<PAGE>
As filed with the Securities and Exchange Commission on April 7, 2000.
File No. 333-69429
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. _2_ [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. _44_ [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
Hartford Life
P.O. Box 2999
Hartford, CT 06104-2999
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
It is proposed that this filing will become effective:
___ immediately upon filingpursuant to paragraph (b) of Rule 485
_X_ on May 1, 2000 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on _______________, 2000 pursuant to paragraph (a)(1) of Rule 485
___ this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Pursuant to Rule 24f-2(a) 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)
<TABLE>
<CAPTION>
N-4 ITEM NO. PROSPECTUS HEADING
- -------------------------------------------------------------------------------------------------
<S> <C>
1. Cover Page Hartford Life and Annuity Insurance Company -
Putnam Capital Manager Trust Separate Account
Two
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Yield Information
Information
5. General Description of Hartford Life Insurance Company, The Separate
Registrant Account, The Fixed Accounts, and The Funds
6. Deductions Contract Charges
7. General Description of The Contract, The Separate Account, The
Annuity Contracts Fixed Accounts, and Surrenders
8. Annuity Period Settlement Provisions
9. Death Benefit Death Benefits
10. Purchases and Contract Value The Contract, and
Contract Value
11. Redemptions Surrenders
12. Taxes Federal Tax Considerations
13. Legal Proceedings Legal Matters and Experts
14. Table of Contents of the Table of Contents to
Statement of Additional Statement of Additional
Information Information
15. Cover Page Part B; Statement of Additional
Information
16. Table of Contents Table of Contents
17. General Information and History Summary
<PAGE>
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 Settlement Provisions
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
</TABLE>
<PAGE>
PART A
<PAGE>
<TABLE>
<S> <C>
PUTNAM HARTFORD CAPITAL
MANAGER VARIABLE ANNUITY
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102-5085
TELEPHONE: 1-800-521-0538 [LOGO]
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Prospectus describes information you should know before you purchase
Series VI of Putnam Hartford Capital Manager variable annuity. Please read it
carefully.
Putnam Hartford Capital Manager variable annuity is a Contract between you and
Hartford Life and Annuity Insurance Company where you agree to make at least one
payment to us and we agree to make a series of annuity payments to you at a
later date. This annuity is a flexible premium, tax-deferred, variable annuity
offered to both individuals and groups. It is:
x Flexible, because you may add premium payments at any time.
x Tax-deferred, which means you don't pay taxes until you take money out or
until we start to make annuity payments to you.
x Variable, because the value of your annuity will fluctuate with the
performance of the underlying funds.
- --------------------------------------------------------------------------------
At purchase, you allocate your premium payment, which is any purchase payment
less any Premium Taxes, 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 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 Fund 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 Fund are listed below:
- - PUTNAM AMERICAN GOVERNMENT INCOME SUB-ACCOUNT which purchases Class IA shares
of Putnam VT American Government Income Fund of Putnam Variable Trust
- - 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
Putnam VT Global Asset Allocation Fund of Putnam Variable Trust
- - 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 GROWTH OPPORTUNITIES SUB-ACCOUNT which purchases Class IA shares of
Putnam VT Growth Opportunities 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
<PAGE>
- - 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
You may also allocate some or all of your premium payment to one of the "Fixed
Accumulation Features", which pays an interest rate guaranteed for a certain
time period from the time the payment is made. Premium payments put in a 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. 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 Securities and Exchange Commission, the Commission doesn't approve or
disapprove these securities or determine if the information is truthful or
complete. Anyone who represents that the Securities and Exchange Commission does
these things may be guilty of a criminal offense.
This Prospectus and the Statement of Additional Information can also be obtained
from the Securities and Exchange Commission'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 1, 2000
STATEMENT OF ADDITIONAL INFORMATION DATED: MAY 1, 2000
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
<S> <C>
GLOSSARY OF SPECIAL TERMS 4
- ----------------------------------------------------------------------
FEE TABLE 5
- ----------------------------------------------------------------------
ACCUMULATION UNIT VALUES 9
- ----------------------------------------------------------------------
SUMMARY 12
- ----------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 14
- ----------------------------------------------------------------------
THE SEPARATE ACCOUNT 14
- ----------------------------------------------------------------------
THE FUNDS AND THE INVESTMENT ADVISER 14
- ----------------------------------------------------------------------
PERFORMANCE RELATED INFORMATION 16
- ----------------------------------------------------------------------
THE FIXED ACCUMULATION FEATURES 17
- ----------------------------------------------------------------------
THE CONTRACT 18
- ----------------------------------------------------------------------
Contract Value -- Before the Annuity Commencement Date 18
- ----------------------------------------------------------------------
Contract Value Transfers Before and After the Annuity
Commencement Date 19
- ----------------------------------------------------------------------
Surrenders 19
- ----------------------------------------------------------------------
Contract Charges 20
- ----------------------------------------------------------------------
Death Benefits 22
- ----------------------------------------------------------------------
SETTLEMENT PROVISIONS 24
- ----------------------------------------------------------------------
Annuity Payments 25
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Other Information 27
- ----------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS 27
- ----------------------------------------------------------------------
A. General 27
- ----------------------------------------------------------------------
B. Taxation of Hartford and the Separate Account 27
- ----------------------------------------------------------------------
C. Taxation of Annuities -- General Provisions Affecting
Purchasers Other than Qualified Retirement Plans 27
- ----------------------------------------------------------------------
D. Federal Income Tax Withholding 30
- ----------------------------------------------------------------------
E. General Provisions Affecting Qualified Retirement Plans 30
- ----------------------------------------------------------------------
F. Annuity Purchases by Nonresident Aliens and Foreign
Corporations 30
- ----------------------------------------------------------------------
G. Generation-Skipping Transfers 30
- ----------------------------------------------------------------------
MISCELLANEOUS 30
- ----------------------------------------------------------------------
How Contracts Are Sold 30
- ----------------------------------------------------------------------
Legal Matters 31
- ----------------------------------------------------------------------
Experts 31
- ----------------------------------------------------------------------
More Information 31
- ----------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION 32
- ----------------------------------------------------------------------
APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT
PLANS 33
- ----------------------------------------------------------------------
APPENDIX II -- OPTIONAL DEATH BENEFIT -- EXAMPLES 36
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
GLOSSARY OF SPECIAL TERMS
ACCOUNT: Any of the Sub-Accounts or Fixed Accumulation Features.
ACCUMULATION UNIT: A unit of measure we use to calculate values before we begin
to make annuity payments to you.
ADMINISTRATIVE OFFICE: Located at 200 Hopmeadow Street, Simsbury, Connecticut
06089. The mailing address is: Investment Product Services, P.O. Box 5085,
Hartford, Connecticut 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 $30 charge for annuities having a value of
less than $50,000 on the most recent Contract Anniversary or when the annuity is
Surrendered in full. The charge is deducted proportionately from the Fund in use
at the time.
ANNUITANT: The person on whose life the Contract is based. The Annuitant may not
be changed.
ANNUITY: A Contract issued by us that provides, in exchange for premium
payments, a series of annuity payments.
ANNUITY CALCULATION DATE: The date we calculate your first annuity payment.
ANNUITY COMMENCEMENT DATE: The date we start to make annuity payments to you.
ANNUITY UNIT: A unit of measure we use to calculate the value of the annuity
payments we make to you.
ASSUMED INVESTMENT RETURN ("AIR"): The investment return, either 3%, 5% or 6%,
which we base your variable dollar amount payments on. You select the AIR before
we start to make annuity payments.
BENEFICIARY: The person or persons you designate to receive payment of the death
benefit upon the death of the Contract Owner.
CODE: The Internal Revenue Code of 1986, as amended.
COMMUTED VALUE: The present value of any remaining guaranteed Annuity Payouts.
This amount is calculated using the Assumed Investment Return for variable
dollar amount Annuity Payouts or the underlying rate of return for fixed dollar
amount Annuity Payouts.
CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before we begin making annuity payments.
CONTRACT: The contract is the individual Annuity contract and any endorsements
or riders. If you have a group annuity, you will receive a certificate rather
than a contract.
CONTRACT ANNIVERSARY: The annual anniversary of the date we issued your annuity.
If your contract anniversary falls on a day that is not a Valuation Day, then
the next Valuation Day will be your Contract Anniversary for that year.
CONTRACT OWNER(S) OR YOU: The owner(s) or holder(s) of this Annuity.
CONTRACT VALUE: The total value of your Annuity that we get by adding up the
value of each of your Sub-Accounts and Fixed Accumulation Features on any
Valuation Day.
CONTRACT YEAR: The 12 months following the date you purchased your annuity and
from any Contract Anniversary.
DOLLAR COST AVERAGING ("DCA"): Systematic transfers from one Account to another.
DCA PROGRAM FIXED ACCUMULATION FEATURES: Fixed Accumulation Features we
establish to use for dollar cost averaging programs. These are part of our
General Account.
DEATH BENEFIT: The amount we pay when the Contract Owner or the Annuitant dies.
DUE PROOF OF DEATH: A certified copy of a death certificate, an order of a court
of competent jurisdiction, or any other proof acceptable to us.
FIXED ACCUMULATION FEATURE: This is an account that is part of our General
Account. You may allocate all or a portion of your premium payments or transfer
of Contract Value to this account. In your contract this is defined as "The
Fixed Account."
FUNDS: The Funds described in this Prospectus or any supplements to the
Prospectus.
GENERAL ACCOUNT: Our General Account that includes our company assets and your
annuity assets allocated to any of the Fixed Accumulation Features or DCA
Program Fixed Accumulation Features.
HARTFORD OR WE: Hartford Life and Annuity Insurance Company.
MAXIMUM ANNIVERSARY VALUE: This is the highest Anniversary Value prior the
deceased's 81st birthday or the date of death, if earlier.
PAYEE: The person or party designated by you to receive annuity payments.
PREMIUM TAX: A tax charged by a state or municipality on premium payments.
SEPARATE ACCOUNT: An account that we establish to separate the assets for your
annuity Sub-Accounts from our company assets. Hartford Life and Annuity
Insurance Company Putnam Capital Manager Trust Separate Account Two.
SUB-ACCOUNT: Divisions established within the Separate Account.
SURRENDER: A complete or partial withdrawal or distribution from your annuity.
SURRENDER VALUE: What we pay you if you terminate your annuity before we begin
to make annuity payments.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined as of the close of the New York
Stock Exchange (generally 4:00 p.m. Eastern Time).
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
- --------------------------------------------------------------------------------
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
SALES CHARGE IMPOSED ON PURCHASES (as a percentage of
Premium Payments) None
- ----------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE (as a percentage of Premium
Payments) (1)
First Year (2) 7%
- ----------------------------------------------------------------------------
Second Year 6%
- ----------------------------------------------------------------------------
Third Year 6%
- ----------------------------------------------------------------------------
Fourth Year 5%
- ----------------------------------------------------------------------------
Fifth Year 4%
- ----------------------------------------------------------------------------
Sixth Year 3%
- ----------------------------------------------------------------------------
Seventh Year 2%
- ----------------------------------------------------------------------------
Eighth Year 0%
- ----------------------------------------------------------------------------
ANNUAL MAINTENANCE FEE (3) $30
- ----------------------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average
daily Sub-Account Value)
Mortality and Expense Risk Charge 1.25%
- ----------------------------------------------------------------------------
Administrative Fees 0.15%
- ----------------------------------------------------------------------------
Total Separate Account Annual Expenses 1.40%
- ----------------------------------------------------------------------------
OPTIONAL CHARGES (as a percentage of average daily
Sub-Account Value)
Optional Death Benefit Charge 0.15%
- ----------------------------------------------------------------------------
Total Separate Account Annual Expenses with the Optional
Death Benefit Charge 1.55%
- ----------------------------------------------------------------------------
</TABLE>
(1) Each Premium Payment has its own Contingent Deferred Sales Charge schedule.
See "Charges and Fees -- The Contingent Deferred Sales Charge." The
Contingent Deferred Sales Charge is not assessed on partial Surrenders which
do not exceed the Annual Withdrawal Amount.
(2) Length of time from each Premium Payment.
(3) An annual $30 charge deducted on a Contract Anniversary or upon Surrender if
the Contract Value at either of those times is less than $50,000. It is
deducted proportionately from the Accounts in which you are invested at the
time of the charge.
The purpose of the Fee Table and Examples is to assist you in understanding
various costs and expenses that you will pay directly or indirectly. The Fee
Table and Examples reflect expenses of the Separate Account and underlying
Funds. We will deduct any Premium Taxes that apply.
The Examples 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 Examples 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.
<PAGE>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
as of the Fund's Year End
(as a percentage of average net assets)
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING EXPENSES
EXPENSES (INCLUDING WAIVERS
MANAGEMENT FEES (INCLUDING ANY AND ANY
(INCLUDING ANY WAIVERS) REIMBURSEMENTS) REIMBURSEMENTS)
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT American Government Income Fund (1) (2) 0.41% 0.49% 0.90%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT Asia Pacific Growth Fund 0.80% 0.33% 1.13%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT Diversified Income Fund 0.68% 0.10% 0.78%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT The George Putnam Fund of Boston 0.65% 0.18% 0.83%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT Global Asset Allocation Fund 0.65% 0.12% 0.77%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT Global Growth Fund 0.61% 0.12% 0.73%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT Growth and Income Fund 0.46% 0.04% 0.50%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT Growth Opportunities Fund (1) 0.70% 0.20% 0.90%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT Health Sciences Fund 0.70% 0.13% 0.83%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT High Yield Fund 0.65% 0.07% 0.72%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT Income Fund 0.60% 0.07% 0.67%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth Fund 0.80% 0.22% 1.02%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth and Income Fund 0.80% 0.18% 0.98%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT International New Opportunities Fund 1.00% 0.33% 1.33%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT Investors Fund 0.63% 0.08% 0.71%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT Money Market Fund 0.41% 0.08% 0.49%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT New Opportunities Fund 0.54% 0.05% 0.59%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT New Value Fund 0.70% 0.10% 0.80%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT OTC & Emerging Growth Fund (2) 0.53% 0.37% 0.90%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT Research Fund (2) 0.54% 0.31% 0.85%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT Small Cap Value Fund (3) 0.53% 0.76% 1.29%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income Fund 0.65% 0.06% 0.71%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund 0.65% 0.10% 0.75%
- --------------------------------------------------------------------------------------------------------------------------
Putnam VT Voyager Fund 0.53% 0.04% 0.57%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Putnam VT American Government Income Fund and Putnam VT Growth Opportunities
Fund commenced operations on January 31, 2000; therefore, the Management
Fees, Other Expenses and Total Annual Fund Operating Expenses are based on
estimates for the Funds' first full fiscal year.
(2) Total Annual Fund Operating Expenses for Putnam VT American Government
Income Fund, Putnam VT OTC & Emerging Growth Fund and Putnam VT Research
Fund reflect voluntary reductions and reimbursements through at least
December 31, 2000. Absent voluntary reductions and reimbursements, Total
Annual Fund Operating Expenses would have been as follows:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES EXPENSES EXPENSES
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Putnam VT American Government Income Fund 0.65% 0.49% 1.14%
- -----------------------------------------------------------------------------------------------------
Putnam VT OTC & Emerging Growth Fund 0.70% 0.37% 1.07%
- -----------------------------------------------------------------------------------------------------
Putnam VT Research Fund 0.65% 0.31% 0.96%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(3) Putnam VT Small Cap Value Fund commenced operations on April 30, 1999.
Expenses for Putnam VT Small Cap Value Fund are estimates for the Fund's
fiscal year ending December 31, 2000.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
- --------------------------------------------------------------------------------
EXAMPLE
THE FOLLOWING EXAMPLE ASSUMES THE OPTIONAL DEATH BENEFIT IS NOT SELECTED:
<TABLE>
<CAPTION>
If you Surrender your Contract at the If you annuitize your Contract at the If you do not Surrender your
end of the applicable time period you end of the applicable time period you Contract, you would pay the
would pay the following expenses on would pay the following expenses on following expenses on a $1,000
a $1,000 investment, assuming a 5% a $1,000 investment, assuming a 5% investment, assuming a 5% annual
annual return on assets: annual return on assets: return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
Putnam American
Government
Income $85 $130 N/A N/A $24 $74 N/A N/A $24 $74 N/A N/A
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Asia
Pacific
Growth $87 $137 $178 $295 $26 $81 $138 $295 $27 $82 $139 $295
-----------------------------------------------------------------------------------------------------------------------------------
Putnam
Diversified
Income $84 $126 $161 $260 $22 $70 $120 $259 $23 $71 $121 $260
-----------------------------------------------------------------------------------------------------------------------------------
Putnam The
George Putnam
of Boston $84 $128 $163 $265 $23 $72 $123 $264 $23 $72 $124 $265
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Global
Asset
Allocation $84 $126 $160 $259 $22 $70 $120 $258 $23 $70 $121 $259
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Global
Growth $83 $125 $158 $254 $22 $69 $118 $254 $22 $69 $119 $254
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Growth
and Income $81 $118 $147 $230 $19 $61 $106 $229 $20 $62 $107 $230
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Growth
Opportunities $85 $130 N/A N/A $24 $74 N/A N/A $24 $74 N/A N/A
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Health
Sciences $84 $128 $163 $265 $23 $72 $123 $264 $23 $72 $124 $265
-----------------------------------------------------------------------------------------------------------------------------------
Putnam High
Yield $83 $125 $158 $253 $22 $68 $117 $253 $22 $69 $118 $253
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Income $83 $123 $155 $248 $21 $67 $115 $247 $22 $67 $115 $248
-----------------------------------------------------------------------------------------------------------------------------------
Putnam
International
Growth $86 $133 $173 $284 $25 $78 $133 $283 $25 $78 $134 $284
-----------------------------------------------------------------------------------------------------------------------------------
Putnam
International
Growth and
Income $86 $132 $171 $280 $24 $76 $131 $279 $25 $77 $131 $280
-----------------------------------------------------------------------------------------------------------------------------------
Putnam
International
New
Opportunities $89 $143 $188 $315 $28 $87 $149 $314 $29 $88 $149 $315
-----------------------------------------------------------------------------------------------------------------------------------
Putnam
Investors $83 $124 $157 $252 $22 $68 $117 $252 $22 $69 $118 $252
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Money
Market $81 $118 $146 $229 $19 $61 $105 $228 $20 $62 $106 $229
-----------------------------------------------------------------------------------------------------------------------------------
Putnam New
Opportunities $82 $121 $151 $240 $20 $64 $111 $239 $21 $65 $111 $240
-----------------------------------------------------------------------------------------------------------------------------------
Putnam New
Value $84 $127 $162 $262 $23 $71 $122 $261 $23 $71 $122 $262
-----------------------------------------------------------------------------------------------------------------------------------
Putnam OTC &
Emerging
Growth $85 $130 $167 $273 $24 $74 $127 $272 $24 $75 $128 $273
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Research $85 $128 $164 $267 $23 $72 $124 $266 $24 $73 $125 $267
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Small
Cap Value $89 $141 $186 $311 $28 $86 $147 $310 $28 $86 $147 $311
-----------------------------------------------------------------------------------------------------------------------------------
Putnam
Utilities
Growth and
Income $83 $124 $157 $252 $22 $68 $117 $252 $22 $69 $118 $252
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Vista $84 $126 $159 $257 $22 $69 $119 $256 $23 $70 $120 $257
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Voyager $82 $120 $150 $238 $20 $64 $110 $237 $21 $64 $110 $238
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
THE FOLLOWING EXAMPLE ASSUMES THE OPTIONAL DEATH BENEFIT IS SELECTED:
<TABLE>
<CAPTION>
If you Surrender your Contract at the If you annuitize your Contract at the If you do not Surrender your
end of the applicable time period you end of the applicable time period you Contract, you would pay the
would pay the following expenses on would pay the following expenses on following expenses on a $1,000
a $1,000 investment, assuming a 5% a $1,000 investment, assuming a 5% investment, assuming a 5% annual
annual return on assets: annual return on assets: return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
Putnam American
Government
Income $87 $134 N/A N/A $25 $78 N/A N/A $26 $79 N/A N/A
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Asia
Pacific
Growth $89 $141 $185 $310 $27 $85 $146 $309 $28 $86 $147 $310
-----------------------------------------------------------------------------------------------------------------------------------
Putnam
Diversified
Income $85 $131 $168 $275 $24 $75 $128 $274 $24 $75 $129 $275
-----------------------------------------------------------------------------------------------------------------------------------
Putnam The
George Putnam
of Boston $86 $132 $171 $280 $24 $76 $131 $279 $25 $77 $131 $280
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Global
Asset
Allocation $85 $131 $168 $274 $24 $74 $128 $273 $24 $75 $128 $274
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Global
Growth $85 $129 $166 $270 $23 $73 $126 $269 $24 $74 $126 $270
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Growth
and Income $83 $123 $154 $246 $21 $66 $114 $245 $22 $67 $114 $246
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Growth
Opportunities $87 $134 N/A N/A $25 $78 N/A N/A $26 $79 N/A N/A
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Health
Sciences $86 $132 $171 $280 $24 $76 $131 $279 $25 $77 $131 $280
-----------------------------------------------------------------------------------------------------------------------------------
Putnam High
Yield $85 $129 $165 $269 $23 $73 $125 $268 $24 $74 $126 $269
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Income $84 $128 $163 $264 $23 $71 $123 $263 $23 $72 $123 $264
-----------------------------------------------------------------------------------------------------------------------------------
Putnam
International
Growth $88 $138 $180 $299 $26 $82 $140 $299 $27 $83 $141 $299
-----------------------------------------------------------------------------------------------------------------------------------
Putnam
International
Growth and
Income $87 $137 $178 $295 $26 $81 $138 $295 $27 $82 $139 $295
-----------------------------------------------------------------------------------------------------------------------------------
Putnam
International
New
Opportunities $91 $147 $195 $330 $30 $92 $156 $329 $30 $92 $157 $330
-----------------------------------------------------------------------------------------------------------------------------------
Putnam
Investors $85 $129 $165 $268 $23 $73 $125 $267 $24 $73 $125 $268
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Money
Market $82 $122 $154 $245 $21 $66 $113 $244 $22 $66 $114 $245
-----------------------------------------------------------------------------------------------------------------------------------
Putnam New
Opportunities $83 $125 $159 $255 $22 $69 $118 $255 $23 $70 $119 $255
-----------------------------------------------------------------------------------------------------------------------------------
Putnam New
Value $86 $131 $169 $277 $24 $75 $129 $276 $25 $76 $130 $277
-----------------------------------------------------------------------------------------------------------------------------------
Putnam OTC &
Emerging
Growth $87 $135 $175 $288 $25 $79 $135 $288 $26 $79 $136 $288
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Research $86 $133 $172 $282 $25 $77 $132 $281 $25 $78 $132 $282
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Small
Cap Value $91 $146 $193 $326 $29 $90 $154 $325 $30 $91 $155 $326
-----------------------------------------------------------------------------------------------------------------------------------
Putnam
Utilities
Growth and
Income $85 $129 $165 $268 $23 $73 $125 $267 $24 $73 $125 $268
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Vista $85 $130 $167 $272 $24 $74 $127 $271 $24 $74 $127 $272
-----------------------------------------------------------------------------------------------------------------------------------
Putnam Voyager $83 $125 $158 $253 $22 $68 $117 $253 $22 $69 $118 $253
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
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 American
Government Income Sub-Account and the Putnam Growth Opportunities Sub-Account
because, as of December 31, 1999, the Sub-Accounts had not yet commenced
operations.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
PUTNAM AMERICAN GOVERNMENT INCOME SUB-ACCOUNT
Accumulation Unit Value at beginning of period N/A
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) N/A
- --------------------------------------------------------------------------------
PUTNAM ASIA PACIFIC GROWTH SUB-ACCOUNT (INCEPTION DATE MAY
1, 1995)
Accumulation Unit Value at beginning of period $ 8.552
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $17.505
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 8,029
- --------------------------------------------------------------------------------
PUTNAM DIVERSIFIED INCOME SUB-ACCOUNT (INCEPTION DATE
SEPTEMBER 5, 1993)
Accumulation Unit Value at beginning of period $12.489
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.532
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 22,092
- --------------------------------------------------------------------------------
PUTNAM THE GEORGE PUTNAM FUND OF BOSTON SUB-ACCOUNT
(INCEPTION DATE MAY 1, 1995)
Accumulation Unit Value at beginning of period $10.242
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.063
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 14,825
- --------------------------------------------------------------------------------
PUTNAM GLOBAL ASSET ALLOCATION SUB-ACCOUNT (INCEPTION DATE
FEBRUARY 1, 1988)
Accumulation Unit Value at beginning of period $30.256
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $33.370
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 15,126
- --------------------------------------------------------------------------------
PUTNAM GLOBAL GROWTH SUB-ACCOUNT (INCEPTION DATE MAY 1,
1995)
Accumulation Unit Value at beginning of period $24.940
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $40.580
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 40,918
- --------------------------------------------------------------------------------
PUTNAM GROWTH AND INCOME SUB-ACCOUNT (INCEPTION DATE
FEBRUARY 1, 1988)
Accumulation Unit Value at beginning of period $45.567
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $45.646
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 100,158
- --------------------------------------------------------------------------------
PUTNAM GROWTH OPPORTUNITIES SUB-ACCOUNT
Accumulation Unit Value at beginning of period N/A
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) N/A
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
PUTNAM HEALTH SCIENCES SUB-ACCOUNT (INCEPTION DATE MAY 1,
1995)
Accumulation Unit Value at beginning of period $10.849
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.277
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 12,308
- --------------------------------------------------------------------------------
PUTNAM HIGH YIELD SUB-ACCOUNT (INCEPTION DATE FEBRUARY 1,
1988)
Accumulation Unit Value at beginning of period $23.742
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $24.799
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 20,315
- --------------------------------------------------------------------------------
PUTNAM INCOME SUB-ACCOUNT (INCEPTION DATE FEBRUARY 1, 1988)
Accumulation Unit Value at beginning of period $21.305
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $20.574
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 16,827
- --------------------------------------------------------------------------------
PUTNAM INTERNATIONAL GROWTH SUB-ACCOUNT (INCEPTION DATE
JANUARY 2, 1997)
Accumulation Unit Value at beginning of period $13.403
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $21.164
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 16,044
- --------------------------------------------------------------------------------
PUTNAM INTERNATIONAL GROWTH AND INCOME SUB-ACCOUNT
(INCEPTION DATE JANUARY 2, 1997)
Accumulation Unit Value at beginning of period $12.922
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $15.876
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 14,449
- --------------------------------------------------------------------------------
PUTNAM INTERNATIONAL NEW OPPORTUNITIES SUB-ACCOUNT
(INCEPTION DATE JANUARY 2, 1997)
Accumulation Unit Value at beginning of period $11.226
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $22.468
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 8,347
- --------------------------------------------------------------------------------
PUTNAM INVESTORS SUB-ACCOUNT (INCEPTION DATE MAY 1, 1995)
Accumulation Unit Value at beginning of period $11.432
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $14.669
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 30,741
- --------------------------------------------------------------------------------
PUTNAM MONEY MARKET SUB-ACCOUNT (INCEPTION DATE FEBRUARY 1,
1988)
Accumulation Unit Value at beginning of period $ 1.538
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 1.591
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 266,227
- --------------------------------------------------------------------------------
PUTNAM NEW OPPORTUNITIES SUB-ACCOUNT (INCEPTION DATE MAY 2,
1994)
Accumulation Unit Value at beginning of period $24.805
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $41.424
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 62,624
- --------------------------------------------------------------------------------
PUTNAM NEW VALUE SUB-ACCOUNT (INCEPTION DATE JANUARY 2,
1997)
Accumulation Unit Value at beginning of period $12.151
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.014
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 12,278
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
PUTNAM OTC & EMERGING GROWTH SUB-ACCOUNT (INCEPTION DATE MAY
1, 1995)
Accumulation Unit Value at beginning of period $ 9.980
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $22.292
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 5,012
- --------------------------------------------------------------------------------
PUTNAM RESEARCH SUB-ACCOUNT (INCEPTION DATE OCTOBER 1, 1998)
Accumulation Unit Value at beginning of period $12.497
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $15.712
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 4,978
- --------------------------------------------------------------------------------
PUTNAM SMALL CAP VALUE SUB-ACCOUNT (INCEPTION DATE APRIL 30,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.251
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 676
- --------------------------------------------------------------------------------
PUTNAM UTILITIES GROWTH AND INCOME SUB-ACCOUNT (INCEPTION
DATE MAY 4, 1992)
Accumulation Unit Value at beginning of period $22.826
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $22.360
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 19,114
- --------------------------------------------------------------------------------
PUTNAM VISTA SUB-ACCOUNT (INCEPTION DATE JANUARY 2, 1997)
Accumulation Unit Value at beginning of period $14.316
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $21.587
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 14,524
- --------------------------------------------------------------------------------
PUTNAM VOYAGER SUB-ACCOUNT (INCEPTION DATE FEBRUARY 1, 1988)
Accumulation Unit Value at beginning of period $55.426
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $86.479
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 52,779
- --------------------------------------------------------------------------------
</TABLE>
Accumulation Unit Values do not include the Optional Death Benefit. If you elect
the Optional Death Benefit, Accumulation Unit Values would be lower.
<PAGE>
12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
SUMMARY
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 $1,000 and subsequent premium payments must be at least $500. The minimum
premium payment requirements may differ if you are participating in our
automatic investing ("InvestEase-Registered Trademark-") program.
- For a limited time, usually within ten days after you receive your annuity,
you may cancel your annuity without paying a Contingent Deferred Sales
Charge. You 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?
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
You don't pay a sales charge when you purchase your Annuity. We may charge you a
CDSC when you partially or fully Surrender your Annuity. The CDSC will depend on
the amount you choose to Surrender and the length of time the Premium Payments
you made have been in your Annuity. The percentage used to calculate the CDSC is
equal to:
<TABLE>
<CAPTION>
NUMBER OF YEARS CONTINGENT
FROM PREMIUM DEFERRED SALES
PAYMENT CHARGE
<S> <C>
- -------------------------------
One Year 7%
- -------------------------------
Two Years 6%
- -------------------------------
Three Years 6%
- -------------------------------
Four Years 5%
- -------------------------------
Five Years 4%
- -------------------------------
Six Years 3%
- -------------------------------
Seven Years 2%
- -------------------------------
Eight Years 0%
- -------------------------------
</TABLE>
IS THERE AN ANNUAL MAINTENANCE FEE?
Yes. We deduct this $30 fee each year on your Contract Anniversary or when you
completely Surrender your annuity, if, on either of those dates, the value of
your annuity is less than $50,000.
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:
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 is .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. See the Annual
Operation Expense Table for more complete information and the funds'
prospectuses attached to this Prospectus.
If an Optional Death Benefit is elected an additional charge is deducted daily
from your Contract Value and is equal to 0.15% per year of your Contract Value
invested in the Funds.
CAN I TAKE OUT ANY OF MY MONEY?
You can partially or fully Surrender your Contract subject to a Contingent
Deferred Sales Charge (CDSC). You can partially Surrender your Contract without
any CDSC applied to the Surrender under the following conditions:
- - Surrenders which don't exceed 15% of premium payments per Contract Year
(Annual Withdrawal Amount);
- - Surrenders made from premium payments invested more than seven years;
- - 100% Surrender of earnings after the seventh Contract Year;
- - Surrenders under the nursing home waiver (described as Eligible Confinement in
the Contract); or
- - Surrenders eligible for disability waiver under a group qualified plan.
WILL HARTFORD PAY A DEATH BENEFIT?
Your Contract has a Death Benefit and we offer an Optional Interest Accumulation
Death Benefit ("Optional Death Benefit") that you can elect for an additional
fee. There is a Death Benefit if the Contract Owner, joint owner or Annuitant,
die before we begin to make annuity payments. The Death Benefit will remain
invested in the Sub-Accounts according to your last instructions (unless
otherwise mutually specified by your Beneficiaries) and will be subject to
market fluctuations.
IF YOU DO NOT ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments you have made to us reduced by any
subsequent Surrenders;
- - 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. 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.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
IF YOU ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments you have made to us reduced by any
subsequent Surrenders;
- - The Contract Value of your annuity;
- - Your Maximum Anniversary Value, which is the highest Anniversary Value before
the deceased's 81st birthday or date of death; or
- - Your Interest Accumulation Value.
The INTEREST ACCUMULATION VALUE is calculated by accumulating interest on your
premium payments at a rate of 5% per year up to the deceased's 81st birthday or
date of death, assuming you have not taken any Surrenders. If you have taken any
Surrenders, the 5% will be accumulated on your premium payments, but there will
be an adjustment for any of the Surrenders. This adjustment will reduce the
Optional Death Benefit proportionally for the Surrenders. The Optional Death
Benefit is limited to a maximum of 200% of premium payments, less proportional
adjustments for any Surrenders. For examples on how the Optional Death Benefit
is calculated see "Appendix II". If you elect the Optional Death Benefit, we
will deduct an additional charge daily from your Contract Value equal to .15%
per year of the Sub-Account value. The Optional Death Benefit may not be
available if the Contract Owner or Annuitant is age 75 or older. For Contracts
issued in the state of Washington, the Optional Death Benefit is not available.
If you elect the Optional Death Benefit at any time after you purchase your
annuity, the Optional Death Benefit calculation will be different.
SPOUSAL CONTRACT CONTINUATION -- If a Beneficiary is the Contract Owner's
spouse, that portion of the Contract for which the spouse is considered the
Beneficiary will continue with the spouse as Contract Owner, unless the spouse
elects to receive the Death Benefit as a lump sum payment. If the Contract
continues with the spouse as Contract Owner, we will adjust the Contract Value
to the amount that we would have paid as the Death Benefit payment, had the
spouse elected to receive the Death Benefit as a lump sum payment or as an
annuity payment option. Spousal Contract Continuation will only apply one time
for each Contract.
WHAT ANNUITY PAYMENT OPTIONS ARE AVAILABLE?
When you purchase your annuity, you may choose one of the following annuity
payment options, or receive a lump sum payment:
LIFE ANNUITY where we make scheduled payments for the Annuitant's life.
- Payments under this option stop upon the death of the Annuitant, even if the
Annuitant dies after one payment.
LIFE ANNUITY WITH CASH REFUND where we make payments during the life of the
Annuitant and when the Annuitant dies, we pay the remaining value to the
Beneficiary. The remaining value is calculated at the time we receive Due Proof
of Death by subtracting the annuity payments already made from the Contract
Value, less any applicable Premium Taxes, applied to this annuity payment
option.
- This option is only available if you select a variable dollar amount payment
with the 5% AIR or fixed dollar amount annuity payments.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN where we make payments for the
life of the Annuitant but you are at least guaranteed payments for a time period
you select which is a minimum of 5 years and a maximum of 100 years minus your
annuitant's age.
- If the Annuitant dies prior to the end of the period selected, we will pay
the value of the remaining payments to your Beneficiary, either in a lump
sum or we will continue payments until the end of the period selected.
JOINT AND LAST SURVIVOR ANNUITY where we make payments during the lifetimes of
the Annuitant and another designated individual called the Joint Annuitant. At
the time of electing this annuity payment option, the Contract Owner may elect
reduced payments over the remaining lifetime of the survivor.
- Payments under this option stop upon the death of the Annuitant and Joint
Annuitant, even if the Annuitant and Joint Annuitant die after one payment.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN where we
make payments during the lifetime of the Annuitant and a Joint Annuitant, and we
guarantee that those payments for a time period you select which is a minimum of
5 years and a maximum 100 years minus the younger Annuitant's age. At the time
of electing this Annuity Option, the Contract Owner may elect reduced payments
over the remaining lifetime of the survivor.
- If the Annuitant and the Joint Annuitant die prior to the end of the period
selected, we will pay the value of the remaining payments to your
Beneficiary, either in a lump sum or we will continue payments until the end
of the period selected.
PAYMENTS FOR A PERIOD CERTAIN where we agree to make payments for a specified
time. The minimum period that you can select is 10 years during the first two
Contract Years and 5 years after the second Contract Anniversary. The maximum
period that you can select is 100 years minus your Annuitant's age.
- If you select this option under a variable dollar amount payment, YOU MAY
SURRENDER YOUR ANNUITY after annuity payments have started and we will give
you the present value of the remaining payments less any applicable
Contingent Deferred Sales Charge.
- If the Annuitant dies prior to the end of the period selected, we will pay
the value of the remaining payments to your Beneficiary, either in a lump
sum or
<PAGE>
14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
we will continue payments until the end of the period selected.
You must begin to take payments before the Annuitant's 90th birthday or the end
of the 10th Contract Year, which ever comes later, unless you elect a later date
to begin receiving payments subject to the laws and regulations then in effect
and our approval. If you do not tell us what annuity payment option you want
before that time, we will pay you under the Life Annuity with a 10 year period
certain. You and Hartford can agree to start payments at a later date if the
laws in effect allow us to defer payment and we agree to allow you to defer.
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, 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>
EFFECTIVE DATE
RATING AGENCY OF RATING RATING BASIS OF RATING
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
A.M. Best and
Company, Inc. 1/1/99 A+ Financial performance
- --------------------------------------------------------------------------------
Standard & Poor's 8/1/99 AA Insurer financial strength
- --------------------------------------------------------------------------------
Duff & Phelps 7/1/99 AA+ Claims paying ability
- --------------------------------------------------------------------------------
</TABLE>
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 March 1, 1993 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 the benefit of you and other Contract Owners, and the persons
entitled to the payments 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 which
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 AND THE INVESTMENT ADVISER
- --------------------------------------------------------------------------------
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
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 AMERICAN GOVERNMENT INCOME FUND -- Seeks high current income with
preservation of capital as its secondary objective.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
PUTNAM VT ASIA PACIFIC GROWTH FUND -- Seeks capital appreciation.
PUTNAM VT DIVERSIFIED INCOME FUND -- Seeks as high a level of current income as
Putnam Management believes is consistent with capital preservation. The Fund
invests in higher-yielding, lower-rated securities commonly referred to as "junk
bonds." See the special considerations for, and risks associated with,
investments in these 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
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.
PUTNAM VT GLOBAL GROWTH FUND -- Seeks capital appreciation.
PUTNAM VT GROWTH AND INCOME FUND -- Seeks capital growth and current income.
PUTNAM VT GROWTH OPPORTUNITIES FUND -- Seeks capital appreciation.
PUTNAM VT HEALTH SCIENCES FUND -- Seeks capital appreciation.
PUTNAM VT HIGH YIELD FUND -- Seeks high current income. Capital growth is a
secondary goal when consistent with achieving high current income. The Fund
invests in higher-yielding, lower-rated securities commonly referred to as "junk
bonds." See the special considerations for, and risks associated with,
investments in these securities described in the Fund prospectus.
PUTNAM VT INCOME FUND -- Seeks high current income consistent with what Putnam
Management believes to be prudent risk.
PUTNAM VT INTERNATIONAL GROWTH FUND -- Seeks capital appreciation.
PUTNAM VT INTERNATIONAL GROWTH AND INCOME FUND -- Seeks capital growth. Current
income is a secondary objective.
PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND -- Seeks long term capital
appreciation.
PUTNAM VT INVESTORS FUND -- Seeks long-term growth of capital and any increased
income that results from this growth.
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.
PUTNAM VT NEW OPPORTUNITIES FUND -- Seeks long-term capital appreciation.
PUTNAM VT NEW VALUE FUND -- Seeks long-term capital appreciation.
PUTNAM VT OTC & EMERGING GROWTH FUND -- Seeks capital appreciation.
PUTNAM VT RESEARCH FUND -- Seeks capital appreciation.
PUTNAM VT SMALL CAP VALUE FUND -- Seeks capital appreciation.
PUTNAM VT UTILITIES GROWTH AND INCOME FUND -- Seeks capital growth and current
income.
PUTNAM VT VISTA FUND -- Seeks capital appreciation.
PUTNAM VT VOYAGER FUND -- Seeks capital appreciation.
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.
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 are 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 contracts, 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
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 tell us how
to vote the Fund shares held for your Contract.
- - Arrange for the handling and tallying of proxies received from Contract
Owners.
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- - 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 Payments 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 may, in our sole discretion, establish new Funds. New Funds will be
will be made available to existing Contract Owners as we determined 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 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 such changes in the Contract as may be necessary or appropriate to reflect
such substitution or change. If we decide that it is in the best interest of the
Contract 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.
ADMINISTRATIVE SERVICES -- Hartford has entered into agreements with the
investment advisers or distributors of many of the Funds. Under the terms of
these agreements, Hartford provides administrative services and the Funds pay a
fee to Hartford that is usually based on an annual percentage of the average
daily net assets of the Funds. These agreements may be different for each Fund
or each Fund family.
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 and assumes that the Optional Death Benefit
has not been elected.
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, divided by the unit value on
the last day of the period. This figure reflects the recurring charges at the
Separate Account level including the Annual Maintenance Fee.
The Putnam Money Market 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 reflect the recurring charges at the Separate Account level
including the Annual Maintenance Fee.
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 value 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 Contracts and the
characteristics of and market for such alternatives.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
- --------------------------------------------------------------------------------
THE FIXED ACCUMULATION FEATURES
IMPORTANT INFORMATION YOU SHOULD KNOW: THIS PORTION OF THE CONTRACT RELATING TO
THE FIXED ACCUMULATION FEATURES IS NOT REGISTERED UNDER THE SECURITIES ACT OF
1933 ("1933 ACT") AND THE FIXED ACCUMULATION FEATURES ARE NOT REGISTERED AS
INVESTMENT COMPANIES UNDER THE INVESTMENT COMPANY ACT OF 1940 ("1940 ACT"). NONE
OF THE FIXED ACCUMULATION FEATURES OR ANY OF THEIR INTERESTS ARE 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 FEATURES. THE FOLLOWING DISCLOSURE ABOUT THE FIXED
ACCUMULATION FEATURES MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS
OF THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURE.
Payments and Contract Values allocated to a Fixed Accumulation Feature become a
part of our general assets. We invest the assets of the General Account in
accordance with applicable law governing the investments of insurance company
General Accounts. We have more than one Fixed Accumulation Feature. The standard
Fixed Accumulation Feature (the "Fixed Accumulation Feature") and then a number
of DCA Program Fixed Accumulation Features, which we collectively refer to as
the "Fixed Accumulation Features".
Currently, 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, in our sole discretion, to credit
interest at a rate in excess of 3% per year. You assume the risk that interest
credited to the Fixed Accumulation Feature may not exceed the minimum guarantee
of 3% for any given year.
We will periodically publish the Fixed Accumulation Feature interest rates
currently in effect. There is no specific formula for the determination of
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.
From time to time, we may credit increased interest rates to Contract Owners
under certain programs established at our sole discretion.
DOLLAR COST AVERAGING PLUS ("DCA PLUS") PROGRAMS -- These programs will use
designated DCA Program Fixed Accumulation Features. Currently, Contract Owners
may enroll in a special pre-authorized transfer program known as our Dollar Cost
Averaging Plus Program (the "Program"). Under this Program, Contract Owners who
enroll may allocate a minimum of $5,000 of their payment into the appropriate
DCA Program Fixed Accumulation Feature (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 payments and accrued interest must be transferred from the DCA
Program Fixed Accumulation Feature in use 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 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, which will generally be less than the prior monthly
transfer amounts.
The pre-authorized transfers will begin within 15 days after we receive the
initial Program payment and 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, we will transfer any remaining amounts to the Fixed
Accumulation Feature and 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, unless otherwise directed by You.
You may only have one dollar cost averaging program in place at one time, this
means one standard dollar cost averaging plan or one Dollar Cost Averaging Plus
Program.
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 of
enrollment in the Program, you will no longer receive the increased interest
rate and unless we receive instructions to the contrary, the amounts remaining
in the DCA Program Fixed Accumulation Feature may be transferred to the Fixed
Accumulation Feature and accrue the interest rate currently in effect.
Transfers made under a Dollar Cost Averaging Program do not count towards the
twelve transfers each Contract Year that we allow without charge and are not
subject to our rule that prohibits any two transfers from occurring on
Consecutive Valuation Days.
We reserve the right to discontinue, modify or amend the Program or any other
interest rate program established by Hartford. Any change to the Program will
not affect Contract Owners currently enrolled in the Program.
<PAGE>
18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
THE CONTRACT
THE CONTRACT OFFERED -- The Contracts are individual or group tax-deferred
variable annuity contracts. They are designed for retirement planning purposes
and may be purchased by any individual, group or trust, including; (a) any
trustee or custodian for a retirement plan qualified under Sections 401(a), or
403(a) of the Internal Revenue Code (which includes Section 401(k));
(b) annuity purchase plans adopted by public school systems and certain
tax-exempt organizations according to Section 403(b) of the Code;
(c) Individual Retirement Annuities adopted according to Section 408 of the
Code; (d) employee pension plans established for employees by a state, a
political subdivision of a state, or an agency or instrumentality of either a
state or a political subdivision of a state, and (e) certain eligible deferred
compensation plans as defined in Section 457 of the Code ("Qualified
Contracts"). If you are purchasing the Contract for use in an IRA or other
qualified retirement plan, you should consider other features of the Contract
besides tax deferral, since any investment vehicle used within an IRA or other
qualified plan receives tax deferred treatment under the Code.
PURCHASING A CONTRACT -- A prospective Contract Owner may purchase a Contract by
completing and submitting an application or an order request along with an
initial premium payment to the Administrative Office of the Company. The maximum
age for Annuitant, Owner and Joint Owner on the Contract Issue Date is 85.
Generally, the minimum premium payment is $1,000. The minimum subsequent premium
payment is $500. Certain plans may be allowed to make smaller periodic premium
payments. Unless we give our prior approval, we will not accept a premium
payment in excess of $1,000,000. Each premium payment, which is your premium
payment after the deduction of any applicable Premium Taxes, may be split among
the various Accounts subject to minimum amounts then in effect. For Contracts
issued in Oregon, premium payments will only be accepted prior to the third
Contract Anniversary. For Contracts issued in Massachusetts, subsequent premium
payments will only be accepted until the Annuitant's 63rd birthday or the third
Contract Anniversary, whichever is later. We will send you a confirmation notice
upon receipt and acceptance of your premium payment.
In Oregon, Premium Payments are only allowed in the first three Contract Years.
In Massachusetts, Premium Payments are only allowed in the first three Contract
Years or until the Contract Owner turns 63, whichever is later.
RIGHT TO EXAMINE THE CONTRACT -- If you are not satisfied with your purchase,
you may cancel the Contract by returning it within 10 days (or longer in some
states) after you receive it. You must send a written request for cancellation
along with the Contract. We will, without deduction for any CDSC normally
assessed, pay you an amount equal to the Contract Value. YOU BEAR THE INVESTMENT
RISK DURING THE PERIOD PRIOR TO OUR RECEIPT OF YOUR REQUEST FOR CANCELLATION. We
will refund the premium paid only for Individual Retirement Annuities, if
returned within seven days of receipt, and in those states where required by
law.
CREDITING AND VALUATION -- Your premium payment, which is the balance remaining
after the deduction of any Premium Tax, is credited to your Contract within two
business days of receipt by us at our Administrative Office of a properly
completed application or an order to purchase a Contract and the premium
payment. The payment will be credited to the Accounts according to the
instructions we receive from you.
If your application or other information is incomplete when received, your
payment will be credited to the Accounts within five business days of receipt of
complete information. If the payment is not credited within five business days,
it will be immediately returned to you unless you have been informed of the
delay and tell us not to return it.
Subsequent premium payments are priced on the Valuation Day we receive the
payment in our Administrative Office, provided it is received before the New
York Stock Exchange closes. Unless otherwise specified, We will allocate any
subsequent payments to Accounts according to your most recent instructions.
CONTRACT VALUE -- BEFORE THE ANNUITY
COMMENCEMENT DATE
Your Contract Value reflects interest rate credited any amounts allocated to the
Fixed Accumulation Features and the investment performance of the Sub-Accounts
where you have payments allocated.
SUB-ACCOUNT VALUES -- Your Sub-Account Values on the date we issue your Contract
is the amount of your premium payment allocated to any Sub-Account. After that,
we determine your Sub-Account value by determining the Accumulation Unit value
for each Sub-Account, and then multiplying that value by the number of those
units. Sub-Account Value reflects any variation of the interest income,
dividends, net capital gains or losses, realized or unrealized, and any amounts
transferred into or out of that Sub-Account.
ACCUMULATION UNITS -- 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.
ACCUMULATION UNIT VALUE -- The Accumulation Unit value for each Sub-Account was
arbitrarily set initially at $1 when the Sub-Account began operations. After
that, the Accumulation Unit value for each Sub-Account will equal (a) the
Accumulation Unit value at the end of the preceding Valuation Day multiplied by
(b) the Net Investment Factor (see the definition below) for the Valuation Day
for which the Accumulation Unit value is being calculated.
You will be advised, at least semiannually, of the number of Accumulation Units
credited to each Sub-Account, the current Accumulation Unit values, and the
total value of your Contract.
THE NET INVESTMENT FACTOR (BEFORE AND AFTER THE ANNUITY COMMENCEMENT
DATE) -- The Net Investment Factor is an
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
- --------------------------------------------------------------------------------
index applied to measure the investment performance of a Sub-Account from one
Valuation Period to the next. For each Sub-Account, the Net Investment Factor
reflects the investment performance of the Fund in which that Sub-Account
invests and the charges assessed against that Sub-Account for a Valuation
Period. The Net Investment Factor is calculated by dividing (a) by (b) and
subtracting (c) from the result, where:
- - Is the Net Asset Value of the Fund held in that Sub-Account, determined at the
end of the current Valuation Period (plus the per share amount of any
dividends or capital gains distributions made by that Fund);
- - Is the Net Asset Value of the Fund held in the Sub-Account, determined at the
beginning of the Valuation Period;
- - Is a daily factor representing the mortality and expense risk charge and any
optional charges deducted from the Sub-Account, adjusted for the number of
days in the Valuation Period.
CONTRACT VALUE TRANSFERS BEFORE AND AFTER THE ANNUITY COMMENCEMENT DATE
You may transfer your Contract Values from one or more Accounts to another
Account free of charge. WE RESERVE THE RIGHT TO LIMIT THE NUMBER OF TRANSFERS TO
12 PER CONTRACT YEAR, WITH NO 2 TRANSFERS OCCURRING ON CONSECUTIVE VALUATION
DAYS. There may be limitations on transfers to and from the Fixed Accumulation
Features that are described in your Contract. Some states may allow us to limit
the dollar amount transferred.
TELEPHONE AND INTERNET TRANSFERS -- In most states, you, or your
attorney-in-fact acting pursuant to a power of attorney, can make transfers:
- - By calling us at (800) 521-0538
- - Electronically, when available, by the Internet through our website at
http://www.putnaminv.com
Transfer instructions received by telephone on any Valuation Day before the
close of the New York Stock Exchange will be carried out that day. Otherwise,
the instructions will be carried out at the close of the New York Stock Exchange
on the next Valuation Day.
Transfer instructions you send electronically are considered to be received by
Hartford at the time and date stated on the electronic acknowledgement Hartford
returns to you. If the time and date indicated on the acknowledgement is before
the close of the New York Stock Exchange on a Valuation Day, the instructions
will be carried out that day. Otherwise, the instructions will be carried out at
the close of the New York Stock Exchange the next Valuation Day. If you do not
receive an electronic acknowledgement, you should telephone us as soon as
possible.
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.
Telephone or Internet transfer requests may currently only be cancelled by
calling us at (800) 521-0538 before the close of the New York Stock Exchange.
Hartford, our agents or our affiliates are not responsible for losses resulting
from telephone or electronic requests that we believe are genuine. We will use
reasonable procedures to confirm that instructions received by telephone or
through our website are genuine, including a requirement that contract owners
provide certain identification information, including a personal identification
number. We record all telephone transfer instructions. We reserve the right to
suspend, modify, or terminate telephone or electronic transfer privileges at any
time.
We may permit you to pre-authorize transfers under certain circumstances.
Transfers between the Accounts may be made both before and after the Annuity
Commencement Date. Generally, the minimum allocation to any Sub-Account may not
be less than $500. All percentage (%) allocations must be in whole numbers
(e.g., 1%). No minimum balance is presently required in any Account.
The right to reallocate Contract Values is subject to modification if we
determine, in our sole opinion, that the exercise of that right by one or more
Contract Owners is, or would be, to the disadvantage of other Contract Owners.
Any modification could be applied to transfers to or from some or all of the
Accounts and could include, but not be limited to, the requirement of a minimum
time period between each transfer, not accepting transfer requests of an agent
acting under a power of attorney on behalf of more than one Contract Owner, or
limiting the dollar amount that may be transferred between the Sub-Accounts by
you at any one time. SUCH RESTRICTIONS MAY BE APPLIED IN ANY MANNER REASONABLY
DESIGNED TO PREVENT ANY USE OF THE TRANSFER RIGHT WHICH WE CONSIDER TO BE TO THE
DISADVANTAGE OF OTHER CONTRACT OWNERS.
For Contracts issued in THE STATES OF FLORIDA, MARYLAND OR OREGON, the
reservation of rights set forth in the preceding paragraph is limited to: (i)
requiring up to a maximum of 10 Valuation Days between each transfer; (ii)
limiting the amount to be transferred on any one Valuation Day to no more than
$2 million; and (iii) upon 30 days prior written notice, to only accepting
transfer instructions from you and not from your representative, agent or person
acting under a power of attorney for you.
Currently, we will not accept instructions from agents acting under a power of
attorney of multiple Contract Owners whose Accounts aggregate more than $2
million, unless the agent has entered into a third party transfer services
agreement with us.
Transfers made under a Dollar Cost Averaging Program do not count towards the
twelve transfers each Contract Year that we allow without charge and are not
subject to our rule that prohibits any two transfers from occurring on
Consecutive Valuation Days.
SURRENDERS
Contract Owners should consult their qualified tax adviser regarding the tax
consequences of a Surrender.
- A Surrender made before age 59 1/2 may result in adverse tax consequences,
including a penalty tax of 10% of the taxable portion of the Surrender
Value. (See "Federal Tax Considerations").
<PAGE>
20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
PAYMENT OF SURRENDER AMOUNTS -- Payment of any request for a full or partial
Surrender from the Accounts will be made as soon as possible and in any event no
later than seven days after we receive the request at our Administrative Office.
There may be postponement in the payment of Surrender Amounts whenever (a) the
New York Stock Exchange is closed; (b) trading on the New York Stock Exchange is
restricted as determined by the Commission; (c) the Commission permits
postponement and so orders; or (d) the Commission determines that an emergency
exists making valuation of the amounts or disposal of securities not reasonably
practicable.
FULL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE -- At any time prior to
the Annuity Commencement Date, you have the right to fully Surrender the
Contract. In such event, the Surrender Value of the Contract may be taken in the
form of a lump sum cash payment.
The Surrender Value of the Contract is equal to the Contract Value less any
Premium Taxes, the Annual Maintenance Fee and any Contingent Deferred Sales
Charge, if applicable. The Surrender Value may be more or less than the amount
of the payments made to your Contract.
PARTIAL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE -- You may make a
partial Surrender of your Contract Value at any time prior to the Annuity
Commencement Date so long as the amount Surrendered is at least equal to our
minimum amount rules then in effect. Additionally, if the remaining Contract
Value following a Surrender is less than $500, we may terminate the Contract and
pay the Surrender Value. For Contracts issued in Texas, the Contract will not be
terminated when the remaining Contract Value after a Surrender is less than $500
unless there were no payments made during the previous 2 Contract Years.
WHEN REQUESTING A PARTIAL SURRENDER, YOU SHOULD SPECIFY THE ACCOUNT(S) FROM
WHICH THE PARTIAL SURRENDER WILL BE TAKEN; OTHERWISE, THE SURRENDER WILL BE
TAKEN ON A PRO RATA BASIS ACCORDING TO THE VALUE IN EACH ACTIVE ACCOUNT.
We may permit you to pre-authorize partial Surrenders subject to certain
limitations then in effect. We permit partial Surrenders by telephone subject to
dollar amount limitations in effect at the time you request the Surrender. To
request partial Surrenders by telephone, you must have completed and returned to
us a Telephone Redemption Program Enrollment Form authorizing telephone
Surrenders. If there are joint Contract Owners, both must authorize us to accept
telephone instructions and agree that We may accept telephone instructions for
partial Surrenders from either Contract Owner. Partial Surrender requests will
not be honored until we receive all required documents in proper form.
Telephone authorization will remain valid until (a) we receive written notice of
revocation by you, or, in the case of joint Contract Owners, written notice from
either Contract Owner; (b) we discontinue the privilege; or (c) we have reason
to believe that you have entered into a market timing agreement with an
investment adviser and/or broker/dealer.
We may record any telephone calls to verify data concerning transactions and may
adopt other procedures to confirm that telephone instructions are genuine. We
will not be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine.
In order to obtain that day's unit values on Surrender, We must receive
telephone Surrender instructions prior to the close of trading on the New York
Stock Exchange (generally 4:00 p.m.).
We may modify, suspend, or terminate telephone transaction privileges at any
time.
SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- You may fully Surrender your
Contract on or after the Annuity Commencement Date if you elect the Payment For
a Period Certain Settlement Option. We pay you the commuted value that is equal
to the present value of the remaining payments we are scheduled to make less any
applicable Contingent Deferred Sales Charge. The commuted value is determined as
of the date we receive your written request for Surrender at our Administrative
Office.
Partial Surrenders are permitted after the Annuity Commencement Date if you
elect a variable dollar amount payment under the Payments for a Period Certain
Settlement Option, but check with your qualified tax adviser because there may
be adverse tax consequences.
IMPORTANT TAX INFORMATION -- There are certain restrictions on section 403(b)
tax-sheltered annuities. As of December 31, 1988, all section 403(b) annuities
have limits on full and partial Surrenders. Contributions to the Contract made
after December 31, 1988 and any increases in cash value after December 31, 1988
may not be distributed unless the Contract Owner/employee has a) attained age
59 1/2, b) separated from service, c) died, d) become disabled or e) experienced
financial hardship (cash value increases may not be distributed for hardships
prior to age 59 1/2). Distributions prior to age 59 1/2 due to financial
hardship or separation from service may still be subject to a penalty tax of
10%. We will not assume any responsibility for determining whether a surrender
is permissible, with or without tax penalty, in any particular situation; or in
monitoring Surrender requests regarding pre or post January 1, 1989 Contract
Values. Any full or partial Surrender described above may affect the continuing
tax-qualified status of some Contracts or plans and may result in adverse tax
consequences to the Contract Owner. The Contract Owner, therefore, should
consult with a tax adviser before undertaking any such Surrender. (See "Federal
Tax Considerations").
CONTRACT CHARGES
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
The CDSC 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 may assess a CDSC when you request a full or partial Surrender. The CDSC is
based on the amount you choose to Surrender and how long your Premium Payments
have been in the Contract. Each Premium Payment has its own CDSC schedule.
Premium Payments are Surrendered in the order in which they were received. The
longer you leave your Premium Payments in
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
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the Contract, the lower the CDSC will be when you Surrender. The amount assessed
a CDSC will not exceed your total Premium Payments.
The percentage used to calculate the CDSC is equal to:
<TABLE>
<CAPTION>
NUMBER OF CONTINGENT
YEARS FROM DEFERRED
PREMIUM SALES
PAYMENT CHARGE
<S> <C>
- ---------------------------
1 7%
- ---------------------------
2 6%
- ---------------------------
3 6%
- ---------------------------
4 5%
- ---------------------------
5 4%
- ---------------------------
6 3%
- ---------------------------
7 2%
- ---------------------------
8 or more 0%
- ---------------------------
</TABLE>
For example, you made an initial Premium Payment of $10,000 five years ago and
an additional Premium Payment of $20,000 one year ago. If you request a partial
withdrawal of $15,000 and you have not taken your Annual Withdrawal Amount for
the year, we will deduct a CDSC as follows.
- - Hartford will Surrender the Annual Withdrawal Amount which is equal to 15% of
your total Premium Payments or $4,500 without charging a CDSC.
- - We will then Surrender the Premium Payments that have been in the Annuity the
longest.
- - That means we would Surrender the entire $10,000 initial Premium Payment and
deduct a CDSC of 4% on that amount or $400.00.
- - The remaining $500 will come from the additional Premium Payment made one year
ago and we will deduct a CDSC of 7% of the $500 or $35.00.
- - Your CDSC is $435.00
If you have any questions about these charges, please contact your financial
adviser or Hartford.
PAYMENTS NOT SUBJECT TO CDSC
ANNUAL WITHDRAWAL AMOUNT -- During the first seven Contract years, you may make
a partial Surrender of Contract Values of up to 15% of the premium payments each
Contract Year on a non-cumulative basis, as determined on the date of the
requested Surrender, without the application of the CDSC. After the seventh
Contract Year, you may make a partial Surrender each Contract Year of 15% of
premium payments made during the seven years prior to the Surrender and 100% of
the Contract Value less the premium payments made during the seven years prior
to the Surrender. These amounts are different for group unallocated Contracts
and Contracts issued to a Charitable Remainder Trust.
EXTENDED SURRENDER PRIVILEGE -- This privilege allows Annuitants who attain age
70 1/2 with a Contract held under an Individual Retirement Account or
403(b) plan to Surrender an amount equal to the required minimum distribution
for the stated Contract without incurring any CDSC.
WAIVERS OF CDSC
CONFINEMENT IN A NURSING HOME, HOSPITAL OR LONG TERM CARE FACILITY (DESCRIBED AS
ELIGIBLE CONFINEMENT IN THE CONTRACT) -- We will waive any CDSC applicable to a
partial or full Surrender if the Annuitant, Contract Owner or joint owner is
confined, at the recommendation of a physician for medically necessary reasons,
for at least 180 calendar days to: a hospital recognized as a general hospital
by the proper authority of the state in which it is located; or a hospital
recognized as a general hospital by the Joint Commission on the Accreditation of
Hospitals; or a facility certified as a hospital or long-term care facility; or
a nursing home licensed by the state in which it is located and offers the
services of a registered nurse 24 hours a day.
The Annuitant, Contract Owner or joint owner cannot be confined at the time the
Contract is purchased in order to receive this waiver and the Contract Owner(s)
must have been the Contract Owner(s) continuously since the Contract issue date.
You must provide written proof of confinement satisfactory to Hartford and you
must request the partial or full Surrender within 91 calendar days of the last
day of confinement.
This waiver may not be available in all states. Please contact your registered
representative or contact Us to determine availability.
DEATH OF THE ANNUITANT OR CONTRACT OWNER OR PAYMENTS UNDER AN ANNUITY
OPTION -- No CDSC otherwise applicable will be assessed in the event of death of
the Annuitant, death of the Contract Owner or if payments are made under an
Annuity option (other than a Surrender of variable payments for a Period Certain
Annuity option) provided for under the Contract.
OTHER PLANS OR PROGRAMS -- Certain plans or programs established by us from time
to time may have different Surrender privileges.
MORTALITY AND EXPENSE RISK CHARGE -- For assuming risks under the Contract, We
deduct a daily charge at the rate of 1.25% per year against all Contract Values
held in the Accounts during the life of the Contract. Although variable annuity
payments made under the Contracts will vary in accordance with the investment
performance of the underlying Fund shares held in the Sub-Account(s), the
payments will not be affected by (a) our actual mortality experience among
Annuitants before or after the Annuity Commencement Date or (b) our actual
expenses, if greater than the deductions provided for in the Contracts because
of the expense and mortality undertakings by us.
There are two types of mortality risks: those made during the accumulation or
deferral phase and those made during the annuity payout phase. The mortality
risk we take in the accumulation phase is that we may experience a loss
resulting from the assumption of the mortality risk relative to the death
benefit in event of the death of an Annuitant or Contract Owner before
commencement of Annuity payments, in periods of declining value. The mortality
risk we take during the annuity payout phase is to make monthly Annuity payments
(determined in accordance with the 1983a Individual Annuity Mortality Table and
other provisions contained in the Contract) to Annuitants regardless of how long
an Annuitant may live, and regardless of
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22 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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how long all Annuitants as a group may live. These mortality undertakings are
based on our determination of expected mortality rates among all Annuitants. If
actual experience among Annuitants during the Annuity payment period deviates
from our actuarial determination of expected mortality rates among Annuitants
because, as a group, their longevity is longer than anticipated, we must provide
amounts from our general funds to fulfill our contractual obligations. We will
bear the loss in such a situation.
During the accumulation phase, we also provide an expense undertaking. We assume
the risk that the Annual Maintenance Fee for maintaining the Contracts prior to
the Annuity Commencement Date may be insufficient to cover the actual cost of
providing such items.
ANNUAL MAINTENANCE FEE -- Each year, on each Contract Anniversary on or before
the Annuity Commencement Date, we will deduct an Annual Maintenance Fee, if
applicable, from Contract Values to reimburse us for expenses relating to the
maintenance of the Contract and Accounts. If during a Contract Year the Contract
is Surrendered for its full value, we will deduct the Annual Maintenance Fee at
the time of such Surrender. The fee is a flat fee that will be due in the full
amount regardless of the time of the Contract Year that Contract Values are
Surrendered. The Annual Maintenance Fee is $30 per Contract Year for Contracts
with less than $50,000 Contract Value on the Contract Anniversary. Fees will be
deducted on a pro rata basis according to the value in each Account under a
Contract.
WAIVERS OF THE ANNUAL MAINTENANCE FEE -- Annual Maintenance Fees are waived for
Contracts with Contract Value equal to or greater than $50,000. In addition, we
will waive one Annual Maintenance Fee for Contract Owners who own one or more
Contracts with a combined Contract Value of $50,000 up to $100,000. If 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 Annual Maintenance Fee waivers to a total of six
Contracts. We reserve the right to waive the Annual Maintenance Fee under other
conditions.
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.
PREMIUM TAXES -- Charges are also deducted for Premium Tax, if applicable,
imposed by state or other governmental entity. Certain states impose a Premium
Tax, currently ranging up to 3.5%. Some states assess the tax at the time
purchase payments are made; others assess the tax at the time of annuitization.
We will pay Premium Taxes at the time imposed under applicable law. At our sole
discretion, we may deduct Premium Taxes at the time we pay such taxes to the
applicable taxing authorities, at the time the Contract is Surrendered, at the
time a death benefit is paid, or at the time the Contract annuitizes.
OPTIONAL DEATH BENEFIT FEE -- If you elect the Optional Death Benefit, we will
deduct daily from your Contract Value an additional charge which equals .15% per
year of the Sub-Account value.
EXCEPTIONS TO CHARGES UNDER THE CONTRACT -- We may offer, at our discretion,
reduced fees and charges including, but not limited to, CDSC, the mortality and
expense risk charge, administration charges, optional charges and the Annual
Maintenance Fee for certain sales (including employer sponsored savings plans)
under circumstances which may result in savings of certain costs and expenses.
Reductions in these fees and charges will not be unfairly discriminatory against
any Contract Owner.
DEATH BENEFITS
DEATH BEFORE THE ANNUITY COMMENCEMENT DATE
DETERMINATION OF THE BENEFICIARY -- If the Contract Owner or the Annuitant dies
before the Annuity Commencement Date, we will pay a Death Benefit to the
Beneficiary.
- IF THE CONTRACT OWNER DIES before the Annuity Commencement Date, any
surviving joint Contract Owner becomes the Beneficiary. If there is no
surviving joint Contract Owner, the designated Beneficiary will be the
Beneficiary. If the Contract Owner's spouse is the sole Beneficiary, the
spouse may elect, in lieu of receiving the Death Benefit, to be treated as
the Contract Owner. If the Annuitant is not living and there is no
Contingent Annuitant, the spouse will be presumed to be the Contingent
Annuitant. If no Beneficiary designation is in effect or if the Beneficiary
has predeceased the Contract Owner, the Contract Owner's estate will be the
Beneficiary.
- IF THE ANNUITANT DIES before the Annuity Commencement Date, the Contingent
Annuitant will become the Annuitant. If either (a) there is no Contingent
Annuitant, (b) the Contingent Annuitant predeceases the Annuitant, or
(c) if any sole Contract Owner dies before the Annuity Commencement Date,
the Beneficiary, as determined under the Contract control provisions, will
receive the Death Benefit. However, if the Annuitant dies prior to the
Annuity Commencement Date and the Contract Owner is living, the Contract
Owner shall be the Beneficiary. In that case, the rights of any designated
Beneficiary shall be void.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
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DETERMINATION OF THE DEATH BENEFIT
IF YOU DID NOT ELECT THE OPTIONAL DEATH BENEFIT, your Death Benefit, which we
will calculate as of the date we receive Due Proof of Death, will be calculated
as follows:
If the deceased HAD NOT REACHED THEIR 81ST BIRTHDAY, the Death Benefit is the
greater of:
- - 100% of the total premium payments made to the Contract, reduced by any
subsequent Surrenders, 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. 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.
IF THE DECEASED REACHED THEIR 81ST BIRTHDAY, then the Death Benefit is the
greater of:
- - 100% of the total premium payments made to us, reduced by any subsequent
Surrenders, or
- - The Contract Value of your annuity, or
- - The Maximum Anniversary Value.
If you did elect the Optional Death Benefit, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments made to us, reduced by any subsequent
Surrenders;
- - The Contract Value of your annuity;
- - The Maximum Anniversary Value; or
- - The Interest Accumulation Value, which is described below.
The Interest Accumulation Value is calculated by accumulating interest on your
premium payments at a rate of 5% per year up to the deceased's 81st birthday or
date of death, assuming you have not taken any Surrenders. If you have taken any
Surrenders, the 5% will be accumulated on your premium payments, but there will
be an adjustment for any of the Surrenders. This adjustment will reduce the
Optional Death Benefit proportionally for the Surrenders. We stop compounding
interest on the deceased's 81st birthday or date of death. After that date, the
Interest Accumulation Value will be adjusted by adding any subsequent payments
and subtracting proportional adjustments for any partial Surrenders. The
Optional Death Benefit is limited to a maximum of 200% of premium payments, less
proportional adjustments for any Surrenders. For examples on how the Optional
Death Benefit is calculated see "Appendix II". The Optional Death Benefit may
not be available if the Contract Owner or Annuitant is age 75 or older. For
Contracts issued in the state of Washington, the Optional Death Benefit is not
available.
If you elect to add the Optional Death Benefit after you purchase your annuity,
the Interest Accumulation Value calculation will be:
- - Your Contract Value on the date we add the Optional Death Benefit to your
annuity;
- - Plus any Premium Payments made after the Optional Death Benefit is added;
- - Minus any partial Surrenders after the Optional Death Benefit is added;
- - Compounded daily at an annual interest rate of 5%.
SPOUSAL CONTRACT CONTINUATION -- If a Beneficiary is the Contract Owner's
spouse, that portion of the Contract for which the spouse is considered the
Beneficiary will continue with the spouse as Contract Owner, unless the spouse
elects to receive the Death Benefit as a lump sum payment or as an annuity
payment option. If the Contract continues with the spouse as Contract Owner, we
will adjust the Contract Value to the amount that we would have paid as the
Death Benefit payment, had the spouse elected to receive the Death Benefit as a
lump sum payment. Spousal Contract Continuation will only apply one time for
each Contract.
CALCULATION OF THE DEATH BENEFIT -- If the Contract Owner or Annuitant dies
before the Annuity Commencement Date and a Death Benefit is payable to the
Beneficiary, the Death Benefit will be calculated as of the date we receive
written notification of Due Proof of Death. THE DEATH BENEFIT REMAINS INVESTED
IN THE SEPARATE ACCOUNT ACCORDING TO YOUR LAST INSTRUCTIONS UNTIL THE PROCEEDS
ARE PAID OR WE RECEIVE NEW SETTLEMENT INSTRUCTIONS FROM THE BENEFICIARY. DURING
THE TIME PERIOD BETWEEN OUR RECEIPT OF WRITTEN NOTIFICATION OF DUE PROOF OF
DEATH AND OUR RECEIPT OF THE COMPLETE SETTLEMENT INSTRUCTIONS, THE CALCULATED
DEATH BENEFIT WILL BE SUBJECT TO MARKET FLUCTUATIONS. UPON RECEIPT OF COMPLETE
SETTLEMENT INSTRUCTIONS, WE WILL CALCULATE THE PAYABLE AMOUNT.
Any Annuity payments made on or after the date of death, but before receipt of
written notification of Due Proof of Death will be recovered by us from the
Payee.
DEATH ON OR AFTER THE ANNUITY COMMENCEMENT DATE
If, on or after the Annuity Commencement Date, the Contract Owner dies and the
Annuitant is living, the Beneficiary becomes the Contract Owner. If the
Annuitant dies and the Contract Owner is living, the Contract Owner becomes the
Beneficiary.
If the Annuitant dies on or after the Annuity Commencement Date, a Death Benefit
may be paid or payments may continue under the following annuity payment
options:
- - Life Annuity with Cash Refund
- - Life Annuity with Payments for a Period Certain
- - Joint and Last Survivor Life Annuity with Payments for a Period Certain and
- - Payments for a Period Certain.
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24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Proceeds from the Death Benefit may be left with us for at least 5 years from
the date of the Contract Owner's death if the death occurs prior to the Annuity
Commencement Date. These proceeds will remain in the Account(s) to which they
were allocated at the time of death unless the Beneficiary elects to reallocate
them. Full or partial Surrenders may be made at any time. In the event of a
complete Surrender, the remaining value will equal the Contract Value of the
proceeds left with us, minus any partial Surrenders. This option may not be
available under certain Contracts issued in connection with Qualified Plans.
SETTLEMENT PROVISIONS
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You select an Annuity Commencement Date which will not be deferred beyond the
Valuation Day immediately following the later of the Annuitant's 90th birthday
or the end of the tenth Contract Year. You may elect a later Annuity
Commencement Date if we allow and subject to the laws and regulations then in
effect. The Annuity Commencement Date may be changed from time to time, but ANY
CHANGE MUST BE WITHIN 30 DAYS PRIOR TO THE DATE ON WHICH ANNUITY PAYMENTS ARE
SCHEDULED TO BEGIN.
You also elect in writing an annuity payment option, which may be any of the
options described below or any annuity payment option then being offered by us.
The annuity payment option may not be changed on or after the Annuity
Commencement Date. The Contract contains the six annuity payment options
described below and the Annuity Proceeds Settlement Option.
For Qualified Contracts, the following annuity payment options are only
available if the guaranteed payment period is less than the life expectancy of
the Annuitant at the time the option becomes effective. The Annuity Proceeds
Settlement option is available for Qualified Contracts only if the guaranteed
payment period is less than the life expectancy of the Beneficiary at the time
the option becomes effective. Such life expectancies are computed on the basis
of the mortality table prescribed by the IRS, or if none is prescribed, the
mortality table in use by us. If you do not elect otherwise, fixed dollar amount
annuity payments will begin automatically on the Annuity Commencement Date,
under the Life Annuity Payment Option.
For Non-Qualified Contracts, if you do not elect otherwise, fixed dollar amount
annuity payments will automatically begin on the Annuity Commencement Date under
the annuity payment option Life Annuity with payments for a Period Certain of 10
years. For Qualified Contracts and Contracts issued in Texas, if you do not
elect otherwise, fixed dollar amount annuity payments will begin automatically
on the Annuity Commencement Date, under the Life Annuity Payment Option.
With the exception of the option Payments for a Period Certain, if the variable
dollar amount payment is selected, no Surrenders are permitted after annuity
payments begin.
ANNUITY PAYMENT OPTIONS
LIFE ANNUITY
where we make Annuity payments for as long as the Annuitant lives.
- Payments under this option STOP UPON THE DEATH OF THE ANNUITANT, even if the
Annuitant dies after one payment.
LIFE ANNUITY WITH CASH REFUND
where we make payments during the life of the Annuitant and when the Annuitant
dies, we pay the remaining value to the Beneficiary. The remaining value is
calculated at the time we receive Due Proof of Death by subtracting the annuity
payments already made from the Contract Value less any applicable Premium Taxes
applied to this annuity payment option.
- This option is only available if you select payments using a VARIABLE DOLLAR
AMOUNT PAYMENT OPTION WITH THE 5% AIR OR FIXED DOLLAR AMOUNT ANNUITY
PAYMENTS.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
where we make payments to you for the life of the Annuitant but you are at least
guaranteed payments for a time period you select which is a minimum of 5 years
and a maximum of 100 years minus your Annuitant's age.
- If the Annuitant dies prior to the end of the period selected, we will pay
your Beneficiary the present value of the remaining payments, either in a
lump sum payment or we will continue payments until the end of the period
selected.
JOINT AND LAST SURVIVOR ANNUITY
where we make payments during the lifetimes of the Annuitant and another
designated individual called the Joint Annuitant. At the time of electing this
Annuity Option, the Contract Owner may elect reduced payments over the remaining
lifetime of the survivor.
- Payments under this option STOP UPON THE DEATH OF THE ANNUITANT AND JOINT
ANNUITANT, even if the Annuitant and Joint Annuitant die after one payment.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
where we make payments during the lifetime of the Annuitant and a Joint
Annuitant, and we guarantee that those payments for a time period you select
which is not less than 5 years and no more than 100 years minus the younger
Annuitant's age. At the time of electing this Annuity Option, the Contract Owner
may elect reduced payments over the remaining lifetime of the survivor.
- If the Annuitant and Joint Annuity die prior to the end of the period
selected, we will pay your Beneficiary the present value of the remaining
payments, either in a lump sum payment or We will continue payments until
the end of the period selected.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
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PAYMENTS FOR A PERIOD CERTAIN
where we agree to make payments for a specified time. The minimum period that
you can select is 10 years during the first two Contract years and 5 years after
the second Contract Anniversary. The maximum period that you can select is 100
years minus your Annuitant's age.
- If you select this option under a variable dollar amount payment, YOU MAY
SURRENDER YOUR ANNUITY after annuity payments have started and we will give
you the present value of the remaining payments less any applicable
Contingent Deferred Sales Charge.
- If the Annuitant dies prior to the end of the period selected, we will pay
your Beneficiary the present value of the remaining payments, either in a
lump sum payment or we will continue payments until the end of the period
selected.
- For Contracts issued in the state of Oregon, Payments for a Period Certain
may be selected as follows: For fixed annuity payments, the minimum period
that you can select is 10 years at any time and 5 years on or after the 2nd
Contract Anniversary. For variable annuity payments, the minimum period that
you can select is 5 years on or after the 10th Contract Anniversary. Under
an Annuity payable with variable annuity payments, you may surrender the
Contract after payments have begun by submitting a written request to us.
The amount available to you is the Commuted Value.
WE MAY OFFER OTHER ANNUITY PAYMENT OPTIONS FROM TIME TO TIME.
ANNUITY PAYMENTS
When your decide to begin to take payments, we calculate your Contract Value
minus any Premium Tax which we must pay and, unless you instruct us otherwise,
we apply that amount to a variable annuity with the same Sub-Account values. You
may however, choose to have your Contract Value applied to a fixed annuity
instead.
IMPORTANT: YOU SHOULD CONSIDER THE QUESTION OF ALLOCATION OF CONTRACT VALUES
(LESS APPLICABLE PREMIUM TAXES) AMONG ACCOUNTS TO MAKE CERTAIN THAT ANNUITY
PAYMENTS ARE BASED ON THE INVESTMENT ALTERNATIVE BEST SUITED TO YOUR NEEDS FOR
RETIREMENT.
ANNUITY PAYMENTS -- The minimum Annuity payment is $50. No election may be made
which results in a first payment of less than $50. If at any time Annuity
payments are or become less than $50, we have the right to change the frequency
of payment to intervals so that payments will at least be $50. If any amount due
is less than the minimum amount per year, we make such other settlement as may
be equitable to the Payee.
All Annuity payments under any option will occur the same day of the month as
the Annuity Commencement Date, based on the payment frequency selected by you.
Available payment frequencies include monthly, quarterly, semi-annual and
annual. The payment frequency may be changed within 30 days prior to the
anniversary of your Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE -- You select the Annuity Commencement Date in your
application or order request. The Annuity Calculation Date will be no more than
five Valuation Days before the Annuity Commencement Date.
ANNUITY CALCULATION DATE -- On the Annuity Calculation Date, your Contract Value
less any applicable Premium Tax is applied to purchase Annuity Units of the
Sub-Accounts selected by you. The first Annuity payment is computed using the
value of these Annuity Units as of the Annuity Calculation Date.
INCOME PAYMENT DATES -- All Annuity payments after the first Annuity payment are
computed and payable as of the Income Payment Dates. These dates are the same
day of the month as the Annuity Commencement Date, based on the Annuity payment
frequency selected by you. They are also shown on the specification page of your
Contract. You may choose from monthly, quarterly, semi-annual and annual
payments. The Annuity payment frequency may not be changed once selected by you.
IN THE EVENT THAT YOU DO NOT SELECT A PAYMENT FREQUENCY, ANNUITY PAYMENTS WILL
BE MADE MONTHLY.
VARIABLE ANNUITY PAYMENTS
THE FIRST VARIABLE ANNUITY PAYMENT -- Variable Annuity payments are periodic
payments we pay to your designated Payee, the amount of which varies from one
Income Payment Date to the next as a function of the net investment performance
of the Sub-Accounts selected by you. The dollar amount of the first Variable
Annuity payment depends on the annuity payment option chosen, the age of the
Annuitant, the gender of the Annuitant (if applicable), the amount of Contract
Value less applicable Premium Tax applied to purchase the Annuity payments, and
the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table using projection scale G projected to the year 2000 and an AIR
of not less than 3.0%.
The dollar amount of the first Variable Annuity payment attributable to each
Sub-Account is determined by dividing the dollar amount of the Contract Value
less applicable Premium Tax applied to that Sub-Account on the Annuity
Calculation Date by $1,000 and multiplying the result by the payment factor in
the Contract for the selected annuity payment option. The dollar value of the
first Variable Annuity payment is the sum of the first Variable Annuity payments
attributable to each Sub-Account.
ANNUITY UNITS -- The number of Annuity Units attributable to a Sub-Account is
derived by dividing the first Variable Annuity payment attributable to that
Sub-Account by the Annuity Unit value for that Sub-Account for the Valuation
Period ending on the Annuity Calculation Date or during which the Annuity
Calculation Date falls if the Valuation Period does not end on such date. The
number of Annuity Units attributable to each Sub-Account under a Contract
remains fixed unless there is a transfer of Annuity Units between Sub-Accounts.
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26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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SUBSEQUENT VARIABLE ANNUITY PAYMENTS -- The dollar amount of each subsequent
Variable Annuity payment attributable to each Sub-Account is calculated on the
Income Payment Date. It is determined by multiplying (a) by (b), where:
- - is the number of Annuity Units of each Sub-Account credited under the Contract
and
- - is the Annuity Unit value (described below) for that Sub-Account.
The total subsequent Variable Annuity payments equal the sum of the amounts
attributable to each Sub-Account.
When an Income Payment Date falls on a day that is not a Valuation Day, the
Income Payment is computed as of the prior Valuation Day. If the date of the
month elected does not occur in a given month, i.e., the 29th, 30th, or 31st of
a month, the payment will be computed as of the last Valuation Day of the month.
The Annuity Unit value of each Sub-Account for any Valuation Period is equal to
(a) multiplied by (b) multiplied by (c) where:
- - is the Net Investment Factor for the Valuation Period for which the Annuity
Unit value is being calculated;
- - is the Annuity Unit value for the preceding Valuation Period; and
- - is the Annuity Unit Factor
The Annuity Unit Factor neutralizes the AIR percentage (3%, 5%, or 6%). The
daily Annuity Unit Factor corresponding to the AIR percentages of 3%, 5%, and 6%
are 0.999919, 0.999866, and 0.999840, respectively.
THE ASSUMED INVESTMENT RETURN (AIR) -- The Annuity Unit value will increase or
decrease from one Income Payment Date to the next in direct proportion to the
net investment return of the Sub-Account(s) supporting the Variable Annuity
payments, less an adjustment to neutralize the selected AIR. Dividing what would
otherwise be the Annuity Unit value by the AIR factor is necessary in order to
adjust the change in the Annuity Unit value (resulting from the Net Investment
Factor) so that the Annuity Unit value only changes to the extent that the Net
Investment Factor represents a rate of return greater than or less than the AIR
selected by you. Without this adjustment, the Net Investment Factor would
decrease the Annuity Unit value to the extent that such value represented an
annualized rate of return of less than 0.0% and increase the Annuity Unit value
to the extent that such value represented an annualized rate of return of
greater than 0.0%.
The Contract permits Contract Owners to select one of three AIRs: 3%, 5% or 6%.
A higher AIR will result in a higher initial payment, a more slowly rising
series of subsequent payments when actual investment performance (minus any
deductions and expenses) exceeds the AIR, and a more rapid drop in subsequent
payments when actual investment performance (minus any deductions and expenses)
is less than the AIR. The 6% AIR is not available in the states of Oklahoma,
Oregon, New Jersey or Texas. The following examples may help clarify the impact
of selecting one AIR over another:
- - If you select a 3% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 3% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return EXCEEDS an annualized rate of return of 3% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 3%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
- - If you select a 5% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 5% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 5% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 5%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
- - If you select a 6% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 6% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 6% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 6%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
LEVEL VARIABLE ANNUITY PAYMENTS WOULD BE PRODUCED IF THE INVESTMENT RATE RETURNS
REMAINED CONSTANT AND EQUAL TO THE AIR. IN FACT, PAYMENTS WILL VARY UP OR DOWN
AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE AIR.
EXCHANGE (TRANSFER) OF ANNUITY UNITS -- After the Annuity Calculation Date, you
may exchange (i.e., transfer) the dollar value of a designated number of Annuity
Units of a particular Sub-Account for an equivalent dollar amount of Annuity
Units of another Sub-Account. On the date of the transfer, the dollar amount of
a Variable Annuity payment generated from the Annuity Units of either
Sub-Account would be the same. Transfers are executed as of the day Hartford
receives a written request for a transfer. For guidelines refer to Sub-Account
Value Transfers Before and After the Annuity Commencement Date.
FIXED DOLLAR ANNUITY -- Fixed Annuity payments are determined at annuitization
by multiplying the Contract Value (less
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
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applicable Premium Taxes) by a rate to be determined by Hartford which is no
less than the rate specified in the Fixed Annuity option tables in the Contract.
The Annuity payment will remain level for the duration of the Annuity. Any Fixed
Annuity allocation may not be changed.
OTHER INFORMATION
ASSIGNMENT -- Ownership of this Contract is generally assignable. However, if
the Contracts are issued pursuant to some form of Qualified Plan, it is possible
that the ownership of the Contracts may not be transferred or assigned depending
on the type of tax-qualified retirement plan involved. An assignment of a
Non-Qualified Contract may subject the Contract Values or assignment proceeds to
income taxes and certain penalty taxes.
CONTRACT MODIFICATION -- The Annuitant may not be changed; however, 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.
FEDERAL TAX CONSIDERATIONS
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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 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.
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.
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28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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.
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.
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
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
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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 post-
exchange Contracts are generally subject to the rules described in this
subparagraph 3.
f. REQUIRED DISTRIBUTIONS.
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary provisions in ii
or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Contract has been distributed, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution being used as of the date of
such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract will be distributed within 5 years after
such death; and
3. If the Contract Owner is not an individual, then for purposes of 1. or
2. above, the primary annuitant under the Contract shall be treated as
the Contract Owner, and any change in the primary annuitant shall be
treated as the death of the Contract Owner. The primary annuitant is the
individual, the events in the life of whom are of primary importance in
affecting the timing or amount of the payout under the Contract.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in i. above is
payable to or for the benefit of a designated beneficiary, such beneficiary
may elect to have the portion distributed over a period that does not extend
beyond the life or life expectancy of the beneficiary. Distributions must
begin within a year of the Contract Owner's 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,
- - 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
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30 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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 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
Any portion of a distribution that is (or is deemed to be) current taxable
income to the Contract Owner will be subject to federal income tax withholding
and reporting under the Code. Generally, however, a Contract Owner may elect not
to have income taxes withheld or to have income taxes withheld at a different
rate by filing a completed election form with us. 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.
G. GENERATION-SKIPPING TRANSFERS
Under certain circumstances, the Internal Revenue Code may impose a "generation
skipping transfer tax" when all or part of an annuity is transferred to, or a
death benefit is paid to, an individual two or more generations younger than the
owner. Federal tax law may require us to deduct the tax from your contract, or
from any applicable payment, and pay it directly to the Internal Revenue
Service.
MISCELLANEOUS
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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 an affiliate of Hartford. Both HSD and Hartford are ultimately controlled by
The Hartford Financial Services Group, Inc. The principal business address of
HSD is the same as that of Hartford.
The securities will be sold by salesperson of HSD who represent Hartford as
insurance and variable annuity agents and who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of 1934
as a Broker-Dealer and is a member of the National Association of Securities
Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 7% of premium
payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on premium payments made by
policyholders
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 31
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or contract owners. This compensation is usually paid from the sales charges
described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or Surrender variable insurance products.
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the contract with
an additional 5.0% of the Premium Payment. This additional percentage of Premium
Payment in no way affects present or future charges, rights, benefits or current
values of other Contract Owners. The following class of individuals are eligible
for this feature: (1) current or retired officers, directors, trustees and
employees (and their families) of the ultimate parent and affiliates of
Hartford; and (2) employees and registered representatives (and their families)
of registered broker-dealers (and their financial institutions) that have a
sales agreement with Hartford and its principal underwriter to sell the
Contracts.
LEGAL MATTERS
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
and Annuity Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.
EXPERTS
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.
MORE INFORMATION
You may call your Representative if you have any questions or write or call us
at the address below:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: 1-800-521-0538
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32 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
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DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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SAFEKEEPING OF ASSETS
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INDEPENDENT PUBLIC ACCOUNTANTS
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DISTRIBUTION OF CONTRACTS
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CALCULATION OF YIELD AND RETURN
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PERFORMANCE COMPARISONS
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FINANCIAL STATEMENTS
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</TABLE>
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 33
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APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT 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 $10,500 (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:
- - 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 2000, $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 of a
governmental employer 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. 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,
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34 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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,
- - 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 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.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
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.
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.
<PAGE>
36 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
APPENDIX II -- OPTIONAL DEATH BENEFIT -- EXAMPLES
EXAMPLE 1
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $108,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
- --------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$108,000 Contract Value prior to Surrender equals
.09259 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 9,722 to be deducted from the Interest Accumulation Value equals
$ 95,278 the new Interest Accumulation Value
</TABLE>
EXAMPLE 2
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $92,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
- --------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$ 92,000 Contract Value prior to Surrender equals
.10870 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 11,413 to be deducted from the Interest Accumulation Value equals
$ 93,587 the New Interest Accumulation Value
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
This form must be completed for all tax sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The variable annuity Contract which you have recently purchased is subject to
certain restrictions imposed by the Tax Reform Act of 1986. Contributions to the
Contract after December 31, 1988 and any increases in cash value after
December 31, 1988 may not be distributed to you unless you have:
- - attained age 59 1/2,
- - separated from service,
- - died, or
- - 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 your annuity. Please refer to your Plan.
Please complete the following and return to:
Hartford Life and Annuity Insurance Company
Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Name of Contract Owner/Participant: ___________________________________________
Address: ______________________________________________________________________
City or Plan/School District: _________________________________________________
Date: _________________________________________________________________________
Contract No.: _________________________________________________________________
Signature: ____________________________________________________________________
<PAGE>
To obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Please send a Statement of Additional Information for Series VI of Putnam
Hartford Capital Manager variable annuity to me at the following address:
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City/State Zip Code
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO
SERIES VI OF PUTNAM CAPITAL MANAGER VARIABLE ANNUITY
This Statement of Additional Information is not a prospectus. The information
contained herein should be read in conjunction with the prospectus.
To obtain a prospectus, send a written request to Hartford Life and Annuity
Insurance Company, Attn: Investment Product Services, P.O. Box 5085, Hartford,
Connecticut 06102-5085.
Date of Prospectus: May 1, 2000
Date of Statement of Additional Information: May 1, 2000
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
DESCRIPTION OF HARTFORD LIFE AND
ANNUITY INSURANCE COMPANY................................................
SAFEKEEPING OF ASSETS......................................................
INDEPENDENT PUBLIC ACCOUNTANTS.............................................
DISTRIBUTION OF CONTRACTS..................................................
CALCULATION OF YIELD AND RETURN............................................
PERFORMANCE COMPARISONS....................................................
FINANCIAL STATEMENTS.......................................................
<PAGE>
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, 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 8/1/99 AA Insurer financial strength
- ----------------------------------------------------------------------------------------------------------------------
Duff & Phelps 7/1/99 AA+ Claims paying ability
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. The assets are
kept physically segregated and are held separate and apart from Hartford's
general corporate assets. Records are maintained of all purchases and
redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in this 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>
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is an affiliate of Hartford. Both HSD and Hartford are ultimately controlled by
The Hartford Financial Services Group, Inc. The principal business address of
HSD is the same as that of Hartford.
The securities will be sold by salesperson of HSD who represent Hartford as
insurance and variable annuity agents and who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of 1934
as a Broker-Dealer and is a member of the National Association of Securities
Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 7% of premium
payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on premium payments made by
policyholders or contract owners. This compensation is usually paid from the
sales charges described in the 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.
Hartford currently pays HSD 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 HSD in its role as Principal Underwriter has been: 1999:
$107,076,937.61; 1998: $67,003,507; and 1997: $97,513,541. HSD has retained none
of these commissions.
CALCULATION OF YIELD AND RETURN
YIELD OF A MONEY MARKET SUB-ACCOUNT. As summarized in the prospectus under the
heading "Performance Related Information," the yield of a Money Market
Sub-Account for a seven day period (the "base period") will be computed by
determining the "net
<PAGE>
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
A 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. THE
CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES ON THE SEPARATE
ACCOUNT LEVEL, INCLUDING THE MAXIMUM ANNUAL MAINTENANCE FEE.
YIELD AND EFFECTIVE YIELD FOR THE SEVEN DAY PERIOD ENDING DECEMBER 31, 1999.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
- ---------------------------------------------------------------------------
<S> <C> <C>
Putnam Money Market 4.09% 4.17%
- ---------------------------------------------------------------------------
</TABLE>
YIELD OF SUB-ACCOUNTS. As summarized in the prospectus under the heading
"Performance Related Information," yields of Sub-Accounts will be computed by
annualizing a recent month's net investment income, divided by a Fund share's
net asset value on the last trading day of that month. Net changes in the value
of a hypothetical account will assume the change in the underlying mutual fund's
"net asset value per share" for the same period in addition to the daily expense
charge assessed, at the sub-account level for the respective period. The
Sub-Accounts' yields will vary from time to time depending upon market
conditions and, the composition of the underlying funds' portfolios. Yield
should also be considered relative to changes in the value of the Sub-Accounts'
shares and to the relative risks associated with the investment objectives and
policies of the underlying Fund.
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL, INCLUDING
THE ANNUAL MAINTENANCE FEE.
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges assessed
against a Contract Owner's account over the base period. Yield quotations based
on a 30 day
<PAGE>
period were computed by dividing the dividends and interest earned
during the period by the maximum offering price per unit on the last day of the
period, according to the following formula:
Example:
6
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1) - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the
period that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the
period.
YIELD QUOTATION BASED ON A 30 DAY PERIOD ENDED DECEMBER 31, 1999.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
SUB-ACCOUNT YIELD
- -------------------------------------------------------------------------
<S> <C>
Putnam American Government Income N/A
- -------------------------------------------------------------------------
Putnam Growth and Income 0.24%
- -------------------------------------------------------------------------
Putnam Global Asset Allocation 0.73%
- -------------------------------------------------------------------------
Putnam High Yield 9.44%
- -------------------------------------------------------------------------
Putnam Utilities Growth and Income 1.92%
- -------------------------------------------------------------------------
Putnam Income 5.67%
- -------------------------------------------------------------------------
Putnam Diversified Income 7.27%
- -------------------------------------------------------------------------
</TABLE>
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 and assumes that
the Optional Death Benefit has not been elected. The formula for total return
used herein includes three steps: (1) calculating the value of the hypothetical
initial investment of $1,000 as of the end of the period by multiplying the
total number of units owned at the end of the period by the unit value per unit
on the last trading day of the period; (2) assuming redemption at the end of the
period and deducting any applicable contingent deferred sales charge and the
$30.00 Annual Maintenance Fee (if applicable) and (3) dividing this account
value for the hypothetical investor by the initial $1,000 investment and
annualizing the result for periods of less than one year. Standardized total
return will be calculated since the inception of the Separate Account 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.
The following are the standardized average annual total return quotations for
the Sub-Accounts. No information is shown for the Putnam American Government
Income Sub-Account and the Putnam Growth Opportunities Sub-Account
because, as of December 31, 1999, the Sub-Accounts had not yet commenced
operations.
<PAGE>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
SEPARATE SINCE INCEPTION
SUB-ACCOUNT ACCOUNT 1 YEAR 5 YEAR 10 YEAR OF SEPARATE
INCEPTION DATE ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Putnam American Government N/A N/A N/A N/A N/A
Income
- ----------------------------------------------------------------------------------------------------------------------
Putnam Asia Pacific Growth 5/1/95 94.69% N/A N/A 8.62%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Fund 9/15/93 -9.65% 2.09% N/A -0.12%
- ----------------------------------------------------------------------------------------------------------------------
Putnam The George Putnam Fund
of Boston 5/1/98 -11.75% N/A N/A -11.16%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Global Asset Allocation 5/20/91 0.30% 12.59% N/A 9.32%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Global Growth 5/20/91 52.71% 22.52% N/A 15.24%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Growth and Income 5/20/91 -9.83% 15.28% N/A 11.03%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Growth Opportunities N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Putnam Health Sciences 5/1/98 -15.27% N/A N/A -5.75%
- ----------------------------------------------------------------------------------------------------------------------
Putnam High Yield 5/20/91 -5.55% 4.04% N/A 7.68%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Income 5/20/91 -13.43% 2.44% N/A 3.30%
- ----------------------------------------------------------------------------------------------------------------------
Putnam International Growth 1/2/97 47.91% N/A N/A 24.42%
- ----------------------------------------------------------------------------------------------------------------------
Putnam International Growth and 1/2/97 12.86% N/A N/A 12.43%
Income
- ----------------------------------------------------------------------------------------------------------------------
Putnam International New 1/2/97 90.14% N/A N/A 26.64%
Opportunities
- ----------------------------------------------------------------------------------------------------------------------
Putnam Investors 5/1/98 18.32% N/A N/A 19.20%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Money Market 5/20/91 -6.59% -0.02% N/A -0.03%
- ----------------------------------------------------------------------------------------------------------------------
Putnam New Opportunities 5/2/94 57.00% 28.67% N/A 26.12%
- ----------------------------------------------------------------------------------------------------------------------
Putnam New Value 1/2/97 -11.13% N/A N/A 1.67%
- ----------------------------------------------------------------------------------------------------------------------
Putnam OTC & Emerging Growth 5/1/98 113.38% N/A N/A 55.09%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Research 10/1/98 15.73% N/A N/A 34.29%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Small Cap Value 5/3/99 N/A N/A N/A -7.39%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEPARATE SINCE INCEPTION
SUB-ACCOUNT ACCOUNT 1 YEAR 5 YEAR 10 YEAR OF SEPARATE
INCEPTION DATE ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Putnam Utilities Growth and 5/1/92 -12.04% 12.86% N/A 8.57%
Income
- ----------------------------------------------------------------------------------------------------------------------
Putnam Vista 1/2/97 40.79% N/A N/A 25.42%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Voyager 5/20/91 46.02% 27.45% N/A 20.74%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Performance figures above do not reflect any deductions for Optional Death
Benefit charges. Performance would have been lower had the Optional Death
Benefit been available and been chosen.
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated since the
inception of the underlying fund for one year, five years, and ten years or
other periods. Non-standardized total return is measured in the same manner as
the standardized total return described above, except that the contingent
deferred sales charge and the Annual Maintenance Fee are not deducted.
Therefore, non-standardized total return for a Sub-Account is higher than
standardized total return for a Sub-Account.
The following are the non-standardized annualized total return quotations for
the Sub-Accounts. No information is shown for the Putnam American Government
Income Sub-Account and the Putnam Growth Opportunities Sub-Account
because, as of December 31, 1999, the Sub-Accounts had not yet commenced
operations.
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE
INCEPTION DATE OF THE SEPARATE ACCOUNT FOR YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
FUND SINCE INCEPTION
SUB-ACCOUNT INCEPTION DATE 1 YEAR 5 YEAR 10 YEAR OF FUND
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Putnam American Government N/A N/A N/A N/A N/A
Income
- ----------------------------------------------------------------------------------------------------------------------
Putnam Asia Pacific Growth 5/1/95 104.69% N/A N/A 12.73%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Fund 9/15/93 0.35% 5.43% N/A 3.65%
- ----------------------------------------------------------------------------------------------------------------------
Putnam The George Putnam Fund
of Boston 5/1/98 -1.75% N/A N/A 0.38%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Global Asset Allocation 2/1/88 10.30% 15.36% 10.71% N/A
- ----------------------------------------------------------------------------------------------------------------------
Putnam Global Growth 5/1/90 62.71% 25.34% N/A 15.58%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
FUND SINCE INCEPTION
SUB-ACCOUNT INCEPTION DATE 1 YEAR 5 YEAR 10 YEAR OF FUND
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Putnam Growth and Income 2/1/88 0.17% 17.74% 12.41% N/A
- ----------------------------------------------------------------------------------------------------------------------
Putnam Growth Opportunities N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Putnam Health Sciences 5/1/98 -5.27% N/A N/A 1.65%
- ----------------------------------------------------------------------------------------------------------------------
Putnam High Yield 2/1/88 4.45% 7.25% 9.29% N/A
- ----------------------------------------------------------------------------------------------------------------------
Putnam Income 2./1/88 -3.43% 5.78% 6.07% N/A
- ----------------------------------------------------------------------------------------------------------------------
Putnam International Growth 1/2/97 57.91% N/A N/A 28.45%
- ----------------------------------------------------------------------------------------------------------------------
Putnam International Growth and 1/2/97 22.86% N/A N/A 16.69%
Income
- ----------------------------------------------------------------------------------------------------------------------
Putnam International New 1/2/97 100.14% N/A N/A 31.04%
Opportunities
- ----------------------------------------------------------------------------------------------------------------------
Putnam Investors 5/1/98 28.32% N/A N/A 25.82%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Money Market 2/1/88 3.41% 3.72% 3.53% N/A
- ----------------------------------------------------------------------------------------------------------------------
Putnam New Opportunities 5/2/94 67.00% 31.05% N/A 28.50%
- ----------------------------------------------------------------------------------------------------------------------
Putnam New Value 1/2/97 -1.13% N/A N/A 6.32%
- ----------------------------------------------------------------------------------------------------------------------
Putnam OTC & Emerging Growth 5/1/98 123.38% N/A N/A 61.68%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Research 10/1/98 25.73% N/A N/A 43.57%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Small Cap Value 5/3/99 N/A N/A N/A 2.61%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Utilities Growth and 5/1/92 -2.04% 15.48% N/A 11.06%
Income
- ----------------------------------------------------------------------------------------------------------------------
Putnam Vista 1/2/97 50.79% N/A N/A 29.30%
- ----------------------------------------------------------------------------------------------------------------------
Putnam Voyager 2/1/88 56.02% 29.83% 20.61% N/A
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Performance figures above do not reflect any deductions for Optional Death
Benefit charges. Performance would have been lower had the Optional Death
Benefit been available and been chosen.
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. The total return and yield may also be used to compare
the performance of the Sub-Accounts against certain widely acknowledged outside
<PAGE>
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 a Fund may customarily invest.
The index does not include bonds in certain of the lower rating classifications
in which a Fund may invest. The performance figures of the index reflect changes
in market prices and reinvestment of all interest payments.
The Lehman Brothers Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Lehman Brothers Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value 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 a Fund may invest. 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
<PAGE>
maintain representativeness.
The NASDAQ-OTC Industrial Average (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded. Its performance figures reflect changes of market prices but do not
reflect reinvestment of cash dividends.
Salomon Brothers Long-Term High-Grade Corporate Bond Index is an unmanaged list
of publicly traded corporate bonds having a rating of at least AA by Standard &
Poor's or Aa by Moody's and is frequently used as general measure of the
performance of fixed-income securities. The average quality of bonds included in
the index may be higher than the average quality of those bonds in which a Fund
may customarily invest. The index does not include bonds in certain of the lower
rating classifications in which a Fund may invest. Performance figures for the
index reflect changes of market prices and reinvestment of all distributions.
The Salomon Brothers 7-10 Year Government Bond Index is an unmanaged list of
U.S. Government and government agency securities with maturities of 7 to 10
years. Performance figures for the index reflect changes of market prices and
reinvestment of all interest payments.
The Standard & Poor's Composite Index of 500 stocks (the "S&P 500") is a market
value-weighted and unmanaged index showing changes in the aggregate market value
of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40 financial services
concerns. The S&P 500 represents about 80% of the market value of all issues
traded on the New York Stock Exchange. Its performance figures reflect changes
of market prices and reinvestment of all regular cash dividends.
The Standard & Poor's 40 Utilities Index is unmanaged list of 40 utility stocks.
The Index assumes reinvestment of all distributions and reflects changes in
market prices but does not take into account brokerage commissions or other
fees. Putnam VT Utilities Growth and Income Fund's telephone and electric
utility stocks are generally held in the same proportion as the telephone and
electric stocks in the S&P Utilities Index. However, there are some utility
stocks held by the Fund that are not part of the Index.
<PAGE>
Report of Independent Public Accountants
To 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 Two (Asia Pacific Growth, Diversified Income, The George Putnam
Fund of Boston, Global Asset Allocation, Global Growth, Growth and Income,
Health Sciences, High Yield, Income, International Growth, International Growth
and Income, International New Opportunities, Investors, Money Market, New
Opportunities, New Value, OTC & Emerging Growth, Research, Small Cap Value,
Utilities Growth and Income, Vista, and Voyager sub-accounts), (collectively,
the Account) as of December 31, 1999, 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,
1999, and the results of its operations and the changes in its net assets for
the periods presented in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 11, 2000
SA-1
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS & LIABILITIES
- -------------------------------------------------------------------------------------------------------------------------------
December 31, 1999 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
Sub-Account
ASSETS
Investments:
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PUTNAM VT ASIA PACIFIC
GROWTH FUND
CLASS IA
Shares 8,164,267
Cost $86,150,675
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: $141,160,176 $ -- $ -- $ -- $ -- $ --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 118,826
Cost $1,680,674
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: 2,049,744 -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT DIVERSIFIED
INCOME FUND
CLASS IA
Shares 28,007,591
Cost $295,063,345
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 278,115,382 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 339,151
Cost $3,421,309
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 3,360,984 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT THE GEORGE PUTNAM
FUND OF BOSTON
CLASS IA
Shares 15,096,173
Cost $154,452,045
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 150,659,802 -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 833,953
Cost $8,598,066
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 8,322,853 -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL ASSET
ALLOCATION FUND
CLASS IA
Shares 25,800,902
Cost $397,088,223
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- 505,955,690 -- --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 129,139
Cost $2,315,986
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- 2,531,118 -- --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL GROWTH FUND
CLASS IA
Shares 54,676,767
Cost $832,832,666
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- 1,667,094,623 --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 199,296
Cost $4,072,524
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- 6,060,601 --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GROWTH AND
INCOME FUND
CLASS IA
Shares 171,340,570
Cost $3,898,527,366
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- -- 4,591,927,277
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 888,514
Cost $24,673,928
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- -- 23,767,757
- -------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company -- -- 15,297 -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Receivable from fund shares sold 1,730,616 103,075 -- 113,635 657,802 1,392,712
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 144,940,536 281,579,441 158,997,952 508,600,443 1,673,813,026 4,617,087,746
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to Hartford Life Insurance
Company 1,729,202 103,325 14,889 109,957 654,492 1,392,393
- -------------------------------------------------------------------------------------------------------------------------------
Payable for fund shares purchased -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,729,202 103,325 14,889 109,957 654,492 1,392,393
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE ANNUITY
CONTRACT LIABILITIES) $143,211,334 $281,476,116 $158,983,063 $508,490,486 $1,673,158,534 $4,615,695,353
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-2
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
- -------------------------------------------------------------------------------------------------------------------------------
December 31, 1999 Health High Yield Income International International International
Sciences Sub-Account Sub-Account Growth Growth New
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 12,133,439
Cost $122,451,187
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: $127,401,113 $ -- $ -- $ -- $ -- $ --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 509,962
Cost $5,171,854
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: 5,349,498 -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT HIGH YIELD FUND
CLASS IA
Shares 45,558,570
Cost $561,878,289
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 505,244,538 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 466,340
Cost $5,316,587
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 5,167,047 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INCOME FUND
CLASS IA
Shares 27,752,955
Cost $367,752,738
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 347,466,992 -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 402,262
Cost $5,379,676
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 5,032,292 -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH FUND
CLASS IA
Shares 15,791,946
Cost $203,516,312
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- 341,895,626 -- --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 388,175
Cost $5,980,248
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- 8,392,352 -- --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH AND INCOME FUND
CLASS IA
Shares 15,115,224
Cost $178,072,228
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- 230,507,159 --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 136,080
Cost $1,741,404
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- 2,071,137 --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND
CLASS IA
Shares 8,076,391
Cost $93,926,382
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- -- 188,260,674
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 89,975
Cost $1,529,608
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- -- 2,094,615
- -------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company 100,323 -- -- 1,684,804 -- 1,251,485
- -------------------------------------------------------------------------------------------------------------------------------
Receivable from fund shares sold -- 515,690 1,346,438 -- 140,472 --
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 132,850,934 510,927,275 353,845,722 351,972,782 232,718,768 191,606,774
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to Hartford Life Insurance
Company -- 509,621 1,346,756 -- 135,895 --
- -------------------------------------------------------------------------------------------------------------------------------
Payable for fund shares purchased 99,487 -- -- 1,681,590 -- 1,251,926
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 99,487 509,621 1,346,756 1,681,590 135,895 1,251,926
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE ANNUITY
CONTRACT LIABILITIES) $132,751,447 $510,417,654 $352,498,966 $350,291,192 $232,582,873 $190,354,848
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-3
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
- -------------------------------------------------------------------------------------------------------------------------------
December 31, 1999 Investors Money New New OTC & Research
Sub-Account Market Opportunities Value Emerging Sub-Account
Sub-Account Sub-Account Sub-Account Growth
ASSETS Sub-Account
Investments:
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PUTNAM VT INVESTORS FUND
CLASS IA
Shares 30,164,408
Cost $349,269,765
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: $457,292,432 $ -- $ -- $ -- $ -- $ --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 1,078,429
Cost $12,935,387
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: 16,316,630 -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT MONEY MARKET FUND
CLASS IA
Shares 424,468,789
Cost $424,468,789
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 424,468,789 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 19,928,941
Cost $19,928,941
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 19,928,941 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT NEW OPPORTUNITIES FUND
CLASS IA
Shares 59,760,365
Cost $999,465,884
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 2,601,966,304 -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 307,466
Cost $9,085,292
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 13,356,331 -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT NEW VALUE FUND
CLASS IA
Shares 12,503,473
Cost $139,318,083
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- 148,291,185 -- --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 102,442
Cost $1,311,136
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- 1,213,934 -- --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT OTC & EMERGING GROWTH FUND
CLASS IA
Shares 4,950,391
Cost $63,675,767
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- 112,819,407 --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 210,909
Cost $2,782,260
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- 4,800,280 --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM RESEARCH FUND
CLASS IA
Shares 5,410,055
Cost $67,742,678
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- -- 79,419,609
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 232,627
Cost $2,948,089
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- -- -- 3,412,641
- -------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company -- 5,630,819 1,443,139 -- 659,310 155,665
- -------------------------------------------------------------------------------------------------------------------------------
Receivable from fund shares sold 632,546 -- -- 56,471 -- --
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 474,241,608 450,028,549 2,616,765,774 149,561,590 118,278,997 82,987,915
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to Hartford Life Insurance
Company 631,523 -- -- 56,077 -- --
- -------------------------------------------------------------------------------------------------------------------------------
Payable for fund shares purchased -- 5,604,821 1,438,686 -- 663,751 155,386
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 631,523 5,604,821 1,438,686 56,077 663,751 155,386
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE ANNUITY
CONTRACT LIABILITIES) $473,610,085 $444,423,728 $2,615,327,088 $149,505,513 $117,615,246 $82,832,529
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-4
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
- -------------------------------------------------------------------------------------------------------------------------------
December 31, 1999 Small Cap Utilities Vista Voyager
Value Growth Sub-Account Sub-Account
Sub-Account and Income
ASSETS Sub-Account
Investments:
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PUTNAM VT SMALL CAP VALUE FUND
CLASS IA
Shares 685,439
Cost $7,029,557
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: $ 7,066,881 $ -- $ -- $ --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 24,059
Cost $241,470
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: 247,804 -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT UTILITIES GROWTH AND INCOME FUND
CLASS IA
Shares 25,240,672
Cost $331,561,067
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 428,334,208 -- --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 205,705
Cost $3,543,420
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- 3,486,707 -- --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT VISTA FUND
CLASS IA
Shares 15,228,334
Cost $197,026,952
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 314,921,952 --
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 199,426
Cost $3,121,455
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- 4,118,153 --
- -------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT VOYAGER FUND
CLASS IA
Shares 69,226,003
Cost $2,168,184,774
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- 4,586,222,714
- -------------------------------------------------------------------------------------------------------------------------------
CLASS IB
Shares 393,685
Cost $18,531,590
- -------------------------------------------------------------------------------------------------------------------------------
Market Value: -- -- -- 26,026,499
- -------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company 73,644 -- 336,876 --
- -------------------------------------------------------------------------------------------------------------------------------
Receivable from fund shares sold -- 425,739 -- 7,214,771
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 7,388,329 432,246,654 319,376,981 4,619,463,984
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to Hartford Life Insurance
Company 73,652 432,697 -- 7,207,404
- -------------------------------------------------------------------------------------------------------------------------------
Payable for fund shares purchased -- -- 337,716 --
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 73,652 432,697 337,716 7,207,404
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE ANNUITY
CONTRACT LIABILITIES) $7,314,677 $431,813,957 $319,039,265 $4,612,256,580
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-5
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------
December 31, 1999 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 8,028,722 $17.505074 $ 140,543,371
- -----------------------------------------------------------------------------------------------------------------------------
Asia Pacific Growth Fund Class IA-ODBO 22,169 17.487776 387,695
- -----------------------------------------------------------------------------------------------------------------------------
Asia Pacific Growth Fund Class IB 95,288 21.510869 2,049,725
- -----------------------------------------------------------------------------------------------------------------------------
Asia Pacific Growth Fund Class IA 1,792 13.640437 24,446
- -----------------------------------------------------------------------------------------------------------------------------
Diversified Income Fund Class IA 22,091,792 12.532208 276,858,929
- -----------------------------------------------------------------------------------------------------------------------------
Diversified Income Fund Class IA-ODBO 41,940 12.519748 525,074
- -----------------------------------------------------------------------------------------------------------------------------
Diversified Income Fund Class IB 353,561 9.506090 3,360,984
- -----------------------------------------------------------------------------------------------------------------------------
Diversified Income Fund Class IA 2,422 10.248057 24,824
- -----------------------------------------------------------------------------------------------------------------------------
George Putnam Fund of Boston Class IA 14,824,919 10.063218 149,186,387
- -----------------------------------------------------------------------------------------------------------------------------
George Putnam Fund of Boston Class IA-ODBO 109,775 10.053218 1,103,588
- -----------------------------------------------------------------------------------------------------------------------------
George Putnam Fund of Boston Class IB 815,811 10.202363 8,323,203
- -----------------------------------------------------------------------------------------------------------------------------
George Putnam Fund of Boston Class IA 4,126 10.185844 42,028
- -----------------------------------------------------------------------------------------------------------------------------
Global Asset Allocation Class IA 15,126,264 33.370480 504,770,693
- -----------------------------------------------------------------------------------------------------------------------------
Global Asset Allocation Class IA-ODBO 5,104 33.337419 170,163
- -----------------------------------------------------------------------------------------------------------------------------
Global Asset Allocation Class IB 226,057 11.214258 2,535,058
- -----------------------------------------------------------------------------------------------------------------------------
Global Growth Fund Class IA 40,918,337 40.579891 1,660,461,667
- -----------------------------------------------------------------------------------------------------------------------------
Global Growth Fund Class IA-ODBO 22,090 40.539605 895,512
- -----------------------------------------------------------------------------------------------------------------------------
Global Growth Fund Class IB 358,559 16.902971 6,060,710
- -----------------------------------------------------------------------------------------------------------------------------
Global Growth Fund Class IA 394 14.430213 5,691
- -----------------------------------------------------------------------------------------------------------------------------
Global Growth Fund Class IA 670 14.434805 9,671
- -----------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund Class IA 100,158,425 45.646494 4,571,880,937
- -----------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund Class IA-ODBO 142,435 45.601095 6,495,184
- -----------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund Class IB 2,276,326 10.439556 23,763,833
- -----------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund Class IA 6,096 10.307248 62,838
- -----------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund Class IA 386 10.435648 4,031
- -----------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund Class IA 46,684 10.310556 481,342
- -----------------------------------------------------------------------------------------------------------------------------
Health Sciences Fund Class IA 12,308,375 10.277002 126,493,199
- -----------------------------------------------------------------------------------------------------------------------------
Health Sciences Fund Class IA-ODBO 69,177 10.266794 710,227
- -----------------------------------------------------------------------------------------------------------------------------
Health Sciences Fund Class IB 524,340 10.202208 5,349,422
- -----------------------------------------------------------------------------------------------------------------------------
Health Sciences Fund Class IA 16,983 10.823834 183,819
- -----------------------------------------------------------------------------------------------------------------------------
High Yield Fund Class IA 20,314,509 24.798771 503,774,857
- -----------------------------------------------------------------------------------------------------------------------------
High Yield Fund Class IA-ODBO 35,500 24.774230 879,482
- -----------------------------------------------------------------------------------------------------------------------------
High Yield Fund Class IB 557,275 9.272015 5,167,059
- -----------------------------------------------------------------------------------------------------------------------------
High Yield Fund Class IA 1,013 10.353154 10,489
- -----------------------------------------------------------------------------------------------------------------------------
Income Fund Class IA 16,826,890 20.574405 346,203,245
- -----------------------------------------------------------------------------------------------------------------------------
Income Fund Class IA-ODBO 26,396 20.553973 542,552
- -----------------------------------------------------------------------------------------------------------------------------
Income Fund Class IB 507,058 9.924506 5,032,298
- -----------------------------------------------------------------------------------------------------------------------------
Income Fund Class IA 2,588 10.064946 26,046
- -----------------------------------------------------------------------------------------------------------------------------
International Growth Fund Class IA 16,044,373 21.164253 339,567,163
- -----------------------------------------------------------------------------------------------------------------------------
International Growth Fund Class IA-ODBO 70,676 21.143290 1,494,314
- -----------------------------------------------------------------------------------------------------------------------------
International Growth Fund Class IB 559,450 14.994851 8,388,870
- -----------------------------------------------------------------------------------------------------------------------------
International Growth Fund Class IA 412 13.202587 5,436
- -----------------------------------------------------------------------------------------------------------------------------
International Growth Fund Class IA 137 14.989280 2,056
- -----------------------------------------------------------------------------------------------------------------------------
International Growth Fund Class IA 5,356 13.206795 70,730
- -----------------------------------------------------------------------------------------------------------------------------
International Growth and Income Fund Class IA 14,448,694 15.876443 229,393,867
- -----------------------------------------------------------------------------------------------------------------------------
International Growth and Income Fund Class IA-ODBO 24,133 15.860687 382,762
- -----------------------------------------------------------------------------------------------------------------------------
International Growth and Income Fund Class IB 177,593 11.666065 2,071,811
- -----------------------------------------------------------------------------------------------------------------------------
International Growth and Income Fund Class IA 633 10.699171 6,772
- -----------------------------------------------------------------------------------------------------------------------------
International Growth and Income Fund Class IA 11,517 10.702604 123,267
- -----------------------------------------------------------------------------------------------------------------------------
International New Opportunities Fund Class IA 8,346,741 22.467545 187,530,768
- -----------------------------------------------------------------------------------------------------------------------------
International New Opportunities Fund Class IA-ODBO 15,967 22.445387 358,379
- -----------------------------------------------------------------------------------------------------------------------------
International New Opportunities Fund Class IB 109,928 19.040832 2,093,126
- -----------------------------------------------------------------------------------------------------------------------------
International New Opportunities Fund Class IA 2,401 15.150314 36,378
- -----------------------------------------------------------------------------------------------------------------------------
International New Opportunities Fund Class IA 54 19.033767 1,021
- -----------------------------------------------------------------------------------------------------------------------------
International New Opportunities Fund Class IA 7,279 15.155127 110,321
- -----------------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-6
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<CAPTION>
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------
December 31, 1999 Units Unit Contract
Owned by Price Liability
Participants
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investors Fund Class IA 30,741,357 $14.669230 $ 450,952,040
- -----------------------------------------------------------------------------------------------------------------------------
Investors Fund Class IA-ODBO 227,502 14.654665 3,333,964
- -----------------------------------------------------------------------------------------------------------------------------
Investors Fund Class IB 1,175,222 13.879211 16,311,156
- -----------------------------------------------------------------------------------------------------------------------------
Investors Fund Class IA 73,722 1.241746 91,544
- -----------------------------------------------------------------------------------------------------------------------------
Investors Fund Class IA 441 13.874033 6,121
- -----------------------------------------------------------------------------------------------------------------------------
Investors Fund Class IA 9,800 12.421449 121,734
- -----------------------------------------------------------------------------------------------------------------------------
Money Market Fund Class IA 266,226,784 1.590607 423,462,187
- -----------------------------------------------------------------------------------------------------------------------------
Money Market Fund Class IA-ODBO 377,012 1.589043 599,089
- -----------------------------------------------------------------------------------------------------------------------------
Money Market Fund Class IB 19,053,195 1.046003 19,929,699
- -----------------------------------------------------------------------------------------------------------------------------
New Opportunities Fund Class IA 62,623,770 41.424321 2,594,147,147
- -----------------------------------------------------------------------------------------------------------------------------
New Opportunities Fund Class IA-ODBO 58,706 41.383256 2,429,442
- -----------------------------------------------------------------------------------------------------------------------------
New Opportunities Fund Class IB 724,639 17.612101 12,762,422
- -----------------------------------------------------------------------------------------------------------------------------
New Opportunities Fund Class IA 4,197 14.591299 61,233
- -----------------------------------------------------------------------------------------------------------------------------
New Opportunities Fund Class IA 33,737 17.605549 593,965
- -----------------------------------------------------------------------------------------------------------------------------
New Opportunities Fund Class IA 13,371 14.595953 195,158
- -----------------------------------------------------------------------------------------------------------------------------
New Value Fund Class IA 12,278,279 12.014336 147,515,367
- -----------------------------------------------------------------------------------------------------------------------------
New Value Fund Class IA-ODBO 20,328 12.002423 243,982
- -----------------------------------------------------------------------------------------------------------------------------
New Value Fund Class IB 119,266 10.179473 1,214,063
- -----------------------------------------------------------------------------------------------------------------------------
New Value Fund Class IA 1,659 10.369967 17,202
- -----------------------------------------------------------------------------------------------------------------------------
New Value Fund Class IA 9,179 10.373288 95,218
- -----------------------------------------------------------------------------------------------------------------------------
OTC & Emerging Fund Class IA 5,011,644 22.292339 111,721,272
- -----------------------------------------------------------------------------------------------------------------------------
OTC & Emerging Fund Class IA-ODBO 45,373 22.270202 1,010,475
- -----------------------------------------------------------------------------------------------------------------------------
OTC & Emerging Fund Class IB 209,596 22.902047 4,800,176
- -----------------------------------------------------------------------------------------------------------------------------
OTC & Emerging Fund Class IA 2,314 16.351294 37,836
- -----------------------------------------------------------------------------------------------------------------------------
Research Fund Class IA 4,978,154 15.711958 78,216,554
- -----------------------------------------------------------------------------------------------------------------------------
Research Fund Class IA-ODBO 64,987 15.696369 1,020,066
- -----------------------------------------------------------------------------------------------------------------------------
Research Fund Class IB 217,731 15.673577 3,412,618
- -----------------------------------------------------------------------------------------------------------------------------
Research Fund Class IA 6,169 11.830791 72,990
- -----------------------------------------------------------------------------------------------------------------------------
Small Cap Value Fund Class IA 676,203 10.251449 6,932,057
- -----------------------------------------------------------------------------------------------------------------------------
Small Cap Value Fund Class IA-ODBO 6,157 10.241295 63,052
- -----------------------------------------------------------------------------------------------------------------------------
Small Cap Value Fund Class IB 23,907 10.234780 244,685
- -----------------------------------------------------------------------------------------------------------------------------
Small Cap Value Fund Class IA 304 10.230953 3,111
- -----------------------------------------------------------------------------------------------------------------------------
Small Cap Value Fund Class IA 6,610 10.858126 71,772
- -----------------------------------------------------------------------------------------------------------------------------
Utilities Growth and Income Fund Class IA 19,114,146 22.360175 427,395,648
- -----------------------------------------------------------------------------------------------------------------------------
Utilities Growth and Income Fund Class IA-ODBO 18,064 22.337937 403,518
- -----------------------------------------------------------------------------------------------------------------------------
Utilities Growth and Income Fund Class IB 322,461 10.813043 3,486,782
- -----------------------------------------------------------------------------------------------------------------------------
Utilities Growth and Income Fund Class IA 547 9.837365 5,378
- -----------------------------------------------------------------------------------------------------------------------------
Utilities Growth and Income Fund Class IA 313 9.840524 3,082
- -----------------------------------------------------------------------------------------------------------------------------
Vista Fund Class IA 14,524,443 21.587416 313,545,204
- -----------------------------------------------------------------------------------------------------------------------------
Vista Fund Class IA-ODBO 36,126 21.566047 779,095
- -----------------------------------------------------------------------------------------------------------------------------
Vista Fund Class IB 267,224 15.410501 4,118,049
- -----------------------------------------------------------------------------------------------------------------------------
Vista Fund Class IA 1,419 13.887315 19,704
- -----------------------------------------------------------------------------------------------------------------------------
Vista Fund Class IA 6,984 13.891759 97,015
- -----------------------------------------------------------------------------------------------------------------------------
Voyager Fund Class IA 52,778,506 86.478855 4,564,224,796
- -----------------------------------------------------------------------------------------------------------------------------
Voyager Fund Class IA-ODBO 72,256 86.393030 6,242,392
- -----------------------------------------------------------------------------------------------------------------------------
Voyager Fund Class IB 1,521,211 16.722826 25,438,943
- -----------------------------------------------------------------------------------------------------------------------------
Voyager Fund Class IA 35,238 16.716602 589,065
- -----------------------------------------------------------------------------------------------------------------------------
Voyager Fund Class IA 16,860 13.922138 234,722
- -----------------------------------------------------------------------------------------------------------------------------
Sub-total: 18,354,310,110
- -----------------------------------------------------------------------------------------------------------------------------
Annuity contracts in the annuity period:
- -----------------------------------------------------------------------------------------------------------------------------
Asia Pacific Growth Fund Class IA 11,774 17.505073 206,097
- -----------------------------------------------------------------------------------------------------------------------------
Diversified Income Fund Class IA 56,359 12.532208 706,305
- -----------------------------------------------------------------------------------------------------------------------------
George Putnam Fund of Boston Class IA 32,580 10.063218 327,857
- -----------------------------------------------------------------------------------------------------------------------------
Global Asset Allocation Class IA 30,403 33.370480 1,014,572
- -----------------------------------------------------------------------------------------------------------------------------
Global Growth Fund Class IA 141,087 40.579891 5,725,283
- -----------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund Class IA 284,955 45.646494 13,007,188
- -----------------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-7
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<CAPTION>
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------
December 31, 1999 Units Unit Contract
Owned by Price Liability
Participants
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Health Sciences Fund Class IA 1,438 $10.277002 $ 14,780
- -----------------------------------------------------------------------------------------------------------------------------
High Yield Fund Class IA 23,621 24.798772 585,767
- -----------------------------------------------------------------------------------------------------------------------------
Income Fund Class IA 33,771 20.574405 694,825
- -----------------------------------------------------------------------------------------------------------------------------
International Growth Fund Class IA 36,034 21.164253 762,623
- -----------------------------------------------------------------------------------------------------------------------------
International Growth and Income Fund Class IA 38,069 15.876443 604,394
- -----------------------------------------------------------------------------------------------------------------------------
International New Opportunities Fund Class IA 10,008 22.467545 224,855
- -----------------------------------------------------------------------------------------------------------------------------
Investors Fund Class IA 190,434 14.669230 2,793,526
- -----------------------------------------------------------------------------------------------------------------------------
Money Market Fund Class IA 272,068 1.590607 432,753
- -----------------------------------------------------------------------------------------------------------------------------
New Opportunities Fund Class IA 124,027 41.424321 5,137,721
- -----------------------------------------------------------------------------------------------------------------------------
New Value Fund Class IA 34,932 12.014336 419,681
- -----------------------------------------------------------------------------------------------------------------------------
OTC & Emerging Fund Class IA 2,040 22.292339 45,487
- -----------------------------------------------------------------------------------------------------------------------------
Research Fund Class IA 7,020 15.711958 110,301
- -----------------------------------------------------------------------------------------------------------------------------
Utilities Growth and Income Fund Class IA 23,235 22.360175 519,549
- -----------------------------------------------------------------------------------------------------------------------------
Vista Fund Class IA 22,244 21.587416 480,198
- -----------------------------------------------------------------------------------------------------------------------------
Voyager Fund Class IA 179,543 86.478855 15,526,662
- -----------------------------------------------------------------------------------------------------------------------------
Sub-total: 49,340,424
- -----------------------------------------------------------------------------------------------------------------------------
GRAND TOTAL: $18,403,650,534
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-8
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
For the Year Ended Asia Pacific Diversified The Global Asset Global Growth Health
December 31, 1999 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>
INVESTMENT INCOME:
Dividends $ -- $20,746,341 $ 3,704,509 $ 9,844,187 $ 4,424,055 $ 66,564,980 $ 110,969
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------------------------------------------------------
Mortality and expense
undertakings (1,029,107) (3,643,120) (1,565,208) (6,198,235) (14,519,780) (61,099,979) (1,414,934)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital gains income -- -- 209,660 27,622,270 92,127,086 332,181,427 --
- ------------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on security transactions 3,372,520 (27,663) (22,537) 1,374,124 5,846,550 (1,138,423) (28,666)
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
during the period 68,792,412 (15,765,873) (6,910,385) 16,671,019 562,391,239 (323,924,007) (2,478,737)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 72,164,932 (15,793,536) (6,932,922) 18,045,143 568,237,789 (325,062,430) (2,507,403)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $71,135,825 $1,309,685 $(4,583,961) $49,313,365 $650,269,150 $12,583,998 $(3,811,368)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-9
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
For the Year Ended High Yield Income International International International Investors Money
December 31, 1999 Sub-Account Sub-Account* Growth Growth New Sub-Account Market
Sub-Account and Income Opportunities Sub-Account
Sub-Account Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 59,497,439 $ 20,028,362 $ -- $ -- $ 35,183 $ -- $ 17,322,804
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
....................................................................................................................................
Mortality and expense
undertakings (6,840,418) (4,661,105) (2,787,802) (2,582,525) (1,296,333) (3,637,258) (4,566,036)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital gains income -- 5,975,488 -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized (loss) gain
on security transactions (1,675,864) (340,290) 1,426,563 2,015,312 3,852,890 (9,389) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized (depreciation)
appreciation of investments
during the period (26,169,927) (33,473,692) 122,393,260 44,768,753 88,295,799 94,977,419 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net (loss) gain on investments (27,845,791) (33,813,982) 123,819,823 46,784,065 92,148,689 94,968,030 --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $24,811,230 $(12,471,237) $121,032,021 $44,201,540 $90,887,539 $91,330,772 $12,756,768
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Formerly Putnam U.S. Government and High Quality Bond Sub-Account, change
effective on April 9, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-10
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (CONTINUED)
- ------------------------------------------------------------------------------------------------
For the Year Ended New New OTC & Research
December 31, 1999 Opportunities Value Emerging Growth Sub-Account
Fund Sub-Account Sub-Account
Sub-Account
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ -- $ 12,285 $ -- $ 149,216
- ------------------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------------------
Mortality and expense
undertakings (22,036,093) (2,036,507) (494,549) (559,197)
- ------------------------------------------------------------------------------------------------
Capital gains income 22,256,056 2,599,425 291,321 2,100,941
- ------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
- ------------------------------------------------------------------------------------------------
Net realized gain (loss)
on security transactions 5,451,734 (728,466) (51,111) 3,620
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
during the period 1,039,871,912 (2,677,084) 49,148,909 10,790,437
- ------------------------------------------------------------------------------------------------
Net gain (loss) on
investments 1,045,323,646 (3,405,550) 49,097,798 10,794,057
- ------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $1,045,543,609 $(2,830,347) $48,894,570 $12,485,017
- ------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------
For the Year Ended Small Cap Utilities Vista Voyager
December 31, 1999 Value Growth Sub-Account Sub-Account
Sub-Account and Income
Sub-Account
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ -- $ 12,574,469 $ -- $ 3,273,531
- -----------------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------------
Mortality and expense
undertakings (31,728) (5,634,179) (2,718,771) (41,187,764)
- -----------------------------------------------------------------------------------------
Capital gains income 22,625 13,206,014 22,637,128 262,577,634
- -----------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
- -----------------------------------------------------------------------------------------
Net realized gain (loss)
on security transactions (10,094) 2,108,928 33,227 721,485
- -----------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
during the period 43,658 (30,354,945) 83,347,036 1,425,647,055
- -----------------------------------------------------------------------------------------
Net gain (loss) on
investments 33,564 (28,246,017) 83,380,263 1,426,368,540
- -----------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $24,461 $(8,099,713) $103,298,620 $1,651,031,941
- -----------------------------------------------------------------------------------------
</TABLE>
*From inception, April 30, 1999, to December 31, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-11
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
For the Year Ended Asia Pacific Diversified The Global Asset Global Growth Health
December 31, 1999 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 (loss) gain $ (1,029,107) $ 17,103,221 $ 2,139,301 $ 3,645,952 $ (10,095,725) $ 5,465,001 $ (1,303,965)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital gains income -- -- 209,660 27,622,270 92,127,086 332,181,427 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on security transactions 3,372,520 (27,663) (22,537) 1,374,124 5,846,550 (1,138,423) (28,666)
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
during the period 68,792,412 (15,765,873) (6,910,385) 16,671,019 562,391,239 (323,924,007) (2,478,737)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 71,135,825 1,309,685 (4,583,961) 49,313,365 650,269,150 12,583,998 (3,811,368)
- ------------------------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 3,806,398 13,537,388 32,216,493 8,047,527 30,766,152 203,654,134 26,786,549
- ------------------------------------------------------------------------------------------------------------------------------------
Net transfers 19,229,603 (10,593,802) 71,992,971 (25,499,112) (6,965,041) 11,743,160 35,811,929
- ------------------------------------------------------------------------------------------------------------------------------------
Surrenders for benefit
payments and fees (4,364,403) (20,757,282) (6,814,707) (29,383,107) (64,786,786) (313,086,698) (5,680,853)
- ------------------------------------------------------------------------------------------------------------------------------------
Net annuity transactions 90,120 387,231 323,682 288,021 437,345 2,862,757 7,497
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from unit transactions 18,761,718 (17,426,465) 97,718,439 (46,546,671) (40,548,330) (94,826,647) 56,925,122
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease)
in net assets 89,897,543 (16,116,780) 93,134,478 2,766,694 609,720,820 (82,242,649) 53,113,754
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning 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
- ------------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $143,211,334 $281,476,116 $158,983,063 $508,490,486 $1,673,158,534 $4,615,695,353 $132,751,447
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-12
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
For the Year Ended High Yield Income International International International Investors Money
December 31, 1999 Sub-Account Sub-Account* Growth Growth New Sub-Account Market
Sub-Account and Income Opportunities Sub-Account
Sub-Account Sub-Account
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 52,657,021 $ 15,367,257 $ (2,787,802) $ (2,582,525) $ (1,261,150) $ (3,637,258) $ 12,756,768
- ------------------------------------------------------------------------------------------------------------------------------------
Capital gains income -- 5,975,488 -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized (loss) gain
on security transactions (1,675,864) (340,290) 1,426,563 2,015,312 3,852,890 (9,389) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized (depreciation)
appreciation of investments
during the period (26,169,927) (33,473,692) 122,393,260 44,768,753 88,295,799 94,977,419 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 24,811,230 (12,471,237) 121,032,021 44,201,540 90,887,539 91,330,772 12,756,768
- ------------------------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 22,103,736 22,113,474 21,416,671 9,338,394 6,456,992 76,548,331 49,910,299
- ------------------------------------------------------------------------------------------------------------------------------------
Net transfers (55,561,867) 22,336,019 43,414,707 7,110,189 18,917,457 185,287,199 216,517,696
- ------------------------------------------------------------------------------------------------------------------------------------
Surrenders for benefit
payments and fees (43,017,635) (30,504,530) (8,882,207) (10,230,215) (6,103,547) (16,578,181) (121,065,526)
- ------------------------------------------------------------------------------------------------------------------------------------
Net annuity transactions (33,122) 113,747 259,824 (68,629) 156,001 1,811,456 274,104
- ------------------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase
in net assets resulting
from unit transactions (76,508,888) 14,058,710 56,208,995 6,149,739 19,426,903 247,068,805 145,636,573
- ------------------------------------------------------------------------------------------------------------------------------------
Total (decrease) increase
in net assets (51,697,658) 1,587,473 177,241,016 50,351,279 110,314,442 338,399,577 158,393,341
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 562,115,312 350,911,493 173,050,176 182,231,594 80,040,406 135,210,508 286,030,387
- ------------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $510,417,654 $352,498,966 $350,291,192 $232,582,873 $190,354,848 $473,610,085 $444,423,728
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Formerly Putnam U.S. Government and High Quality Bond Sub-Account, change
effective on April 9, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-13
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
For the Year Ended New New OTC & Research
December 31, 1999 Opportunities Value Emerging Growth Sub-Account
Sub-Account Sub-Account Sub-Account
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income $ (22,036,093) $ (2,024,222) $ (494,549) $ (409,981)
- ---------------------------------------------------------------------------------------------------------------
Capital gains income 22,256,056 2,599,425 291,321 2,100,941
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on security transactions 5,451,734 (728,466) (51,111) 3,620
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
during the period 1,039,871,912 (2,677,084) 49,148,909 10,790,437
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 1,045,543,609 (2,830,347) 48,894,570 12,485,017
- ---------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 70,100,418 8,191,732 8,984,358 16,494,882
- ---------------------------------------------------------------------------------------------------------------
Net transfers 33,449,655 (2,806,534) 44,505,495 42,014,115
- ---------------------------------------------------------------------------------------------------------------
Surrenders for benefit
payments and fees (94,557,079) (8,355,209) (1,966,594) (2,168,283)
- ---------------------------------------------------------------------------------------------------------------
Net annuity transactions 839,512 43,123 20,689 95,277
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from unit transactions 9,832,506 (2,926,888) 51,543,948 56,435,991
- ---------------------------------------------------------------------------------------------------------------
Total increase (decrease)
in net assets 1,055,376,115 (5,757,235) 100,438,518 68,921,008
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 1,559,950,973 155,262,748 17,176,728 13,911,521
- ---------------------------------------------------------------------------------------------------------------
END OF PERIOD $2,615,327,088 $149,505,513 $117,615,246 $82,832,529
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
For the Year Ended Small Cap Utilities Vista Voyager
December 31, 1999 Value Growth Sub-Account Sub-Account
Sub-Account and Income
Sub-Account
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income $ (31,728) $ 6,940,290 $ (2,718,771) $ (37,914,233)
- ------------------------------------------------------------------------------------------------------------
Capital gains income 22,625 13,206,014 22,637,128 262,577,634
- ------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on security transactions (10,094) 2,108,928 33,227 721,485
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
during the period 43,658 (30,354,945) 83,347,036 1,425,647,055
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 24,461 (8,099,713) 103,298,620 1,651,031,941
- ------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 1,292,420 17,307,803 16,637,471 148,997,226
- ------------------------------------------------------------------------------------------------------------
Net transfers 6,150,077 6,544,954 28,831,699 120,612,605
- ------------------------------------------------------------------------------------------------------------
Surrenders for benefit
payments and fees (152,281) (33,444,261) (12,112,147) (189,360,075)
- ------------------------------------------------------------------------------------------------------------
Net annuity transactions -- 71,129 119,647 2,330,058
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from unit transactions 7,290,216 (9,520,375) 33,476,670 82,579,814
- ------------------------------------------------------------------------------------------------------------
Total increase (decrease)
in net assets 7,314,677 (17,620,088) 136,775,290 1,733,611,755
- ------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period -- 449,434,045 182,263,975 2,878,644,825
- -----------------------------------------------------------------------------------------------------------
END OF PERIOD $7,314,677 $431,813,957 $319,039,265 $4,612,256,580
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*From inception, April 30, 1999, to December 31, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-14
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- ---------------------------------------------------------------------------------------------------------
For the Year Ended Asia Pacific Diversified The Global Asset
December 31, 1998 Growth Income George Putnam Allocation
Sub-Account Sub-Account Fund of Boston Sub-Account
Sub-Account*
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 1,983,854 $ 7,773,682 $ 290,393 $ 3,657,599
- ---------------------------------------------------------------------------------------------------------
Capital gains income -- 5,008,700 -- 44,644,942
- ---------------------------------------------------------------------------------------------------------
Net realized (loss) gain
on security transactions (2,643,384) (10,560) (77) (1,101,556)
- ---------------------------------------------------------------------------------------------------------
Net unrealized (depreciation)
appreciation of investments
during the period (4,019,185) (21,217,526) 2,842,929 5,910,330
- ---------------------------------------------------------------------------------------------------------
Net (decrease) increase
in net assets resulting
from operations (4,678,715) (8,445,704) 3,133,245 53,111,315
- ---------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 3,701,343 33,956,636 22,958,516 24,919,757
- ---------------------------------------------------------------------------------------------------------
Net transfers (11,415,291) 17,449,089 40,402,664 (3,015,745)
- ---------------------------------------------------------------------------------------------------------
Surrenders for benefit
payments and fees (2,634,973) (15,560,109) (660,976) (20,755,078)
- ---------------------------------------------------------------------------------------------------------
Net annuity transactions 7,452 108,092 15,136 38,867
- ---------------------------------------------------------------------------------------------------------
Net (decrease) increase
in net assets resulting
from unit transactions (10,341,469) 35,953,708 62,715,340 1,187,801
- ---------------------------------------------------------------------------------------------------------
Total (decrease) increase
in net assets (15,020,184) 27,508,004 65,848,585 54,299,116
- ---------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 68,333,975 270,084,892 -- 451,424,676
- ---------------------------------------------------------------------------------------------------------
END OF PERIOD $53,313,791 $297,592,896 $65,848,585 $505,723,792
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
For the Year Ended Global Growth Health
December 31, 1998 Growth and Income Sciences
Sub-Account Sub-Account Sub-Account*
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 10,660,832 $ 9,588,435 $ (265,972)
- --------------------------------------------------------------------------------------------
Capital gains income 119,580,624 449,520,386 --
- --------------------------------------------------------------------------------------------
Net realized (loss) gain
on security transactions (2,048,000) (2,692,306) (40,455)
- --------------------------------------------------------------------------------------------
Net unrealized (depreciation)
appreciation of investments
during the period 103,901,524 87,694,015 7,606,308
- --------------------------------------------------------------------------------------------
Net (decrease) increase
in net assets resulting
from operations 232,094,980 544,110,530 7,299,881
- --------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 40,146,277 391,563,606 26,776,582
- --------------------------------------------------------------------------------------------
Net transfers (16,693,380) 178,476,225 46,345,740
- --------------------------------------------------------------------------------------------
Surrenders for benefit
payments and fees (42,527,743) (203,033,706) (791,265)
- --------------------------------------------------------------------------------------------
Net annuity transactions 780,680 3,076,200 6,755
- --------------------------------------------------------------------------------------------
Net (decrease) increase
in net assets resulting
from unit transactions (18,294,166) 370,082,325 72,337,812
- --------------------------------------------------------------------------------------------
Total (decrease) increase
in net assets 213,800,814 914,192,855 79,637,693
- --------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 849,636,900 3,783,745,147 --
- --------------------------------------------------------------------------------------------
END OF PERIOD $1,063,437,714 $4,697,938,002 $79,637,693
- --------------------------------------------------------------------------------------------
</TABLE>
*From inception, April 29, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-15
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------
For the Year Ended High Yield Income International International
December 31, 1998 Sub-Account Sub-Account*** Growth Growth
Sub-Account and Income
Sub-Account
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 37,390,576 $ 9,107,847 $ (1,215,665) $ 123,840
- -----------------------------------------------------------------------------------------------------------
Capital gains income 7,154,195 339,070 -- 6,025,944
- -----------------------------------------------------------------------------------------------------------
Net realized (loss) gain
on security transactions (441,473) (333) 925,343 1,131,061
- -----------------------------------------------------------------------------------------------------------
Net unrealized (depreciation)
appreciation of investments
during the period (87,363,215) 8,314,527 16,747,707 4,828,897
- -----------------------------------------------------------------------------------------------------------
Net (decrease) increase
in net assets resulting
from operations (43,259,917) 17,761,111 16,457,385 12,109,742
- -----------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 72,624,888 37,202,879 33,867,169 28,578,698
- -----------------------------------------------------------------------------------------------------------
Net transfers 12,770,669 83,756,988 46,801,653 30,062,010
- -----------------------------------------------------------------------------------------------------------
Surrenders for benefit
payments and fees (33,136,210) (21,228,886) (3,887,820) (5,364,128)
- -----------------------------------------------------------------------------------------------------------
Net annuity transactions 51,619 379,477 185,497 110,000
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from unit transactions 52,310,966 100,110,458 76,966,499 53,386,580
- -----------------------------------------------------------------------------------------------------------
Total increase (decrease)
in net assets 9,051,049 117,871,569 93,423,884 65,496,322
- -----------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 553,064,263 233,039,924 79,626,292 116,735,272
- -----------------------------------------------------------------------------------------------------------
END OF PERIOD $562,115,312 $350,911,493 $173,050,176 $182,231,594
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- ------------------------------------------------------------------------------------------
For the Year Ended International Investors Money
December 31, 1998 New Sub-Account* Market
Opportunities Sub-Account
Sub-Account
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (885,013) $ (329,888) $ 8,443,527
- ------------------------------------------------------------------------------------------
Capital gains income -- -- --
- ------------------------------------------------------------------------------------------
Net realized (loss) gain
on security transactions 643,101 9,797 --
- ------------------------------------------------------------------------------------------
Net unrealized (depreciation)
appreciation of investments
during the period 10,000,358 16,426,490 --
- ------------------------------------------------------------------------------------------
Net (decrease) increase
in net assets resulting
from operations 9,758,446 16,106,399 8,443,527
- ------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 8,986,296 36,748,793 69,440,184
- ------------------------------------------------------------------------------------------
Net transfers 22 83,171,689 84,802,844
- ------------------------------------------------------------------------------------------
Surrenders for benefit
payments and fees (2,835,620) (1,228,854) (57,809,657)
- ------------------------------------------------------------------------------------------
Net annuity transactions 5,654 412,481 105,102
- ------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from unit transactions 6,156,352 119,104,109 96,538,473
- ------------------------------------------------------------------------------------------
Total increase (decrease)
in net assets 15,914,798 135,210,508 104,982,000
- ------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 64,125,608 -- 181,048,387
- ------------------------------------------------------------------------------------------
END OF PERIOD $80,040,406 $135,210,508 $286,030,387
- ------------------------------------------------------------------------------------------
</TABLE>
*From inception, April 29, 1998, to December 31, 1998.
***Formerly Putnam U.S. Government and High Quality Bond Sub-Account, change
effective on April 9, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-16
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------
For the Year Ended New New OTC & Research
December 31, 1998 Opportunities Value Emerging Growth Sub-Account**
Sub-Account Sub-Account Sub-Account*
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment (loss) income $ (18,820,230) $ 778,978 $ (63,507) $ (4,105)
- ----------------------------------------------------------------------------------------------------------
Capital gains income 18,663,729 2,710,447 -- 1,054
- ----------------------------------------------------------------------------------------------------------
Net realized (loss) gain
on security transactions (5,582,249) (77,945) (5,586) (25)
- ----------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
during the period 284,218,314 3,462,804 2,012,751 1,351,047
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 278,479,564 6,874,284 1,943,658 1,347,971
- ----------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 100,408,112 24,038,360 4,950,556 1,647,789
- ----------------------------------------------------------------------------------------------------------
Net transfers 18,404,946 11,223,213 10,400,668 10,968,597
- ----------------------------------------------------------------------------------------------------------
Surrenders for benefit
payments and fees (50,246,741) (5,866,336) (118,154) (52,836)
- ----------------------------------------------------------------------------------------------------------
Net annuity transactions 103,931 42,793 -- --
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from unit transactions 68,670,248 29,438,030 15,233,070 12,563,550
- ----------------------------------------------------------------------------------------------------------
Total increase (decrease)
in net assets 347,149,812 36,312,314 17,176,728 13,911,521
- ----------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 1,212,801,161 118,950,434 -- --
- ----------------------------------------------------------------------------------------------------------
END OF PERIOD $1,559,950,973 $155,262,748 $17,176,728 $13,911,521
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
For the Year Ended Utilities Vista Voyager
December 31, 1998 Growth Sub-Account Sub-Account
and Income
Sub-Account
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
OPERATIONS:
Net investment (loss) income $ 5,455,978 $ (1,899,386) $ (28,562,774)
- --------------------------------------------------------------------------------------------
Capital gains income 18,737,853 -- 139,641,873
- --------------------------------------------------------------------------------------------
Net realized (loss) gain
on security transactions (18,444) (244,730) (6,215,151)
- --------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments
during the period 26,881,495 24,961,915 407,773,124
- --------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 51,056,882 22,817,799 512,637,072
- --------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Purchases 35,162,888 35,890,384 199,996,300
- --------------------------------------------------------------------------------------------
Net transfers 29,486,383 30,156,192 84,727,443
- --------------------------------------------------------------------------------------------
Surrenders for benefit
payments and fees (20,582,321) (4,767,016) (106,034,590)
- --------------------------------------------------------------------------------------------
Net annuity transactions 138,914 171,740 1,865,032
- --------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from unit transactions 44,205,864 61,451,300 180,554,185
- --------------------------------------------------------------------------------------------
Total increase (decrease)
in net assets 95,262,746 84,269,099 693,191,257
- --------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 354,171,299 97,994,876 2,185,453,568
- --------------------------------------------------------------------------------------------
END OF PERIOD $449,434,045 $182,263,975 $2,878,644,825
- --------------------------------------------------------------------------------------------
</TABLE>
*From inception, April 29, 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-17
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT TWO --
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1. ORGANIZATION:
Putnam Capital Manager Trust Separate Account Two (the Account) is a separate
investment account within Hartford Life & Annuity Insurance Company (the
Company) and is registered with the Securities and Exchange Commission (SEC) as
a unit investment trust under the Investment Company Act of 1940, as amended.
Both the Company and the Account are subject to supervision and regulation by
the Department of Insurance of the State of Connecticut and the SEC. The Account
invests deposits by variable annuity contractowners of the Company in the
various mutual funds (the Funds) as directed by the contractowners.
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). Realized gains and losses on the
sales of securities are computed on the basis of identified cost of the fund
shares sold. Dividend and capital gains income are accrued as of the ex-dividend
date. Capital gains income represents dividends from the Funds which are
characterized as capital gains under tax regulations.
B) SECURITY VALUATION -- The 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, 1999.
C) UNIT TRANSACTIONS -- Unit transactions are executed based on the unit values
calculated at the close of the business day. All unit transactions are executed
at fair value.
D) SECURITY CLASS -- Putnam Variable Trust consists of a series of funds, each
of which is represented by a separate series of class IA shares and class IB
shares.
Class IA shares are offered at net asset value and are not subject to a
distribution fee. Class IA .40% are for Company employees only.
Class IB shares are offered at net asset value and pay an ongoing distribution
fee.
E) 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.
F) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
A) MORTALITY AND EXPENSE UNDERTAKINGS -- The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and, with
respect to the Account, receives a maximum annual fee of 1.50% 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 contractowners'
accounts, in accordance with the terms of the contracts. In addition, certain
other charges may apply based on the characteristics of the underlying contract.
These charges are reflected in surrenders for benefit payments and fees on the
accompanying statements of changes in net assets.
SA-18
<PAGE>
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, 1999 and
1998, 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, 1999. These statutory 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 auditing standards generally accepted
in the United States. 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 2 of notes to statutory financial
statements. When financial statements are presented for purposes other than for
filing with a regulatory agency, auditing standards generally accepted in the
United States require that an auditors' report on them state whether they are
presented in conformity with accounting principles generally accepted in the
United States. The accounting practices used by the Company vary from accounting
principles generally accepted in the United States as explained and quantified
in Note 2.
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 accounting principles generally accepted in the
United States, the financial position of the Company as of December 31, 1999 and
1998, or the results of its operations or its cash flows for each of the three
years in the period ended December 31, 1999.
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, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with statutory accounting practices as described in Note 2.
Hartford, Connecticut
January 31, 2000 ARTHUR ANDERSEN LLP
F-1
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
BALANCE SHEETS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Bonds $ 1,465,815 $ 1,453,792
Common stocks 42,430 40,650
Mortgage loans 63,784 59,548
Policy loans 59,429 47,212
Cash and short-term investments 267,579 469,955
- ------------------------------------------------------------------------------------------------
Other invested assets 2,892 2,188
- ------------------------------------------------------------------------------------------------
Total cash and invested assets 1,901,929 2,073,345
Investment income due and accrued 21,069 20,126
Other assets 39,576 45,691
Separate account assets 44,865,042 32,876,278
- ------------------------------------------------------------------------------------------------
TOTAL ASSETS $46,827,616 $35,015,440
- ------------------------------------------------------------------------------------------------
LIABILITIES
Aggregate reserves for future benefits $ 591,621 $ 579,140
Policy and contract claim liabilities 7,677 5,667
Liability for premium and other deposit funds 1,969,262 2,011,672
Asset valuation reserve 4,935 21,782
Payable to affiliates 14,084 19,271
Accrued expense allowances and other amounts due from
separate accounts (1,377,927) (1,173,513)
Remittances and items not allocated 111,582 87,449
Other liabilities 118,464 111,182
Separate account liabilities 44,865,042 32,876,278
- ------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 46,304,740 34,538,928
- ------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS
Common stock 2,500 2,500
Gross paid-in and contributed surplus 226,043 226,043
Unassigned funds 294,333 247,969
- ------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS 522,876 476,512
- ------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $46,827,616 $35,015,440
- ------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-2
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums and annuity considerations $ 621,789 $ 469,343 $ 296,645
Annuity and other fund deposits 2,991,363 2,051,251 1,981,246
Net investment income 122,322 129,982 102,285
Commissions and expense allowances on reinsurance ceded 379,905 444,241 396,921
Reserve adjustment on reinsurance ceded 1,411,342 3,185,590 3,672,076
Fee income 647,565 448,260 290,675
Other revenues 842 9,930 (2,043)
- -------------------------------------------------------------------------------------------------------
TOTAL REVENUES 6,175,128 6,738,597 6,737,805
- -------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Death and annuity benefits 47,372 43,152 65,961
Disability and other benefits 6,270 6,352 7,532
Surrenders and other fund withdrawals 1,250,813 739,663 454,417
Commissions 467,338 435,994 470,334
Increase (Decrease) in aggregate reserves for future
benefits 12,481 (10,711) 33,213
(Decrease) Increase in liability for premium and other
deposit funds (47,852) 218,642 640,840
General insurance expenses 192,196 190,979 77,237
Net transfers to separate accounts 4,160,501 4,956,007 4,914,980
Other expenses 35,385 22,091 15,671
- -------------------------------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 6,124,504 6,602,169 6,680,185
- -------------------------------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS
Before federal income tax (benefit) expense 50,624 136,428 57,620
Federal income tax (benefit) expense (10,231) 35,887 (14,878)
- -------------------------------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS 60,855 100,541 72,498
Net realized capital (losses) gains, after tax (36,428) 2,085 1,544
- -------------------------------------------------------------------------------------------------------
NET INCOME $ 24,427 $ 102,626 $ 74,042
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-3
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------
<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 247,969 143,257 74,570
Net income 24,427 102,626 74,042
Change in net unrealized capital gains on common stocks
and other invested assets 2,258 1,688 2,186
Change in asset valuation reserve 16,847 (8,112) (6,228)
Change in non-admitted assets 6,557 (1,277) (1,313)
Credit on reinsurance ceded (3,725) 9,787 --
- -------------------------------------------------------------------------------------------------
Balance, end of year 294,333 247,969 143,257
- -------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS,
End of year $522,876 $476,512 $371,800
- -------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-4
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums and annuity considerations $3,613,217 $2,520,655 $2,277,874
Net investment income 122,998 127,425 101,991
Fee income 647,565 448,260 290,675
Other income 1,799,323 3,644,704 4,091,043
- -------------------------------------------------------------------------------------------------------
Total income 6,183,103 6,741,044 6,761,583
- -------------------------------------------------------------------------------------------------------
Benefits paid 1,303,801 790,051 529,733
Federal income tax (recoveries) payments (8,815) 25,780 (14,499)
Net transfers to separate accounts 4,364,914 5,222,144 5,199,354
Other expenses 669,525 626,240 547,692
- -------------------------------------------------------------------------------------------------------
Total benefits and expenses 6,329,425 6,664,215 6,262,280
- -------------------------------------------------------------------------------------------------------
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES (146,322) 76,829 499,303
- -------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD
Bonds 753,358 633,926 614,413
Common stocks 939 34,010 11,481
Mortgage loans 53,704 85,275 --
Other 1,490 19,990 152
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT PROCEEDS 809,491 773,201 626,046
- -------------------------------------------------------------------------------------------------------
COST OF INVESTMENTS ACQUIRED
Bonds 804,947 586,913 848,267
Common stocks 464 7,012 28,302
Mortgage loans 57,665 59,702 85,103
Other 14,211 11,847 26,227
- -------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS ACQUIRED 877,287 665,474 987,899
- -------------------------------------------------------------------------------------------------------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES $ (67,796) $ 107,727 $ (361,853)
- -------------------------------------------------------------------------------------------------------
FINANCING AND MISCELLANEOUS ACTIVITIES
Net other cash provided (used) 11,742 (24,033) (4,848)
- -------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) FINANCING
AND MISCELLANEOUS ACTIVITIES 11,742 (24,033) (4,848)
- -------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and short-term investments (202,376) 160,523 132,602
Cash and short-term investments, beginning of year 469,955 309,432 176,830
- -------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF YEAR $ 267,579 $ 469,955 $ 309,432
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(STATUTORY BASIS)
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS:
Hartford Life and Annuity Insurance Company (the "Company") is a wholly owned
subsidiary of Hartford Life Insurance Company ("HLIC"), which is an indirect
subsidiary of Hartford Life, Inc. ("HLI"). HLI is indirectly majority owned by
The Hartford Financial Services Group, Inc. ("The Hartford"). 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 approximately 18.6% of the
equity ownership of HLI.
In 1998, the Company changed its name to Hartford Life and Annuity Insurance
Company from ITT Hartford Life and Annuity Insurance Company.
The Company offers a complete line of fixed and variable annuities, as well as
variable, universal and traditional individual life insurance.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying statutory basis financial statements of the Company were
prepared in conformity with statutory accounting practices prescribed or
permitted by the National Association of Insurance Commissioners ("NAIC") and
the State of Connecticut Department of Insurance. Certain reclassifications have
been made to prior year financial information to conform to the current year
presentation.
Current prescribed statutory accounting practices include accounting
publications of the 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.
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 periods. 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 VERSUS GAAP
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, etc.) which are charged to expense when incurred for statutory
purposes rather than on a pro-rata basis over the expected life and gross
profit stream 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 only consist of charges assessed to policy
account balances for cost of insurance, policy administration and
surrenders. When policy charges received relate to coverage or services to
be provided in the future, the charges are recognized as revenue on a
pro-rata basis over the expected life and gross profit stream of the policy.
Also, for GAAP purposes, premiums for traditional life insurance policies
are recognized as revenues when they are due from policyholders;
(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 under GAAP;
(4) providing for income taxes based on current taxable income only for
statutory purposes, rather than establishing additional assets or
liabilities for deferred Federal income taxes to recognize the tax effect
related to reporting revenues and expenses in different periods for
financial reporting and tax return purposes or required under GAAP;
(5) excluding certain assets designated as non-admitted assets (e.g., negative
Interest Maintenance Reserve, and past due agents' balances) from the
balance sheet for statutory purposes by directly charging surplus;
(6) the calculation of post retirement benefits obligation which, for statutory
accounting, excludes non-vested employees whereas GAAP liabilities include a
provision for such employees; statutory and GAAP accounting permit either
immediate recognition of the liability or straight-line amortization of the
liability over a period not to exceed 20 years. For GAAP, The Hartford's
obligation was immediately recognized, whereas for statutory accounting, the
obligation is being recognized ratably over a 20 year period;
F-6
<PAGE>
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve) for statutory purposes; as well as the deferral and
amortization of realized gains and losses, caused 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) for
statutory purposes; 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 for
statutory purposes; whereas on a GAAP basis, reserves are reported gross of
reinsurance with reserve credits presented as recoverable assets;
(9) the reporting of fixed maturities at amortized cost for statutory purposes,
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 separate component of Stockholder's
Equity; as well as the change in the basis of the Company's other invested
assets, which consist primarily of limited partnership investments, which is
recognized as income under GAAP and as a change in surplus under statutory
accounting; and
(10) statutory accounting calculates separate account liabilities using
prescribed actuarial methodologies, which approximate the market value of
separate account assets less applicable surrender charges. The separate
account surplus generated by these reserving methods is recorded as an
amount due to or from the separate account on the statutory basis balance
sheet, with changes reflected in the statutory basis results of operations.
On a GAAP basis, separate account assets and liabilities are held at fair
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>
1999 1998 1997
<S> <C> <C> <C>
----------------------------------------
GAAP Net Income $ 75,654 $ 74,525 $ 58,050
Deferral and amortization of policy
acquisition costs, net (272,171) (331,882) (345,657)
Change in unearned revenue reserve (64,915) 23,118 4,058
Deferred taxes 57,833 2,476 47,092
Separate account expense allowance 214,388 259,287 282,818
Asset impairments and write-downs (17,250) 17,250 --
Benefit reserve adjustment 11,491 5,360 24,666
Gain on commutation of reinsurance
(Note 4) -- 52,026 --
Prepaid reinsurance premium (3,524) -- --
Statutory voluntary reserve (6,286) -- --
Other, net 29,207 466 3,015
----------------------------------------
STATUTORY NET INCOME $ 24,427 $ 102,626 $ 74,042
----------------------------------------
GAAP Stockholder's Equity $ 676,428 $ 648,097 $ 570,469
Deferred policy acquisition costs (1,887,824) (1,615,653) (1,283,771)
Unearned revenue reserve 95,965 160,951 134,789
Deferred taxes 122,105 68,936 64,522
Separate account expense allowance 1,398,030 1,183,642 924,355
Asset impairments and write-downs -- 17,250 --
Unrealized losses (gains) on
investments 26,292 (24,955) (21,451)
Benefit reserve adjustment 81,111 69,233 16,378
Asset valuation reserve (4,935) (21,782) (13,670)
Adjustment relating to Lyndon
contribution (Note 4) -- -- (23,671)
Prepaid reinsurance premium (7,728) (4,204) --
Statutory voluntary reserve (6,286) -- --
Other, net 29,718 (5,003) 3,850
----------------------------------------
STATUTORY CAPITAL AND SURPLUS $ 522,876 $ 476,512 $ 371,800
----------------------------------------
</TABLE>
F-7
<PAGE>
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 applicable 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 the Commissioners Annuity Reserve Valuation Method
("CARVM").
The Company has established separate accounts to segregate the assets and
liabilities of certain life insurance and annuity contracts that must be
segregated from the Company's general assets under the terms of its contracts.
The assets consist primarily of marketable securities and are reported at market
value. Premiums, benefits and expenses of these contracts are reported in the
statutory basis statements of operations.
An analysis of Annuity Actuarial Reserves and Deposit Liabilities by Withdrawal
Characteristics as of December 31, 1999 (including general and separate account
liabilities) is as follows:
<TABLE>
<CAPTION>
% of
Amount Total
<S> <C> <C>
--------------------
Subject to discretionary withdrawal:
--------------------
With market value adjustment $ 4,564 0.0%
At book value less current surrender charge of 5% or more 1,427,302 3.2%
At market value 42,431,996 95.4%
--------------------
Total with adjustment or at market value 43,863,862 98.6%
At book value without adjustment (minimal or no charge or
adjustment): 573,583 1.3%
Not subject to discretionary withdrawal: 34,816 0.1%
--------------------
Total, gross 44,472,261 100.0%
Reinsurance ceded --
------------
Total, net $44,472,261
------------
</TABLE>
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 reduction in
the value of a security is deemed to be unrecoverable, the decline in value 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. Mortgage
loans, which are carried at cost and approximate fair value, include investments
in assets backed by mortgage loan pools. Other invested assets are generally
recorded at fair value.
The Asset Valuation Reserve ("AVR") is designed to provide a standardized
reserving process for realized and unrealized losses due to default and equity
risks associated with invested assets. The AVR balances were $4,935 and $21,782
as of December 31, 1999 and 1998, respectively. Additionally, the Interest
Maintenance Reserve ("IMR") captures net realized capital gains and losses, net
of applicable income taxes, resulting from changes in interest rates and
amortizes these gains or losses into income over the life of the bond or
mortgage sold. The IMR balance as of December 31, 1999 is an asset balance of
$981 and is reflected as a component of non-admitted assets in Unassigned Funds
in accordance with statutory accounting practices. The IMR balance as of
December 31, 1998 is a liability balance of $452 and is reflected as an other
liability. The net capital (losses) gains transferred to the IMR in 1999, 1998
and 1997 were $(1,255), $852 and $(719), respectively. The amount of income
(expense) amortized from the IMR in 1999, 1998 and 1997 included in the
Company's Statements of Operations, was $178, $(207), and $(85), respectively.
Realized capital gains and losses, net of taxes, not included in the IMR are
reported in the statutory basis statements of operations. Realized investment
gains and losses are determined on a specific identification basis.
CODIFICATION
The NAIC adopted the Codification of Statutory Accounting Principles in March
1998. The proposed effective date for this statutory accounting guidance is
January 1, 2001. It is expected that Connecticut, the Company's domiciliary
state, will adopt these accounting standards and, therefore, the Company will
make the necessary accounting and reporting changes required for implementation.
The Company has not yet determined the impact that these new accounting
standards will have on its statutory basis financial statements.
F-8
<PAGE>
3. INVESTMENTS:
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
-----------------------------
Interest income from bonds and short-term investments $113,646 $123,370 $100,475
Interest income from policy loans 3,494 3,133 1,958
Interest and dividends from other investments 6,371 4,482 1,005
-----------------------------
Gross investment income 123,511 130,985 103,438
Less: investment expenses 1,189 1,003 1,153
-----------------------------
NET INVESTMENT INCOME $122,322 $129,982 $102,285
-----------------------------
</TABLE>
(B) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND
SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
-----------------------------
Gross unrealized capital gains $ 561 $ 10,905 $23,357
Gross unrealized capital losses (6,441) (833) (1,906)
-----------------------------
Net unrealized capital (losses) gains (5,880) 10,072 21,451
Balance, beginning of year 10,072 21,451 7,979
-----------------------------
CHANGE IN NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND
SHORT-TERM INVESTMENTS $(15,952) $(11,379) $13,472
-----------------------------
</TABLE>
(C) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON COMMON STOCKS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Gross unrealized capital gains $2,508 $ 2,204 $ 537
Gross unrealized capital losses (24) (1,871) (1,820)
--------------------------
Net unrealized capital gains (losses) 2,484 333 (1,283)
Balance, beginning of year 333 (1,283) (3,447)
--------------------------
CHANGE IN NET UNREALIZED CAPITAL GAINS ON COMMON STOCKS $2,151 $ 1,616 $ 2,164
--------------------------
</TABLE>
(D) COMPONENTS OF NET REALIZED CAPITAL (LOSSES) GAINS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Bonds and short-term investments $(37,959) $1,314 $ (120)
Common stocks 104 1,624 421
Other invested assets 172 (1) (307)
--------------------------
Realized capital (losses) gains (37,683) 2,937 (6)
Capital gains benefit -- -- (831)
--------------------------
Net realized capital (losses) gains (37,683) 2,937 825
Less: amounts transferred to the IMR (1,255) 852 (719)
--------------------------
NET REALIZED CAPITAL (LOSSES) GAINS $(36,428) $2,085 $1,544
--------------------------
</TABLE>
Sales and maturities of investments in bonds and short-term investments for the
years ended December 31, 1999, 1998 and 1997 resulted in proceeds of $1,367,027,
$1,354,563 and $1,435,820, gross realized capital gains of $1,106, $1,705, and
$964 and gross realized capital losses of $39,065, $391, and $1,084,
respectively, before transfers to the IMR. Sale of common stocks for the years
ended December 31, 1999, 1998 and 1997 resulted in proceeds of $939, $33,088,
and $10,168, gross realized capital gains of $115, $1,688, and $421 and gross
realized capital losses of $11, $64, and $0, respectively.
(E) DERIVATIVE INVESTMENTS
The Company had no significant derivative holdings as of December 31, 1999, 1998
or 1997.
(F) CONCENTRATION OF CREDIT RISK
Excluding U.S. government and government agency investments, the Company is not
exposed to any significant concentrations of credit risk in fixed maturities of
a single issuer greater than 10% of capital and surplus as of December 31, 1999.
F-9
<PAGE>
(G) BONDS, SHORT-TERM INVESTMENTS AND COMMON STOCKS
<TABLE>
<CAPTION>
1999
----------------------------------------------
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 $ 4,768 $ 1 $ (37) $ 4,732
-- Guaranteed and sponsored -- asset backed 170,746 -- -- 170,746
States, municipalities and political subdivisions 10,401 -- (48) 10,353
International governments 7,351 94 (15) 7,430
Public utilities 18,413 92 (73) 18,432
All other corporate -- excluding asset-backed 592,233 374 (6,194) 586,413
All other corporate -- asset-backed 539,688 -- -- 539,688
Short-term investments 228,105 -- -- 228,105
Certificates of deposit 5,158 -- (74) 5,084
Parents, subsidiaries and affiliates 117,057 -- -- 117,057
----------------------------------------------
TOTAL BONDS AND SHORT-TERM INVESTMENTS $1,693,920 $561 $(6,441) $1,688,040
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------
Common stock -- unaffiliated $ 4,562 $1,105 $ (24) $ 5,643
Common stock -- affiliated 35,384 1,403 -- 36,787
--------------------------------------------
TOTAL COMMON STOCKS $39,946 $2,508 $ (24) $42,430
--------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1999
----------------------------------------------
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 -- excluding asset-backed 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>
The amortized cost and estimated fair value of bonds and short-term investments
as of December 31, 1999 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 the Company's estimates
of the rate of
F-10
<PAGE>
future prepayments of principal over the remaining lives of the securities.
Expected maturities differ from contractual maturities due to call or prepayment
provisions.
<TABLE>
<CAPTION>
Amortized Estimated
Maturity Cost Fair Value
<S> <C> <C>
--------------------------
One year or less $ 545,290 $ 543,397
Over one year through five years 692,881 690,476
Over five years through ten years 370,835 369,548
Over ten years 84,914 84,619
--------------------------
TOTAL $1,693,920 $1,688,040
--------------------------
</TABLE>
Bonds with a carrying value of $10,457 were on deposit as of December 31, 1999
with various regulatory authorities as required.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS-BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1999 1998
------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
------------------------------------------------------
ASSETS
Bonds and short-term investments $1,694 $1,688 $1,898 $1,908
Common stocks 42 42 41 41
Policy loans 59 59 47 47
Mortgage loans 64 64 60 60
Other invested assets 3 3 2 2
LIABILITIES
Deposit funds and other benefits $2,051 $2,017 $2,078 $2,053
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments: fair value of bonds, short-term
investments, common stock, and other invested assets approximate those
quotations published by the NAIC; policy loans and mortgage loans carrying
amounts approximates fair value; and fair value of liabilities on deposit funds
and other benefits is determined by forecasting future cash flows and
discounting the forecasted cash flows at current market rates.
4. REINSURANCE:
The Company cedes insurance to other insurers in order to limit its maximum
losses. Such transfer does not relieve the Company of its primary liability to
the policyholder. Failure of reinsurers to honor their obligations could result
in losses to the Company. The Company reduces this risk by evaluating the
financial condition of reinsurers and monitoring for possible concentrations of
credit risk.
The Company cedes significant portions of its variable annuity business written
since 1994 to RGA Reinsurance Company ("RGA"). Certain core annuity products
were excluded from this reinsurance arrangement beginning in the second quarter
of 1999 and, as such, the amounts ceded to RGA have declined significantly.
In 1995, The Hartford was "spun-off" from ITT Industries, Inc. and became its
own, autonomous entity. In conjunction with this spin-off, the assets and
liabilities of Lyndon Insurance Company (Lyndon) were merged into the Company.
The statutory net assets contributed to the Company as a result of this
transaction were approximately $112 million and were reflected as an increase in
Gross Paid-In and Contributed Surplus at December 31, 1995. This amount was
approximately $41 million lower than the value of net assets contributed on a
GAAP basis.
The majority of the business written in Lyndon was assumed from an unaffiliated
insurer. In 1998, this unaffiliated insurer recaptured the inforce blocks of
business it had been ceding to the Company through Lyndon. In conjunction with
this commutation transaction, the Company transferred statutory basis reserves
of $26,404. Additionally, the Company received fair value consideration for the
bonds it transferred which exceeded the statutory statement value of these
assets by $25,622. As a result of this activity, the Company recognized a
pre-tax gain from this transaction of $52,026 in its 1998 Statements of
Operations.
There were no material reinsurance recoverables from reinsurers outstanding as
of and for the years ended, December 31, 1999 and 1998.
F-11
<PAGE>
The effect of reinsurance as of and for the years ended December 31, is
summarized as follows:
<TABLE>
<CAPTION>
1999 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 784,502 $ 53 $ (192,934) $ 591,621
Policy and Contract Claim
Liabilities $ 7,827 $ 203 $ (353) $ 7,677
Premium and Annuity Considerations $ 674,219 $ 1,261 $ (53,691) $ 621,789
Annuity and Other Fund Deposits $6,195,917 $ -- $(3,204,554) $2,991,363
Death, Annuity, Disability and
Other Benefits $ 65,251 $ 1,104 $ (12,713) $ 53,642
Surrenders $2,541,449 $ -- $(1,290,636) $1,250,813
</TABLE>
<TABLE>
<CAPTION>
1998 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 713,375 $ 50 $ (134,285) $ 579,140
Policy and Contract Claim
Liabilities $ 5,895 $ 85 $ (313) $ 5,667
Premium and Annuity Considerations $ 483,328 $24,954 $ (38,939) $ 469,343
Annuity and Other Fund Deposits $6,461,470 $ -- $(4,410,219) $2,051,251
Death, Annuity, Disability and
Other Benefits $ 64,331 $ 1,574 $ (16,401) $ 49,504
Surrenders $1,481,797 $ -- $ (742,134) $ 739,663
</TABLE>
<TABLE>
<CAPTION>
1997 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Premium and Annuity Considerations $ 266,427 $51,630 $ (21,412) $ 296,645
Annuity and Other Fund Deposits $6,515,347 $ -- $(4,534,101) $1,981,246
Death, Annuity, Disability and
Other Benefits $ 79,779 $ 839 $ (7,126) $ 73,492
Surrenders $ 882,094 $ -- $ (427,677) $ 454,417
</TABLE>
5. RELATED PARTY TRANSACTIONS:
Transactions between the Company and its affiliates, relate principally to tax
settlements, reinsurance, insurance coverages, rental and service fees, capital
contributions and payments of dividends. In addition, certain affiliated
insurance companies purchased group annuity contracts from the Company to fund
pension costs and claim annuities to settle casualty claims. Substantially all
general insurance expenses related to the Company, including rent and benefit
plan expenses, are initially paid by The Hartford. Direct expenses are allocated
using specific identification and indirect expenses are allocated using other
applicable methods. Indirect expenses include those for corporate areas which,
depending on type, are allocated based on either a percentage of direct expenses
or on utilization.
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, Hartford Life, LTD.
For additional information, see Notes 4, 6, and 8.
6. 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 affiliated group of
which The Hartford is the common parent. The Hartford and its non-life
subsidiaries filed a single consolidated Federal income tax return for 1998 and
1997 and intend to file a separate consolidated Federal income tax return for
1999. The life insurance companies filed a separate consolidated Federal income
tax return for 1998 and 1997 and intend to file a separate consolidated Federal
income tax return for 1999. Federal income taxes (received) paid by the Company
for operations and capital gains (losses) were $(8,815), $25,780, and $(14,499)
in 1999, 1998 and 1997, respectively. The effective tax rate was (73)%, 27%, and
(28)% in 1999, 1998 and 1997, respectively.
F-12
<PAGE>
The following schedule provides a reconciliation of the tax provision (including
realized capital gains(losses)) at the U.S. Federal Statutory rate to Federal
income tax (benefit) expense (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
------------------
Tax provision at U.S. Federal Statutory rate $ 5 $48 $ 20
Tax deferred acquisition costs 31 25 25
Statutory to tax reserve differences (7) 8 1
Investments (31) (60) (61)
Other (8) 15 (1)
------------------
FEDERAL INCOME TAX (BENEFIT) EXPENSE $(10) $36 $(16)
------------------
</TABLE>
7. CAPITAL AND SURPLUS AND SHAREHOLDER DIVIDEND RESTRICTIONS:
The maximum amount of dividends which can be paid to shareholders by Connecticut
domiciled insurance companies, without prior approval, 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 1999,
1998 or 1997. The amount available for dividend in 2000 is approximately
$60,855.
8. PENSION, RETIREMENT, AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:
All employees that work for The Hartford's life insurance companies are included
in The Hartford's non-contributory defined benefit pension plans. These plans
provide pension benefits that are based on years of service and the employee's
compensation during the last ten years of employment. The Hartford'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 group
pension contracts sold by affiliates. The costs that were allocated to the
Company for pension related expenses were $762, $1,045 and $840 for 1999, 1998
and 1997, respectively.
Employees of The Hartford's life insurance companies are also provided, through
The Hartford, certain health care and life insurance benefits for eligible
retired employees. The contribution for health care benefits depends on the
retiree's date of retirement and years of service. In addition, this benefit
plan has a defined dollar cap, which limits average company contributions. The
Hartford 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 benefits
expense allocated to the Company was not material to the results of operations
for 1999, 1998 or 1997.
The assumed rate in the per capita cost of health care (the health care trend
rate) was 7.1% for 1999, 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.
Substantially all of The Hartford's life insurance companies' employees are
eligible to participate in The Hartford's Investment and Savings Plan. Under
this plan, designated contributions, which may be invested in Class A Common
Stock of HLI or certain other investments, are matched to a limit of 3% of
compensation.
9. SEPARATE ACCOUNTS:
The Company maintains separate account assets totaling $44.9 billion and $32.9
billion as of December 31, 1999 and 1998, respectively. Separate account assets
are segregated from other investments and reported at fair value. Separate
account liabilities are determined in accordance with prescribed actuarial
methodologies, which approximate the market value less applicable surrender
charges. The resulting surplus is recorded in the general account statement of
operations as a component of Net Transfers to Separate Accounts. The Company's
separate accounts are non-guaranteed, wherein the policyholder assumes
substantially all the investment risk and rewards. Investment income (including
investment gains and losses) and interest credited to policyholders on separate
account assets are not separately reflected in the statutory statements of
operations.
Separate account management fees, net of minimum guarantees, were $493 million,
$363 million, and $252 million in 1999, 1998 and 1997, respectively, and are
recorded as a component of fee income on the Company's statutory basis
Statements of Operations.
F-13
<PAGE>
10. COMMITMENTS AND CONTINGENT LIABILITIES:
(A) LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for alleged economic and punitive damages
have been asserted. Some of these cases have been filed as purported class
actions and some cases have been filed in certain jurisdictions that permit
punitive damage awards disproportionate to the actual damages incurred. 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,
will have a material adverse effect on the statutory capital and surplus of the
Company.
(B) GUARANTY FUNDS
Under insurance guaranty fund laws in each state, the District of Columbia and
Puerto Rico, insurers licensed to do business can be assessed by state insurance
guaranty associations for certain obligations of insolvent insurance companies
to policyholders and claimants. Recent regulatory actions against certain large
life insurers encountering financial difficulty have prompted various state
insurance guaranty associations to begin assessing life insurance companies for
the deemed losses. Most of these laws do provide, however, that an assessment
may be excused or deferred if it would threaten an insurer's solvency and
further provide annual limits on such assessments. Part of the assessments paid
by the Company pursuant to these laws may be used as credits for a portion of
the associated premium taxes. The Company paid guaranty fund assessments of
approximately $523, $1,043 and $1,544 in 1999, 1998, and 1997, respectively, of
which $318, $995, and $548 in 1999, 1998 and 1997, respectively were estimated
to be creditable against premium taxes.
(C) TAX MATTERS
The Company's Federal income tax returns are routinely audited by the Internal
Revenue Service ("IRS"). The Company's 1997 and 1996 Federal income tax returns
are currently under audit by the IRS. As of March 31, 2000, the audit was in its
initial stage and no material issues had been raised.
F-14
<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.(4)
(5) Form of Application.(4)
(6) (a) Certificate of Incorporation of Hartford.(3)
(6) (b) Bylaws of Hartford.(1)
(7) Not applicable.
(8) Form of the participation agreement.(3)
(9) Opinion and Consent of Lynda Godkin, Senior Vice President,
General Counsel and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(11) No financial statements are omitted.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
- -------------------
(1) Incorporated by reference to Post-Effective Amendment No. 2, to
the Registration Statement File No. 33-73572, dated May 1, 1995.
(2) Incorporated by reference to Post-Effective Amendment No. 3, to
the Registration Statement File No. 33-73572, dated April 29,
1996.
(3) Incorporated by reference to Post-Effective Amendment No. 8, to
the Registration Statement File No. 33-73572, filed on April 15,
1998.
(4) Incorporated by reference to the initial filing to the
Registration Statement File No. 333-69429, filed on December
22, 1999.
<PAGE>
Item 25. Directors and Officers of the Depositor
- -------------------------------------------------------------------------------
NAME POSITION WITH HARTFORD
- -------------------------------------------------------------------------------
David A. Carlson Vice President
- -------------------------------------------------------------------------------
Peter W. Cummins Senior Vice President
- -------------------------------------------------------------------------------
Bruce W. Ferris Vice President
- -------------------------------------------------------------------------------
Timothy M. Fitch Vice President & Actuary
- -------------------------------------------------------------------------------
Mary Jane B. Fortin Vice President & Chief Accounting Officer
- -------------------------------------------------------------------------------
David T. Foy Senior Vice President, Chief Financial
Officer & Treasurer, Director*
- -------------------------------------------------------------------------------
Lynda Godkin Senior Vice President, General Counsel, and
Corporate Secretary, Director*
- -------------------------------------------------------------------------------
Lois W. Grady Senior Vice President
- -------------------------------------------------------------------------------
Stephen T. Joyce Senior Vice President
- -------------------------------------------------------------------------------
Michael D. Keeler Vice President
- -------------------------------------------------------------------------------
Robert A. Kerzner Senior Vice President
- -------------------------------------------------------------------------------
Thomas M. Marra President, Director*
- -------------------------------------------------------------------------------
Steven L. Matthiesen Vice President
- -------------------------------------------------------------------------------
Deanne Osgood Vice President
- -------------------------------------------------------------------------------
Craig R. Raymond Senior Vice President and Chief Actuary
- -------------------------------------------------------------------------------
Lowndes A. Smith Chief Executive Officer,
Director*
- -------------------------------------------------------------------------------
David M. Znamierowski Senior Vice President & Chief Investment
Officer, Director*
- -------------------------------------------------------------------------------
Unless otherwise indicated, the principal business address of each of the
above individuals is P.O. Box 2999, Hartford, CT 06104-2999.
*Denotes Board of Directors.
Item 26. Persons Controlled By or Under Common Control with the Depositor
or Registrant
Filed herewith as Exhibit 16.
Item 27. Number of Contract Owners
As of January 31, 2000, there were 245,081 Contract Owners.
Item 28. Indemnification
<PAGE>
Sections 33-770 to 33-778, inclusive, of the Connecticut General
Statutes ("CGS") provide that a corporation may provide indemnification
of or advance expenses to a director, officer, employee or agent.
Reference is hereby made to Section 33-771(e) of CGS regarding
indemnification of directors and Section 33-776(d) of CGS regarding
indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide, in general, that Connecticut
corporations incorporated prior to January 1, 1997 shall, except to the
extent that their certificate of incorporation expressly provides
otherwise, indemnify their directors, officers, employees and agents
against "liability" (defined as the obligation to pay a judgment,
settlement, penalty, fine, including an excise tax assessed with
respect to an employee benefit plan, or reasonable expenses incurred
with respect to a proceeding) when (1) a determination is made pursuant
to Section 33-775 that the party seeking indemnification has met the
standard of conduct set forth in Section 33-771 or (2) a court has
determined that indemnification is appropriate pursuant to Section
33-774. Under Section 33-775, the determination of and the
authorization for indemnification are made (a) by the disinterested
directors, as defined in Section 33-770(3); (b) by special counsel; (c)
by the shareholders; or (d) in the case of indemnification of an
officer, agent or employee of the corporation, by the general counsel
of the corporation or such other officer(s) as the board of directors
may specify. Also, Section 33-772 provides that a corporation shall
indemnify an individual who was wholly successful on the merits or
otherwise against reasonable expenses incurred by him in connection
with a proceeding to which he was a party because he was a director of
the corporation. In the case of a proceeding by or in the right of the
corporation or with respect to conduct for which the director, officer,
agent or employee was adjudged liable on the basis that he received a
financial benefit to which he was not entitled, indemnification is
limited to reasonable expenses incurred in connection with the
proceeding against the corporation to which the individual was named a
party.
Under the Depositor's bylaws, the Depositor must indemnify both
directors and officers of the Depositor for (1) any claims and
liabilities to which they become subject by reason of being or having
been directors or officers of the Depositor and (2) legal and other
expenses incurred in defending against such claims, in each case, to
the extent such is consistent with statutory provisions.
Section 33-777 of CGS specifically authorizes a corporation to procure
indemnification insurance on behalf of an individual who was a
director, officer, employer or agent of the corporation. Consistent
with the statute, the directors and officers of the Depositor and
Hartford Securities Distribution Company, Inc. ("HSD") are covered
under a directors and
<PAGE>
officers liability insurance policy issued to The Hartford Financial
Services Group, Inc. and its subsidiaries.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling 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.
<PAGE>
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
<PAGE>
Hartford Life and Annuity Insurance Company - Separate Account One
Hartford Life and Annuity Insurance Company - Putnam Capital Manager
Trust Separate Account Two
Hartford Life and Annuity Insurance Company - Separate Account Three
Hartford Life and Annuity Insurance Company - Separate Account Five
Hartford Life and Annuity Insurance Company - Separate Account Six
Hartford Life and Annuity Insurance Company - Separate Account Seven
Hart Life Insurance Company - Separate Account One
Hart Life Insurance Company - Separate Account Two
American Maturity Life Insurance Company - Separate Account AMLVA
Servus Life Insurance Company - Separate Account One
Servus Life Insurance Company - Separate Account Two
(b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
------------------ ----------------------
David A. Carlson Vice President
Peter W. Cummins Senior Vice President
David T. Foy Treasurer
Lynda Godkin Senior Vice President, General Counsel
and Corporate Secretary
George R. Jay Controller
Robert A. Kerzner Executive Vice President
Thomas M. Marra Executive Vice President, Director
Paul E. Olson Supervising Registered Principal
Lowndes A. Smith President and Chief Executive Officer,
Director
Unless otherwise indicated, the principal business address of each 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.
<PAGE>
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective amendment to
this Registration Statement as frequently as is necessary to ensure
that the audited financial statements in the Registration Statement
are never more than 16 months old so long as payments under the
variable annuity Contracts may be accepted.
(b) The Registrant hereby undertakes to include either (1) as part of any
application to purchase a Contract offered by the Prospectus, a space
that an applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written communication
affixed to or included in the Prospectus that the applicant can
remove to send for a Statement of Additional Information.
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to be
made available under this Form promptly upon written or oral request.
(d) Hartford hereby represents that the aggregate fees and charges under
the 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. Registrant has
complied with conditions one through four of the no-action letter.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to
be signed on its behalf, in the Town of Simsbury, and State of Connecticut on
this 7th day of April, 2000.
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, President* Marianne O'Doherty
Attorney-in-Fact
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Depositor)
*By: Thomas M. Marra
---------------------------
Thomas M. Marra, 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.
David T. Foy, Senior Vice President, Chief
Financial Officer and Treasurer, Director*
Lynda Godkin, Senior Vice President, General
Counsel and Corporate Secretary, Director*
Thomas M. Marra, President, By: /s/ Marianne O'Doherty
Director* ----------------------
Lowndes A. Smith, Chief Marianne O'Doherty
Executive Officer, Director* Attorney-in-Fact
David M. Znamierowski, Senior Vice President
And Chief Investment Officer, Director* Date: April 7, 2000
<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) Power of Attorney.
(16) Organizational Chart.
<PAGE>
[LOGO]
[HARTFORD LIFE]
April 6, 2000
LYNDA GODKIN
SENIOR VICE PRESIDENT, GENERAL COUNSEL &
CORPORATE SECRETARY
Board of Directors
Hartford Life and Annuity Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
Re: HARTFORD LIFE AND ANNUITY INSURANCE COMPANY PUTNAM CAPITAL MANAGER
TRUST SEPARATE ACCOUNT TWO
FILE NO. 333-69429
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 Connecticut with the registration of an indefinite
amount of securities in the form of flexible premium variable annuity
insurance 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 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 yours,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
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. 333-69429 for Hartford Life and Annuity
Insurance Company Putnam Capital Manager Trust Separate Account Two on Form
N-4.
Hartford, Connecticut /s/ Arthur Andersen LLP
April 7, 2000
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
POWER OF ATTORNEY
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 Marta Czekajewski 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 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/ David T. Foy
- -------------------------------- Dated as of January 15, 2000
David T. Foy
/s/ Lynda Godkin
- -------------------------------- Dated as of January 15, 2000
Lynda Godkin
/s/ Thomas M. Marra
- -------------------------------- Dated as of January 15, 2000
Thomas M. Marra
/s/ Lowndes A. Smith
- -------------------------------- Dated as of January 15, 2000
Lowndes A. Smith
/s/ David M. Znamierowski
- -------------------------------- Dated as of January 15, 2000
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 AND ACCIDENT INSURANCE COMPANY
(CONNECTICUT)
|
|
|
-------------------------------------------------------------------------------------------------------------------------
| | | | | | | | |
HARTFORD LIFE | | | | | | PLANCO PLANCO
INTERNATIONAL, LTD.| | | | | | FINANCIAL INCORPORATED
(CONNECTICUT) | | | | | | SERVICES, (PENNSYLVANIA)
| | | | | | INCORPORATED
| | | | | | (PENNSYLVANIA)
| | | | | |
| HART LIFE HARTFORD FINANCIAL HARTFORD LIFE HARTFORD AMERICAN
| INSURANCE SERVICES LIFE INSURANCE COMPANY FINANCIAL MATURITY LIFE
| COMPANY INSURANCE COMPANY (CONNECTICUT) SERVICES, LLC INSURANCE COMPANY
| (CONNECTICUT) (CONNECTICUT) | (DELAWARE) (CONNECTICUT)
| | | |
| ------------------------------------- | AML FINANCIAL, INC.
| | | | | (CONNECTICUT)
|SERVUS LIFE HARTFORD HARTFORD |
| INSURANCE INTERNATIONAL LIFE AND |
| COMPANY LIFE REASSURANCE ANNUITY INSURANCE |
|(CONNECTICUT) CORPORATION COMPANY |
| (CONNECTICUT) (CONNECTICUT) |
| | |
| | |
| HARTFORD |
| LIFE, LTD. |
| (BERMUDA) |
| |
| |
----------| -----------------------------------------------------------------------
| | | | |
INTERNATIONAL HL INVESTMENT HARTFORD HARTFORD SECURITIES HARTFORD-COMPREHENSIVE
CORPORATE ADVISORS, LLC EQUITY SALES DISTRIBUTION EMPLOYEE
MARKETING GROUP, INC. (CONNECTICUT) COMPANY, INC. COMPANY, INC. BENEFIT SERVICE
(CONNECTICUT) | (CONNECTICUT) (CONNECTICUT) COMPANY
| | (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)
|
----------------------------------------------------------------------------------------------------------------------------
| | |
| | Hartford Accidental and Indemnity Company
| | (Connecticut)
| | |
| | Hartford Life, Inc
| | (Delaware)
| | |
| | Hartford Life and Accident Insurance Company
| | (Connecticut)
| | |
| | HARTFORD LIFE
| | -------INTERNATIONAL LTD.
| | | (CONNECTICUT)
| | | |
| | | ITT HARTFORD
| | | ----SUDAMERICANA
| | | | HOLDING S.A.
| | | | (ARGENTINA)
| | | |------------------------------------------------------
| | | | | |
| | | | ITT HARTFORD GALICIA INSTITUTO DE
| | | | SEGUROS VIDA COMPANIA SALTA COMPANIA DE
| | | |------DE VIDA S.A. DE SEGUROS S.A. SEGUROS DE VIDA S.A.
| | | | (URUGUAY) (ARGENTINA) (ARGENTINA)
| | | |
| | ICATU | | HARTFORD
| | HARTFORD | |---SEGUROS DE VIDA S.A.
| | SEGUROS S.A.----------| | (ARGENTINA)
| | (BRAZIL) |
| | | |
| | | | 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) |
|
|
|
|--------- U.O.R., S.A.
(ARGENTINA)
</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 -THE HARTFORD |
| S.A. INSURANCE CO., N.V. |--- EDINBURGH INTERNATIONAL |
| ZWOLSCHE ALGEMEENE (FRANCE) (BELGIUM) | INSURANCE CO., LTD. FINANCIAL |
|----SCHADEVERZEKERING | | (U.K.) SERVICES |
--------| N.V.----------------------------------- | | | GROUP CIA |
| | (NETHERLANDS) | | | | DE SEGUROS Y |
Z.A. | | | | EXCESS INSURANCE REASEGUROS S.A.|
- --VERZEKERINGEN | | | | COMPANY LTD. (SPAIN) |
| 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>
