposit accounting receivables and deferred tax liabilities. In
1998, the majority of the former Lyndon's assumed business was recaptured by the
unaffiliated direct writer.
AGGREGATE RESERVES FOR FUTURE BENEFITS AND LIABILITY FOR PREMIUM AND OTHER
DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits
were computed in accordance with actuarial standards. Reserves for life
insurance policies are generally based on the 1958 and 1980 Commissioner's
Standard Ordinary Mortality Tables and various valuation rates ranging from 2.5%
to 6%. Accumulation and on-benefit annuity reserves are based principally on
individual annuity tables at various rates ranging from 2.5% to 8.75% and using
CARVM. Accident and health reserves are established using a two year preliminary
term method and morbidity tables based on Company experience.
ILA has established separate accounts to segregate the assets and
liabilities of certain annuity contracts that must be segregated from the
Company's general assets under the terms of the contracts. The assets consist
primarily of marketable securities reported at market value. Premiums, benefits
and expenses of these contracts are reported in the statutory basis statements
of operations.
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds that are deemed
ineligible to be held at amortized cost by the NAIC Securities Valuation Office
("SVO") are carried at the appropriate SVO published value. When a permanent
reduction in the value of publicly traded securities occurs, the decrease is
reported as a realized loss and the carrying value is adjusted accordingly.
Short-term investments consist of money market funds and are stated at cost,
which approximates fair value. Common stocks are carried at fair value with the
current year change in the difference from cost reflected in surplus. Other
invested assets are generally recorded at fair value.
The Company uses a variety of derivative financial instruments as part of an
overall risk management strategy. These instruments, including interest rate and
foreign currency swaps, caps, and floors are used as a means of hedging exposure
to price, foreign currency and/or interest rate risk on planned investment
purchases or existing assets and liabilities. The Company does not hold or issue
derivative financial instruments for trading purposes. Derivatives must be
designated at inception as a hedge measured for effectiveness both at inception
and on an ongoing basis. The Company's correlation threshold for hedge
designation is 80% to 120%. If correlation, which is assessed monthly and
measured based on a rolling three month average, falls outside the 80% to 120%
range, hedge accounting will be terminated.
Interest rate swaps involve the periodic exchange of payments without the
exchange of underlying principal or notional amounts. Net receipts or payments
are accrued and recognized over the life of the swap agreement as an adjustment
to net investment income. Should the swap be terminated the gains or losses are
adjusted into the basis of the asset or liability and amortized over the
remaining life. Should the hedged asset be sold or liability terminated without
terminating the swap position, any swap gains or losses are immediately
recognized in net investment income. Interest rate swaps purchased in
anticipation of an asset purchase ("anticipatory transaction") are recognized
consistent with the underlying asset components such that the settlement
component is recognized in the statutory basis statements of operations while
the change in market value is recognized as an unrealized gain or loss. Foreign
currency swaps are similar to interest rate swaps except there is an initial
exchange of principal in two currencies and an agreement to re-exchange the
currencies at a future date, at an agreed upon exchange rate.
Premiums paid on purchased floor or cap agreements and the premium received
on issued cap or floor agreements (used for risk management) are adjusted into
the basis of the applicable asset and amortized over the asset life. Gains or
losses on termination of such positions are adjusted into the basis of the asset
or liability and amortized over the remaining asset life. Net payments are
recognized as an adjustment to income or basis adjusted and amortized depending
on the specific hedge strategy.
Derivatives used to create a synthetic asset must meet synthetic accounting
criteria, including designation at inception and consistency of terms between
the synthetic and the instrument being replicated. Consistent with industry
practice, synthetic instruments are accounted for like the financial instrument
they are intended to replicate. Derivatives which fail to meet risk management
criteria subsequent to acquisition, are accounted for at fair market value with
the impact reflected in the statutory basis statements of operations.
Open forward commitment contracts are marked to market through surplus. Such
contracts are accounted for at settlement by recording the purchase of specified
securities at the previously committed price. Gains or losses resulting from
termination of the forward commitment contracts before the delivery of the
securities are recognized immediately in the statutory basis statements of
operations as a component of Net Realized Capital Gains, after tax.
The Asset Valuation Reserve ("AVR") is designed to provide a standardized
reserving process for realized and unrealized losses due to default and equity
risks associated with invested assets. The reserve increased $8,112 and $6,228
in 1998 and 1997, respectively and decreased $(568) in 1996. Additionally, the
Interest Maintenance Reserve ("IMR") captures net realized capital gains and
losses, net
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-9
- --------------------------------------------------------------------------------
of applicable income taxes, resulting from changes in interest rates and
amortizes these gains or losses into income over the life of the mortgage loan
or bond sold. The IMR balance as of December 31, 1998 and December 31, 1997 was
$452 and $(193), respectively and is reflected in Other Liabilities and as a
component of non-admitted assets in Unassigned Funds for each of the years then
ended. For the years ended December 31, 1998, 1997 and 1996, amortization of IMR
is included in Other Revenues and was $(207), $(85) and $(392), respectively.
Realized capital gains and losses, net of taxes not included in IMR are reported
in the statutory basis statements of operations. Realized investment gains and
losses are determined on a specific identification basis.
OTHER LIABILITIES
The amount reflected in other liabilities includes a receivable from the
separate accounts of $1,187 million and $923 million as of December 31, 1998 and
1997, respectively. The balances are classified in accordance with NAIC
prescribed practices.
MORTGAGE LOANS
Mortgage loans, which are carried at cost and approximate fair value,
include investments in assets backed by mortgage loan pools.
2. INVESTMENTS:
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
Interest income from bonds and
short-term investments.......... $ 123,370 $ 100,475 $ 89,940
Interest income from policy
loans........................... 3,133 1,958 1,846
Interest and dividends from other
investments..................... 4,482 1,005 7,864
---------- ---------- ---------
Gross investment income.......... 130,985 103,438 99,650
Less: investment expenses........ 1,003 1,153 1,209
---------- ---------- ---------
Net investment income............ $ 129,982 $ 102,285 $ 98,441
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
(B) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON COMMON STOCKS
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Gross unrealized capital gains.. $ 2,204 $ 537 $ 713
Gross unrealized capital
losses......................... (1,871) (1,820) (4,160)
--------- --------- ---------
Net unrealized capital
(losses)/gains................. 333 (1,283) (3,447)
Balance, beginning of year...... (1,283) (3,447) 1,724
--------- --------- ---------
Change in net unrealized capital
gains (losses) on Common
stocks......................... $ 1,616 $ 2,164 $ (5,171)
--------- --------- ---------
--------- --------- ---------
</TABLE>
(C) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON BONDS AND SHORT-TERM
INVESTMENTS
<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ----------
<S> <C> <C> <C>
Gross unrealized capital
gains........................ $ 10,905 $ 23,357 $ 11,821
Gross unrealized capital
losses....................... (833) (1,906) (3,842)
---------- --------- ----------
Net unrealized capital
gains........................ 10,072 21,451 7,979
Balance, beginning of year.... 21,451 7,979 20,877
---------- --------- ----------
Change in net unrealized
capital gains on bonds and
short-term investments....... $ (11,379) $ 13,472 $ (12,898)
---------- --------- ----------
---------- --------- ----------
</TABLE>
(D) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Bonds and short-term investments.... $ 1,314 $ (120) $ 2,756
Common stocks....................... 1,624 -- --
Real estate and other............... (1) 114 --
--------- --------- ---------
Realized capital (losses) gains..... 2,937 (6) 2,756
Capital gains (benefit) tax......... -- (831) 936
--------- --------- ---------
Net realized capital gains.......... 2,937 825 1,820
Amounts transferred to IMR.......... 852 (719) 1,413
--------- --------- ---------
Net realized capital gains.......... $ 2,085 $ 1,544 $ 407
--------- --------- ---------
--------- --------- ---------
</TABLE>
(E) OFF-BALANCE SHEET INVESTMENTS
The Company had no significant financial instruments with off-balance sheet
risk as of December 31, 1998.
(F) CONCENTRATION OF CREDIT RISK
The Company has invested in securities of a single issuer, Bankers Trust
Corporation, in an amount greater than 10% of the Company's statutory capital
and surplus. The statement value of this investment was $105,221 as of December
31, 1998. The NAIC ratings on these holdings were 1z and 2. Excluding this and
U.S. government and government agency investments, the Company had no other
significant concentrations of credit risk as of December 31, 1998.
<PAGE>
F-10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
(G) BONDS, SHORT-TERM INVESTMENTS AND COMMON STOCKS
<TABLE>
<CAPTION>
1998
------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored.................................... $ 4,982 $ 35 $ (2) $ 5,015
-- Guaranteed and sponsored -- asset-backed.................... 75,615 -- -- 75,615
States, municipalities and political subdivisions................ 10,402 415 -- 10,817
International governments........................................ 7,466 568 -- 8,034
Public utilities................................................. 94,475 1,330 (39) 95,766
All other corporate.............................................. 607,679 8,473 (792) 615,360
All other corporate -- asset-backed.............................. 505,900 -- -- 505,900
Short-term investments........................................... 343,783 -- -- 343,783
Certificates of deposit.......................................... 130,216 84 -- 130,300
Parents, subsidiaries and affiliates............................. 117,057 -- -- 117,057
---------- ---------- ---------- ----------
Total bonds and short-term investments........................... $1,897,575 $10,905 $(833) $1,907,647
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Common stock -- unaffiliated................................. $ 4,933 $ 290 $ (50) $ 5,173
Common stock -- affiliated................................... 35,384 1,914 (1,821) 35,477
--------- ---------- ---------- ----------
Total common stocks.......................................... $40,317 $2,204 $(1,871) $40,650
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
1997
------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored.................................... $ 11,114 $ 55 $ (51) $ 11,118
-- Guaranteed and sponsored -- asset-backed.................... 55,506 1,056 (269) 56,293
States, municipalities and political subdivisions................ 26,404 329 -- 26,733
International governments........................................ 7,609 500 -- 8,109
Public utilities................................................. 73,024 754 (132) 73,646
All other corporate.............................................. 517,715 14,110 (704) 531,121
All other corporate -- asset-backed.............................. 630,069 5,005 (739) 634,335
Short-term investments........................................... 277,330 33 (8) 277,355
Certificates of deposit.......................................... 93,770 1,515 (3) 95,282
Parents, subsidiaries and affiliates............................. 86,100 -- -- 86,100
---------- ---------- ---------- ----------
Total bonds and short-term investments........................... $1,778,641 $23,357 $(1,906) $1,800,092
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Common stock -- unaffiliated................................. $30,307 $537 $ -- $30,844
Common stock -- affiliated................................... 35,384 -- (1,820) 33,564
--------- ----- ---------- ----------
Total common stocks.......................................... $65,691 $537 $(1,820) $64,408
--------- ----- ---------- ----------
--------- ----- ---------- ----------
</TABLE>
The amortized cost and estimated fair value of bonds and short-term
investments as of December 31, 1998 by estimated maturity year are shown below.
Asset-backed securities, including mortgage backed securities and
collaterialized mortgage obligations, are distributed to maturity year based on
ILA's estimates of the rate of future prepayments of principal over the
remaining lives of the securities. Expected maturities differ from contractual
maturities due to call or repayment provisions.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
MATURITY COST FAIR VALUE
- ----------------------------------- ------------ ------------
<S> <C> <C>
One year or less................... $ 788,845 $ 792,826
Over one year through five years... 689,025 692,811
Over five years through ten
years............................. 308,661 310,357
Over ten years..................... 111,044 111,653
------------ ------------
Total.............................. $ 1,897,575 $ 1,907,647
------------ ------------
------------ ------------
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-11
- --------------------------------------------------------------------------------
Proceeds from sales and maturities of investments in bonds and short-term
investments during 1998, 1997 and 1996 were $1,354,563, $1,435,820 and
$1,139,073, respectively, resulting in gross realized gains of $1,705, $964 and
$3,675, respectively, and gross realized losses of $391, $1,084 and $919,
respectively, before transfers to IMR.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Bonds and short-term
investments..................... $ 1,898 $ 1,908 $ 1,779 $ 1,800
Common stocks.................... 41 41 64 64
Policy loans..................... 47 47 37 37
Mortgage loans................... 60 60 85 85
Other invested assets............ 2 2 21 21
LIABILITIES
Liabilities on investment
contracts....................... $ 2,053 $ 2,129 $ 1,911 $ 1,835
</TABLE>
The estimated fair value of bonds and short-term investments was determined
by the Company primarily using NAIC market values. The carrying amounts for
policy loans approximates fair value. The fair value of mortgage loans was
determined by discounting future expected cash flows using interest rates
currently being offered for similar loans. The fair value of liabilities on
investment contracts is determined by forecasting future cash flows and
discounting the forecasted cash flows at current market interest rates.
3. AGGREGATE RESERVES FOR FUTURE BENEFITS
The Company's existing reserves consist of life, health, annuity and
supplementary contracts. The Company cedes and assumes insurance to and from
non-affiliated insurers in order to limit its maximum loss. Such transfers do
not relieve the Company or the unaffiliated reinsured of their primary
liabilities. The Company cedes to RGA Reinsurance Company and its affiliate
Employers Reassurance Corporation, on a modified coinsurance basis, 80% of the
variable annuity business written since 1994 and 100% of the variable life and
variable universal life excess sales load refund obligation effective 1998.
There were no material reinsurance recoverables from reinsurers outstanding as
of, and for the years ended, December 31, 1998 and 1997.
A summary of reinsurance information as of and for the years ended December
31, follows:
<TABLE>
<CAPTION>
1998 DIRECT ASSUMED CEDED NET
- ----------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Premium and Annuity
Considerations.................... $ 483,328 $ 24,954 $ (38,939) $ 469,343
Death, Annuity, Disability and
Other Benefits.................... $ 64,331 $ 1,574 $ (16,401) $ 49,504
Surrenders......................... $ 739,663 $ -- $ -- $ 739,663
Aggregate Reserves for Future
Benefits.......................... $ 713,425 $ -- $ (134,285) $ 579,140
Policy and Contract Claims......... $ 5,895 $ 85 $ (313) $ 5,667
<CAPTION>
1997 DIRECT ASSUMED CEDED NET
- ----------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Premium and Annuity
Considerations.................... $ 266,427 $ 51,630 $ (21,412) $ 296,645
Death, Annuity, Disability and
Other Benefits.................... $ 79,779 $ 839 $ (7,126) $ 73,492
Surrenders......................... $ 454,417 $ -- $ -- $ 454,417
Aggregate Reserves for Future
Benefits.......................... $ 651,820 $ -- $ (46,637) $ 605,183
Policy and Contract Claims......... $ 5,861 $ 157 $ (346) $ 5,672
<CAPTION>
1996 DIRECT ASSUMED CEDED NET
- ----------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Premium and Annuity
Considerations.................... $ 226,612 $ 33,817 $ (10,185) $ 250,244
Death, Annuity, Disability and
Other Benefits.................... $ 34,950 $ 35,138 $ (3,339) $ 66,749
Surrenders......................... $ 270,165 $ -- $ -- $ 270,165
</TABLE>
In connection with the distribution described in Note 1, on June 30, 1995,
the assets of Lyndon were contributed to the Company. The statutory basis assets
in excess of statutory basis liabilities was approximately $112 million and was
reflected as an increase in Gross Paid-In and Contributed Surplus at December
31, 1995. In 1998, the majority of former Lyndon's assumed business was
recaptured by the unaffiliated direct writer. A ceding commission of $25,622 and
change in reserve of $26,404 for the year ended December 31, 1998, is reflected
in Other Revenue and Increase/(Decrease) in Aggregate Reserves for Future
Benefits in the statutory basis statements of operations, respectively.
<PAGE>
F-12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Analysis of Annuity Actuarial Reserves and Deposit Liabilities by Withdrawal
Characteristics as of December 31, 1998 (including general and separate account
liabilities) are as follows:
<TABLE>
<CAPTION>
% OF
SUBJECT TO DISCRETIONARY WITHDRAWAL: AMOUNT TOTAL
- --------------------------------------- ------------- ---------
<S> <C> <C>
With market value adjustment........... $ 4,563 0.0%
At book value less current surrender
charge of 5% or more.................. 1,378,056 4.1%
At market value........................ 31,087,511 93.8%
------------- ---------
Total with adjustment or at market
value................................. 32,470,130 97.9%
At book value without adjustment
(minimal or no charge or
adjustment)........................... 665,159 2.0%
Not subject to discretionary
withdrawal............................ 19,739 0.1%
------------- ---------
Reinsurance ceded...................... 33,155,028
Total, net......................... $ 33,155,028
-------------
-------------
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Transactions between the Company and its affiliates within The Hartford
relate principally to tax settlements, reinsurance, rental and service fees,
capital contributions and payments of dividends. The Company has also invested
in bonds of its affiliates, Hartford Financial Services Corporation and HL
Investment Advisors, Inc., and common stock of its subsidiary, ITT Hartford
Life, LTD.
5. FEDERAL INCOME TAXES:
The Company and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. Federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were filing separate Federal, state and local
income tax returns.
As long as The Hartford continues to own at least 80% of the combined voting
power and 80% of the value of the outstanding capital stock of HLI, the Company
will be included for Federal income tax purposes in the consolidated group of
which The Hartford is the common parent. It is the intention of The Hartford and
its non-life subsidiaries to file a single consolidated Federal income tax
return. The life insurance companies will file a separate consolidated Federal
income tax return. Federal income taxes (received) paid by the Company for
operations and capital gains were $25,780, $(14,499) and $29,793 in 1998, 1997
and 1996, respectively. The effective tax rate was 26%, (26)% and 22% in 1998,
1997 and 1996, respectively.
The Company is currently under audit by the Internal Revenue Service (IRS)
for the three year tax period ending 1995. The audit is not yet complete. As of
December 31, 1998, the Company does not currently expect any material
adjustments to arise from this audit.
The following schedule provides a reconciliation of the tax provision at the
U.S. Federal Statutory rate to Federal income tax (benefit) expense (in
millions):
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Tax provision at U.S. Federal statutory
rate..................................... $ 48 $ 20 $ 30
Tax deferred acquisition costs............ 25 25 27
Statutory to tax reserve differences...... 8 1 --
Unrealized gain on separate accounts...... (41) (44) (21)
Investments and other..................... (4) (17) (17)
--------- --------- ---------
Federal income tax (benefit) expense...... $ 36 $ (15) $ 19
--------- --------- ---------
--------- --------- ---------
</TABLE>
6.CAPITAL AND SURPLUS AND SHAREHOLDER DIVIDEND RESTRICTIONS:
The maximum amount of dividends which can be paid, without prior approval,
by State of Connecticut insurance companies to shareholders is generally
restricted to the greater of 10% of surplus as of the preceding December 31st or
the net gain from operations for the previous year. Dividends are paid as
determined by the Board of Directors and are not cumulative. No dividends were
paid in 1998, 1997 and 1996. The amount available for dividend in 1999 is
$100,541.
7. PENSION PLANS AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:
HLI's employees are included in The Hartford's non-contributory defined
benefit pension plans. These plans provide pension benefits that are based on
years of service and the employee's compensation during the last ten years of
employment. HLI's funding policy is to contribute annually an amount between the
minimum funding requirements set forth in the Employee Retirement Income
Security Act of 1974, as amended, and the maximum amount that can be deducted
for U.S. Federal income tax purposes. Generally, pension costs are funded
through the purchase of affiliated group pension contracts. The cost to HLI was
approximately $9,000 in 1998 and $7,000 in both 1997 and 1996.
HLI also provides, through The Hartford, certain health care and life
insurance benefits for eligible retired employees. A substantial portion of
HLI's employees may become eligible for these benefits upon retirement. HLI's
contribution for health care benefits will depend on the retiree's date of
retirement and years of service. In addition, the plan has a defined dollar cap
which limits average company contributions. HLI has prefunded a portion of the
health care and life insurance obligations through trust funds where such
prefunding can be accomplished on a tax effective basis. Postretirement health
care and life insurance
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-13
- --------------------------------------------------------------------------------
benefits expense, allocated by The Hartford, was immaterial to the results of
operations for 1998, 1997 and 1996.
The assumed rate in the per capita cost of health care (the health care
trend rate) was 7.8% for 1998, decreasing ratably to 5.0% in the year 2003.
Increasing the health care trend rates by one percent per year would have an
immaterial impact on the accumulated postretirement benefit obligation and the
annual expense. To the extent that the actual experience differs from the
inherent assumptions, the effect will be amortized over the average future
service of covered employees.
8. SEPARATE ACCOUNTS:
The Company maintains separate account assets and liabilities totaling $32.9
billion and $23.2 billion as of December 31, 1998 and 1997, respectively.
Separate account assets are reported at fair value and separate account
liabilities are determined in accordance with CARVM, which approximates the
market value less applicable surrender charges. Separate account assets are
segregated from other investments, the policyholder assumes the investment risk,
and the investment income and gains and losses accrue directly to the
policyholder. Separate account management fees, net of minimum guarantees, were
$360 million, $252 million and $144 million in 1998, 1997 and 1996,
respectively, and are recorded as a component of other revenues on the statutory
basis statements of operations.
9. COMMITMENTS AND CONTINGENCIES:
As of December 31, 1998, the Company had no material contingent liabilities,
nor had the Company committed any surplus funds for any contingent liabilities
or arrangements. The Company is involved in pending and threatened litigation in
the normal course of its business in which claims for monetary and punitive
damages have been asserted. Although there can be no assurances, at the present
time the Company does not anticipate that the ultimate liability arising from
such pending or threatened litigation, after consideration of provisions made
for potential losses and costs of defense, will have a material adverse effect
on the statutory capital and surplus of the Company.
As discussed in Note 5, issues may potentially be raised by the IRS in
future audits of open years. Management does not believe that possible audit
adjustments will have a material effect on the statutory capital and surplus of
the Company.
Under insurance guaranty fund laws in each state, insurers licensed to do
business can be assessed up to prescribed limits for policyholder losses
incurred by insolvent companies. The amount of any future assessments on ILA
under these laws cannot be reasonably estimated. Most of the laws do provide,
however, that an assessment may be excused or deferred if it would threaten an
insurer's own financial strength. Additionally, guaranty fund assessments are
used to reduce state premium taxes paid by the Company in certain states. ILA
paid guaranty fund assessments of $1,043, $1,544 and $1,262 in 1998, 1997 and
1996, respectively. ILA incurred guaranteed fund expense of $548 in 1998, 1997
and 1996.
<PAGE>
PART C
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
(b) (1) Resolution of the Board of Directors of Hartford Life and
Annuity Insurance Company ("Hartford") authorizing the
establishment of the Separate Account.(1)
(2) Not applicable.
(3) (a) Principal Underwriter Agreement.(2)
(3) (b) Form of Dealer Agreement.(2)
(4) Form of Individual Flexible Premium Variable Annuity Contract.(1)
(5) Form of Application.(1)
(6) (a) Certificate of Incorporation of Hartford.(3)
(6) (b) Bylaws of Hartford.(2)
(7) Not applicable.
(8) Not applicable.
(9) Opinion and Consent of Lynda Godkin, General Counsel.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(11) No financial statements are omitted
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
_______________________
(1) Incorporated by reference to Post-Effective No. 4, to the Registration
Statement File No. 33-60702, dated May 1, 1995.
(2) Incorporated by reference to Post-Effective Amendment No. 5, to the
Registration Statement File No. 33-60702, dated May 1, 1996.
(3) Incorporated by reference to Post-Effective Amendment No. 7, to the
Registration Statement File No. 33-60702, filed on April 14, 1998.
<PAGE>
Item 25. Directors and Officers of the Depositor
- ------------------------------------------------------------------------------
NAME, AGE POSITION WITH HARTFORD
- ------------------------------------------------------------------------------
Wendell J. Bossen Vice President
- ------------------------------------------------------------------------------
Gregory A. Boyko Senior Vice President, Director*
- ------------------------------------------------------------------------------
Peter W. Cummins Senior Vice President
- ------------------------------------------------------------------------------
Timothy M. Fitch Vice President & Actuary
- ------------------------------------------------------------------------------
Mary Jane B. Fortin Vice President & Chief Accounting Officer
- ------------------------------------------------------------------------------
David T. Foy Senior Vice President & Treasurer
- ------------------------------------------------------------------------------
Lynda Godkin Senior Vice President, General Counsel, and
Corporate Secretary, Director*
- ------------------------------------------------------------------------------
Lois W. Grady Senior Vice President
- ------------------------------------------------------------------------------
Stephen T. Joyce Vice President
- ------------------------------------------------------------------------------
Michael D. Keeler Vice President
- ------------------------------------------------------------------------------
Robert A. Kerzner Senior Vice President
- ------------------------------------------------------------------------------
Thomas M. Marra Executive Vice President, Director*
- ------------------------------------------------------------------------------
Steven L. Matthiesen Vice President
- ------------------------------------------------------------------------------
Craig R. Raymond Senior Vice President and Chief Actuary
- ------------------------------------------------------------------------------
Lowndes A. Smith President and Chief Executive Officer, Director*
- ------------------------------------------------------------------------------
David M. Znamierowski Senior Vice President, Director*
- ------------------------------------------------------------------------------
Unless otherwise indicated, the principal business address of each of the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
*Denotes election to Board of Directors.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Filed herewith as Exhibit 16.
<PAGE>
Item 27. Number of Contract Owners
As of March 31, 1999, there were 235,924 Contract Owners.
Item 28. Indemnification
Under Section 33-772 of the Connecticut General Statutes, unless limited by
its certificate of incorporation, the Registrant must indemnify a director
who was wholly successful, on the merits or otherwise, in the defense of any
proceeding to which he was a party because he is or was a director of the
corporation against reasonable expenses incurred by him in connection with
the proceeding.
The Registrant may indemnify an individual made a party to a proceeding
because he is or was a director against liability incurred in the proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Registrant, and, with respect to any
criminal proceeding, had no reason to believe his conduct was unlawful. Conn.
Gen. Stat. Section 33-771(a). Additionally, pursuant to Conn. Gen. Stat.
Section 33-776, the Registrant may indemnify officers and employees or agents
for liability incurred and for any expenses to which they becomes subject by
reason of being or having been an employees or officers of the Registrant.
Connecticut law does not prescribe standards for the indemnification of
officers, employees and agents and expressly states that their
indemnification may be broader than the right of indemnification granted to
directors.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-770 et seq.
Notwithstanding the fact that Connecticut law obligates the Registrant to
indemnify only a director that was successful on the merits in a suit, under
Article VIII, Section 2 of the Registrant's bylaws, the Registrant must
indemnify both directors and officers of the Registrant who are parties or
threatened to be parties to a legal proceeding by reason of his being or
having been a director or officer of the Registrant for any expenses if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the company, and with respect to criminal
proceedings, had no reason to believe his conduct was unlawful. Unless
otherwise mandated by a court, no indemnification shall be made if such
officer or director is adjudged to be liable for negligence or misconduct in
the performance of his duty to the Registrant.
Additionally, the directors and officers of Hartford and Hartford Securities
Distribution Company, Inc. ("HSD") are covered under a directors and officers
liability insurance policy issued to The Hartford Financial Services Group,
Inc. and its subsidiaries. Such policy will reimburse the Registrant for
any payments that it shall make to directors and
<PAGE>
officers pursuant to law and will, subject to certain exclusions contained in
the policy, further pay any other costs, charges and expenses and settlements
and judgments arising from any proceeding involving any director or officer
of the Registrant in his past or present capacity as such, and for which he
may be liable, except as to any liabilities arising from acts that are deemed
to be uninsurable.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 29. Principal Underwriters
(a) HSD acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - Separate Account One
Hartford Life Insurance Company - Separate Account Two
Hartford Life Insurance Company - Separate Account Two
(DC Variable Account I)
Hartford Life Insurance Company - Separate Account Two
(DC Variable Account II)
Hartford Life Insurance Company - Separate Account Two
(QP Variable Account)
Hartford Life Insurance Company - Separate Account Two
(Variable Account "A")
Hartford Life Insurance Company - Separate Account Two
(NQ Variable Account)
Hartford Life Insurance Company - Putnam Capital Manager Trust
Separate Account
Hartford Life Insurance Company - Separate Account Three
Hartford Life Insurance Company - Separate Account Five
Hartford Life Insurance Company - Separate Account Seven
Hartford Life and Annuity Insurance Company - Separate Account One
Hartford Life and Annuity Insurance Company - Putnam Capital Manager
Trust Separate Account Two
<PAGE>
Hartford Life and Annuity Insurance Company - Separate Account Three
Hartford Life and Annuity Insurance Company - Separate Account Five
Hartford Life and Annuity Insurance Company - Separate Account Six
Alpine Life Insurance Company - Separate Account One
Alpine Life Insurance Company - Separate Account Two
American Maturity Life Insurance Company - Separate Account AMLVA
Royal Life Insurance Company - Separate Account One
Royal Life Insurance Company - Separate Account Two
b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
------------------ ----------------------
Lowndes A. Smith President and Chief Executive Officer,
Director
Thomas M. Marra Executive Vice President, Director
Lynda Godkin Senior Vice President, General Counsel
and Corporate Secretary
Peter W. Cummins Senior Vice President
David T. Foy Treasurer
George R. Jay Controller
Unless otherwise indicated, the principal business address of each of
the above individuals is P. O. Box 2999, Hartford, Connecticut
06104-2999.
Item 30. Location of Accounts and Records
All of the accounts, books, records or other documents required to
be kept by Section 31(a) of the Investment Company Act of 1940 and
rules thereunder, are maintained by Hartford at 200 Hopmeadow Street,
Simsbury, Connecticut 06089.
Item 31. Management Services
All management contracts are discussed in Part A and Part B of this
Registration Statement.
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective amendment to
this Registration Statement as frequently as is necessary to ensure
that the audited financial statements in the Registration Statement
are never more than 16 months old so long as payments under the
variable annuity contracts may be accepted.
<PAGE>
(b) The Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space
that an applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written communication
affixed to or included in the prospectus that the applicant can remove
to send for a Statement of Additional Information.
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to be
made available under this Form promptly upon written or oral request.
(d) Hartford hereby represents that the aggregate fees and charges under
the Contract are reasonable in relation to the services rendered, the
expenses expected to be incurred and the risks assumed by Hartford.
The Registrant is relying on the no-action letter issued by the
Division of Investment Management to American Counsel of Life
Insurance, Ref. No. IP-6-88, November 28, 1988. The Registrant has
complied with conditions one through four of the no-action letter.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and duly caused this Registration Statement to be
signed on its behalf, in the City of Hartford, and State of Connecticut on
this 9th day of April, 1999.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY -
PUTNAM CAPITAL MANAGER TRUST
SEPARATE ACCOUNT TWO
(Registrant)
*By: Thomas M. Marra *By: /s/ Marianne O'Doherty
-------------------------- -------------------------
Thomas M. Marra, Executive Marianne O'Doherty
Vice President Attorney-in-Fact
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Depositor)
*By: Thomas M. Marra
--------------------------
Thomas M. Marra, Executive
Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons and in the capacities and
on the dates indicated.
Gregory A. Boyko, Senior Vice President, Director*
Lynda Godkin, Senior Vice President, General Counsel and
Corporate Secretary, Director*
Thomas M. Marra, Executive Vice *By: /s/ Marianne O'Doherty
President, Director* ------------------------
Lowndes A. Smith, President & Marianne O'Doherty
Chief Operating Officer, Director* Attorney-in-fact
David M. Znamierowski, Senior Vice
President, Director* Dated: April 9, 1999
<PAGE>
EXHIBIT INDEX
(9) Opinion and Consent of Lynda Godkin, Senior Vice President, General
Counsel and Corporate Secretary
(10) Consent of Arthur Andersen LLP, Independent Public Accountants
(15) Copy of Power of Attorney
(16) Organizational Chart
<PAGE>
EXHIBIT 9
April 9, 1999 LYNDA GODKIN,
SENIOR VICE PRESIDENT, GENERAL
COUNSEL & CORPORATE SECRETARY
Law Department
Board of Directors
Hartford Life and Annuity Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
FILE NO. 33-60702
Dear Sir/Madam:
I have acted as General Counsel to Hartford Life and Annuity Insurance
Company (the "Company"), a Connecticut insurance company, and Hartford Life
and Annuity Insurance Company Putnam Capital Manager Trust Separate Account
Two (the "Account") in connection with the registration of an indefinite
amount of securities in the form of tax-deferred variable annuity contracts
(the "Contracts") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended. I have examined such documents
(including the Form N-4 Registration Statement) and reviewed such questions
of law as I considered necessary and appropriate, and on the basis of such
examination and review, it is my opinion that:
1. The Company is a corporation duly organized and validly existing as a stock
life insurance company under the laws of the State of Connecticut and is
duly authorized by the Insurance Department of the State of Connecticut to
issue the Contracts.
2. The Account is a duly authorized and validly existing separate account
established pursuant to the provisions of Section 38a-433 of the
Connecticut Statutes.
3. To the extent so provided under the Contracts, that portion of the assets
of the Account equal to the reserves and other contract liabilities with
respect to the Account will not be chargeable with liabilities arising out
of any other business that the Company may conduct.
4. The Contracts, when issued as contemplated by the Form N-4 Registration
Statement, will constitute legal, validly issued and binding obligations
of the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form N-4
Registration Statement for the Contracts and the Account.
Sincerely,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
EXHIBIT 10
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
Registration Statement File No. 33-60702 for Hartford Life and Annuity Insurance
Company Putnam Capital Manager Trust Separate Account Two on Form N-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 12, 1999
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
POWER OF ATTORNEY
-----------------
Gregory A. Boyko
David T. Foy
Lynda Godkin
Thomas M. Marra
Lowndes A. Smith
David M. Znamierowski
do hereby jointly and severally authorize Lynda Godkin, Christine Repasy,
Marianne O'Doherty, Thomas S. Clark and Brian Lord to sign as their agent,
any Registration Statement, pre-effective amendment, post-effective amendment
and any application for exemptive relief of the Hartford Life and Annuity
Insurance Company under the Securities Act of 1933 and/or the Investment
Company Act of 1940, and do hereby ratify any such signatures heretofore made
by such persons.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for
the purpose herein set forth.
/s/ Gregory A. Boyko Dated as of January 15, 1999
- ------------------------------
Gregory A. Boyko
/s/ David T. Foy Dated as of January 15, 1999
- ------------------------------
David T. Foy
/s/ Lynda Godkin Dated as of January 15, 1999
- ------------------------------
Lynda Godkin
/s/ Thomas M. Marra Dated as of January 15, 1999
- ------------------------------
Thomas M. Marra
/s/ Lowndes A. Smith Dated as of January 15, 1999
- ------------------------------
Lowndes A. Smith
/s/ David M. Znamierowski Dated as of January 15, 1999
- ------------------------------
David M. Znamierowski
<PAGE>
ORGANIZATIONAL CHART
<TABLE>
<CAPTION>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
---------------------------------------------
NUTMEG INSURANCE COMPANY |
(CONNECTICUT) THE HARTFORD INVESTMENT
| MANAGEMENT COMPANY
HARTFORD FIRE INSURANCE COMPANY (DELAWARE)
(CONNECTICUT) |
| |
HARTFORD ACCIDENT AND INDEMNITY COMPANY HARTFORD INVESTMENT
(CONNECTICUT) SERVICES, INC.
| (CONNECTICUT)
HARTFORD LIFE, INC.
(DELAWARE)
|
HARTFORD LIFE & ACCIDENT INSURANCE COMPANY
(CONNECTICUT)
|
|
|
-------------------------------------------------------------------------------------------------------------------------
| | | | | | | | |
ITT HARTFORD LIFE | | | | | | HLIC PLANCO
INTERNATIONAL LTD. | | | | | | CANADA FINANCIAL
(CONNECTICUT) | | | | | | HOLDINGS, INC. SERVICES,
| | | | | | | (CANADA) INCORPORATED
| | | | | | | | (PENNSYLVANIA)
| | | | | | | | |
| | ALPINE LIFE HARTFORD FINANCIAL HARTFORD LIFE HARTFORD AMERICAN | |
| | INSURANCE SERVICES LIFE INSURANCE COMPANY FINANCIAL MATURITY LIFE | |
| | COMPANY INSURANCE CO. (CONNECTICUT) SERVICES, LLC INSURANCE COMPANY | |
| | (CONNECTICUT) (CONNECTICUT) | (DELAWARE) (CONNECTICUT) | PLANCO, INC.
| | | | | | (PENNSYLVANIA)
| | ------------------------------------- | AML FINANCIAL, INC. |
HARTFORD CALMA | | | | | (CONNECTICUT) |
COMPANY | ROYAL LIFE HARTFORD HARTFORD | HARTFORD
(FLORIDA) | INSURANCE INTERNATIONAL LIFE AND | LIFE INSURANCE
| COMPANY LIFE REASSURANCE ANNUITY INSURANCE | COMPANY
| OF AMERICA CORP. COMPANY | OF CANADA
|(CONNECTICUT) (CONNECTICUT) (CONNECTICUT) | (CANADA)
| | |
| | |
| ITT HARTFORD |
| LIFE, LTD. |
| (BERMUDA) |
| |
| |
----------| ---------------------------------------------------------------------------------------------
| | | | | |
INTERNATIONAL MS FUND HL INVESTMENT HARTFORD HARTFORD SECURITIES HARTFORD COMP. EMP.
CORPORATE AMERICA 1993-K ADVISORS, LLC EQUITY SALES DISTRIBUTION BENEFITS SERVICE
MARKETING GROUP, INC. SPE, INC. (CONNECTICUT) COMPANY, INC. COMPANY, INC. COMPANY
(CONNECTICUT) (DELAWARE) | (CONNECTICUT) (CONNECTICUT) (CONNECTICUT)
| |
| |
THE EVERGREEN HARTFORD INVESTMENT
GROUP, INC. FINANCIAL SERVICES
(NEW YORK) COMPANY
(DELAWARE)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
NUTMEG INSURANCE COMPANY
(CONNECTICUT)
|
HARTFORD FIRE INSURANCE COMPANY
(CONNECTICUT)
|
----------------------------------------------------------------------------------------------------------------------------
| | |
| | ITT HARTFORD LIFE
| | -------INTERNATIONAL LTD.
| | | (CONNECTICUT)
| | | |
| | | ITT HARTFORD
| | | ----SUDAMERICANA
| | | | HOLDING S.A.
| | | | (ARGENTINA)
| | | |------------------------------------------------------
| | | | | |
| | | | HARTFORD GALICIA INSTITUTO DE
| | | | SEGUROS VIDA COMPANIA SALTA COMPANIA DE
| | | |--------DE VIDA DE SEGUROS S.A. SEGUROS DE VIDA S.A.
| | | | (URUGUAY) (ARGENTINA) (ARGENTINA)
| | | |
| | ICATU | | ITT HARTFORD
| | HARTFORD | |-----SEGUROS DE VIDA
| | SEGUROS S.A.----------| | (ARGENTINA)
| | (BRAZIL) | |
| | | | |
| | | | | ITT HARTFORD
| | -- ----------| | |------SEGUROS DE
| | | | | | RETIRO S.A.
| | | | | | (ARGENTINA)
|-----------|----------------|---------------|---|--------------------------------------------------------------------------
| | | | | |
| | | ICATU HARTFORD | | CONSULTORA DE CAPITALES
| | | FUNDO DE PENSAO | | S.A. SOCIEDAD GERENTE
| | | (BRAZIL) | |----DE FONDOS COMUNES
| | | | | | DE ENVERSION
| | | | | | (ARGENTINA)
| | | ICATU HARTFORD | |
| | | CAPITALIZACAO S.A. | | CLARIDAD
| | | (BRAZIL) | | ADMINISTRADORA DE
| | | | | |---FONDOS DE JUBILACIONES
| | | BRAZILCAP | | Y PENSIONES S.A.
| | | CAPITALIZACAO S.A. | | (ARGENTINA)
| | | (BRAZIL) | |
| | | | |
| | -------------------------- | |
| |--------------- | | |
| | | | |
HARTFORD FIRE HARTFORD FIRE | | |------- SEGPOOL S.A.
INTERNATIONAL------------INTERNATIONAL, LTD. | | | (ARGENTINA)
(GERMANY) GMBH (CONNECTICUT) | | |
(WEST GERMANY) | | |
| | |
ICATU HARTFORD | | | THESIS S.A.
ADMINISTRACAO | | |-------- (ARGENTINA)
DE BENEFICIOS LTDA-- | | |
(BRAZIL) | |
| |
----------------- |
| |
CAB |--------- U.O.R., S.A.
CORPORATION (ARGENTINA)
(BRITISH VIRGIN ISLANDS)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
NUTMEG INSURANCE COMPANY
(CONNECTICUT)
|
HARTFORD FIRE INSURANCE COMPANY
(CONNECTICUT)
|
- --------------------------------------------------------------------------------------------------------------------------------|
| |
THE HARTFORD INTERNATIONAL |
|-----------------------------------------------------------------------FINANCIAL SERVICES GROUP, INC. |
| | | (DELAWARE) |
| | | ----------------------|----------------- |
| | | | | | | |
ZWOLSCHE | | ITT HARTFORD LONDON AND | HARTFORD |
ALGEMEENE N.V. | | INTERNATIONAL, LTD. EDINBURGH | EUROPE, INC. |
(NETHERLANDS) | | (U.K.) INSURANCE GROUP, LTD.| (DELAWARE) |
| | | (U.K.) | |
| | | | | |
| | | ------------- | |
| | | | | |
| ITT ASSURANCES HARTFORD INTERNATIONAL | LONDON AND --ITT ERCOS |
| S.A. INSURANCE CO., N.V. |--- EDINBURGH DE SEGUROS Y |
| ZWOLSCHE ALGEMEENE (FRANCE) (BELGIUM) | INSURANCE CO., LTD. REASEGUROS S.A.|
|----SCHADEVERZEKERING | | (U.K.) (SPAIN) |
--------| N.V.----------------------------------- | | | |
| | (NETHERLANDS) | | | | |
Z.A. | | | | EXCESS INSURANCE |
- --VERZEKERINGEN | | | | COMPANY LTD. |
| N.V. | ZWOLSCHE ALGEMEENE | | | (U.K.) |
| (BELGIUM) |------HERVERZEKERING B.V. | | | |
| | -----| (NETHERLANDS) | | | LONDON AND |
| | | | | | |--- EDINBURGH LIFE |
| Z.A. LUX S.A. | | | | ASSURANCE CO., LTD. |
| (LUXEMBURG) | ZWOLSCHE ALGEMEENE | | | (U.K.) |
| |--LEVENS-VERZEKERING N.V.------------ | | | |
| | (NETHERLANDS) | | | | |
- ----------------|------------------------------------|------------|------|--------------|---------------------------------------|
| | | | | | |
| -------- | | | | |
| | | | | | | |
| ZWOLSCHE | ZWOLSCHE ALGEMEENE ZWOLSCHE ALGEMEENE | | | |
| ALGEMEENE |-----HYPOTHEKEN N.V. BELEGGINGEN III B.V. | | | |
| EUROPA B.V. | (NETHERLANDS) (NETHERLANDS) | | | |
| (NETHERLANDS) | ---------- | | |
- --------| | | | | |
| EXPLOITATIEMAAT- BELEGGINGSMAAT- | | |
|----- SCHAPPIJ SCHAPPIJ | | |
| BUIZERDLAAN B.V. BUIZERDLAAN B.V. | | |
| (NETHERLANDS) (NETHERLANDS) | | |
| | | |
| | | -----
| HOLLAND | |-------------------------- |
|---- BELEGGINGSGROEP B.V. | | | |
(NETHERLANDS) | |----------------- | |
| -------| | | |
| | | | | |
| | | | | |
F.A. KNIGHT | MACALISTER & LONDON AND | HARTFORD FIRE
& SON N.V. | DUNDAS, LTD. EDINBURGH | INTERNATIONAL
(BELGIUM) | (SCOTLAND) TRUSTEES, LTD. | SERVICIOS
| (U.K.) | (SPAIN)
------------------------- -----------
| | |
FENCOURT QUOTEL LONDON AND
PRINTERS, LTD. INSURANCE EDINBURGH
(U.K.) SYSTEMS, LTD. SERVICES, LTD.
(U.K.) (U.K.)
|
EUROSURE
INSURANCE
MARKETING, LTD.
(U.K.)
</TABLE>
