<PAGE>
File No. 33-80732
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. 3 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 3 [X]
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT THREE
(Exact Name of Registrant)
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Name of Depositor)
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Address of Depositor's Principal Offices)
(860) 843-7563
(Depositor's Telephone Number, Including Area Code)
SCOTT K. RICHARDSON, ESQ.
ITT HARTFORD LIFE INSURANCE COMPANIES
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
--------
X on May 1, 1996 pursuant to paragraph (b) of Rule 485
--------
60 days after filing pursuant to paragraph (a)(1) of Rule 485
--------
on May 1, 1996 pursuant to paragraph (a)(1) of Rule 485
--------
this post-effective amendment designates a new effective date for
-------- a previously filed post-effective amendment.
<PAGE>
PURSUANT TO RULE 24F-2(a)(1) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES. THE RULE 24F-2
NOTICE FOR THE REGISTRANT'S MOST RECENT FISCAL YEAR WAS FILED ON OR ABOUT
FEBRUARY 29, 1996.
<PAGE>
-3-
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 Item No. Prospectus Heading
- --------------------------------------- -----------------------------------
1. Cover Page Cover Page
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Information Statement of Additional Information
5. General Description of Registrant, The Contract;
Depositor, and Portfolio Companies The Separate Account;
The Fixed Account;
The Company;
The Portfolios; General Matters
6. Deductions Charges Under the Contract
7. General Description of Operation of the Contract
Annuity Contracts Accumulation Period;
Death Benefit;
The Contract;
The Separate Account;
General Matters
8. Annuity Period Annuity Benefits
9. Death Benefit Death Benefit
10. Purchases and Contract Value Operation of the Contract/
Accumulation Period
11. Redemptions Operation of the Contract/
Accumulation Period
12. Taxes Federal Tax Considerations
13. Legal Proceedings General Matters - Legal
<PAGE>
14. Table of Contents of the Statement Proceedings
of Additional Information Table of Contents to Statement
of Additional Information
15. Cover Page Part B; Statement of
Additional Information
16. Table of Contents Tables of Contents
17. General Information and Introduction
History
18. Services None
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Calculation of Yield and
Data Return
22. Annuity Payments Annuity Benefits
23. Financial Statements Financial Statements
24. Financial Statements and Financial Statements and
Exhibits Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Depositor Common Control with the Depositor
or Registrant or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts and Records
31. Management Services Management Services
32. Undertakings Undertakings
<PAGE>
ITT HARTFORD
LIFE AND ANNUITY INSURANCE COMPANY
P.O. Box 5085
Hartford, CT 06102-5085
Telephone 1-800-862-6668 (Contact Owner)
1-800-862-4397 (Investment Representative)
SEPARATE ACCOUNT THREE
[LOGO]
This Prospectus describes the Dean Witter Select Dimensions Plan, a tax
deferred variable annuity issued by ITT Hartford Life and Annuity Insurance
Company ("ITT Hartford"). Payments for the Contract will be held in the Fixed
Account and/or a series of ITT Hartford Life and Annuity Insurance Company --
Separate Account Three (the "Separate Account"). Allocations to and transfers
to and from the Fixed Account are not permitted in certain states.
There are currently twelve Sub-Accounts available under the Contract. The
underlying investment portfolios ("Portfolios") of the Dean Witter Select
Dimensions Investment Series for the Sub-Accounts are the Money Market
Portfolio, the North American Government Securities Portfolio, the Diversified
Income Portfolio, the Balanced Portfolio, the Utilities Portfolio, the
Dividend Growth Portfolio, the Value-Added Market Portfolio, the Core Equity
Portfolio, the American Value Portfolio, the Global Equity Portfolio, the
Developing Growth Portfolio, and the Emerging Markets Portfolio.
This Prospectus sets forth the information concerning the Separate Account
and the Fixed Account that investors should know before investing. This
Prospectus should be kept for future reference. Additional information about
the Separate Account and the Fixed Account has been filed with the Securities
and Exchange Commission and is available without charge upon request. To
obtain the Statement of Additional Information send a written request to ITT
Hartford Life and Annuity Insurance Company, Attn: Annuity Marketing Services,
P.O. Box 5085, Hartford, CT 06102-5085. The Table of Contents for the
Statement of Additional Information may be found on page 32 of this
Prospectus. The Statement of Additional Information is incorporated by
reference into this Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED
BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT
TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
------------------------------------------------------------------------------
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THIS PROSPECTUS IS ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE DEAN WITTER
SELECT DIMENSIONS INVESTMENT SERIES ("FUND") AND IS VALID ONLY WHEN
ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE FUND.
------------------------------------------------------------------------------
Prospectus Dated: May 1, 1996
Statement of Additional Information Dated: May 1, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GLOSSARY OF SPECIAL TERMS............................................... 3
FEE TABLE............................................................... 5
ACCUMULATION UNIT VALUES................................................ 6
SUMMARY................................................................. 7
PERFORMANCE RELATED INFORMATION......................................... 9
INTRODUCTION............................................................ 9
THE CONTRACT............................................................ 9
Right to Cancel Period................................................ 10
THE SEPARATE ACCOUNT.................................................... 10
THE FIXED ACCOUNT....................................................... 11
THE COMPANY............................................................. 12
THE PORTFOLIOS.......................................................... 12
OPERATION OF THE CONTRACT/ACCUMULATION PERIOD........................... 14
Premium Payments...................................................... 14
Value of Accumulation Units........................................... 15
Value of the Fixed Account............................................ 15
Value of the Contract................................................. 15
Transfers Among Sub-Accounts.......................................... 15
Transfers Between the Fixed Account and the Sub-Accounts.............. 16
Redemption/Surrender of a Contract.................................... 16
DEATH BENEFIT........................................................... 17
CHARGES UNDER THE CONTRACT.............................................. 18
Contingent Deferred Sales Charges..................................... 18
During the First Seven Contract Years................................. 18
After the Seventh Contract Year....................................... 18
Mortality and Expense Risk Charge..................................... 19
Administration and Maintenance Fees................................... 20
Premium Taxes......................................................... 20
ANNUITY BENEFITS........................................................ 20
Annuity Options....................................................... 20
The Annuity Unit and Valuation........................................ 21
Determination of Payment Amount....................................... 21
FEDERAL TAX CONSIDERATIONS.............................................. 22
General............................................................... 22
Taxation of ITT Hartford and the Separate Account..................... 22
Taxation of Annuities -- General Provisions Affecting Purchasers Other
Than Qualified Retirement Plans........................................ 23
Federal Income Tax Withholding........................................ 26
General Provisions Affecting Qualified Retirement Plans............... 26
Annuity Purchases by Nonresident Aliens and Foreign Corporations...... 26
GENERAL MATTERS......................................................... 27
Assignment............................................................ 27
Modification.......................................................... 27
Delay of Payments..................................................... 27
Voting Rights......................................................... 27
Distribution of the Contracts......................................... 28
Other Contracts Offered............................................... 28
Custodian of Separate Account Assets.................................. 28
Legal Proceedings..................................................... 28
Legal Counsel......................................................... 28
Experts............................................................... 28
Additional Information................................................ 28
APPENDIX I.............................................................. 29
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION................ 32
</TABLE>
2
<PAGE>
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT: An accounting unit of measure used to calculate values before
Annuity payments begin.
ANNUAL WITHDRAWAL AMOUNT: The amount which can be withdrawn in any Contract year
without surrender charges.
ANNUITANT: The person or participant upon whose life the Contract is issued.
ANNUITY: A series of payments for life, or for life with a minimum number of
payments or a determinable sum guaranteed, or for a joint lifetime and
thereafter during the lifetime of the survivor, or for a designated period.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to commence.
Under a group unallocated Contract, the date for each participant is determined
by the Contract Owner in accordance with the terms of the Plan.
ANNUITY UNIT: An accounting unit of measure used to calculate the value of
Annuity payments.
BENEFICIARY: The person(s) who receive Contract Values in the event of the
Annuitant's or Contract Owner's death under certain conditions. Under a group
unallocated Contract, the person named within the Plan documents/enrollment
forms by each Participant entitled to receive benefits as per the terms of the
Contract in case of the death of the Participant.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: Securities and Exchange Commission.
CONTINGENT ANNUITANT: The person so designated by the Contract Owner, who upon
the Annuitant's death, prior to the Annuity Commencement Date, becomes the
Annuitant.
CONTRACT ANNIVERSARY: The anniversary of the Contract Date.
CONTRACT OWNER(S): The owner(s) of the Contract, trustee or other entity,
sometimes herein referred to as "you".
CONTRACT VALUE: The aggregate value of any Sub-Account Accumulation Units held
under the Contract plus the value of the Fixed Account.
CONTRACT YEAR: A period of 12 months commencing with the Contract Date or any
anniversary thereof.
DEATH BENEFIT: The amount payable upon the death of a Contract Owner or
Annuitant (or Participant in the case of a group unallocated Contract) before
annuity payments have started.
FIXED ACCOUNT: Part of the General Account of ITT Hartford to which a Contract
Owner may allocate all or a portion of his Premium Payment or Contract Value.
FIXED ANNUITY: An Annuity providing for guaranteed payments which remain fixed
in amount throughout the payment period and which do not vary with the
investment experience of a separate account.
FUND: Dean Witter Select Dimensions Investment Series.
GENERAL ACCOUNT: The General Account of ITT Hartford which consists of all
assets of the ITT Hartford Life and Annuity Insurance Company other than those
allocated to the separate accounts of the ITT Hartford Life and Annuity
Insurance Company.
ITT HARTFORD: ITT Hartford Life and Annuity Insurance Company.
HOME OFFICE OF THE COMPANY: Currently located at 200 Hopmeadow Street, Simsbury,
Connecticut. All correspondence concerning the Contract should be sent to P.O.
Box 5085, Hartford, CT 06102-5085, Attn: Individual Annuity Services.
MAXIMUM ANNIVERSARY VALUE: A value used in determining the death benefit. It is
based on a series of calculations of Contract Values on Contract Anniversaries,
premium payments and partial surrenders, as described on page 17.
NON-QUALIFIED CONTRACT: A Contract which is not classified as a tax-qualified
retirement plan using pre-tax dollars under the Internal Revenue Code.
PARTICIPANT: (For Group Unallocated Contracts Only). Any eligible employee of an
employer/ Contract Owner participating in the Plan.
PLAN: A voluntary Plan of an Employer which qualifies for special tax treatment
under a section of the Internal Revenue Code.
PORTFOLIOS: Currently, the portfolios of Dean Witter Select Dimensions
Investment Series described on page 12 of this Prospectus.
PREMIUM PAYMENT: A payment made to ITT Hartford pursuant to the terms of the
Contract.
3
<PAGE>
QUALIFIED CONTRACT: A Contract which qualifies as a tax-qualified retirement
plan using pre-tax dollars under the Internal Revenue Code, such as an
employer-sponsored Section401(k) plan or an Individual Retirement Annuity (IRA).
PREMIUM TAX: A tax charged by a state or municipality on Premium Payments or
Contract Values.
SEPARATE ACCOUNT: The ITT Hartford separate account entitled "ITT Hartford Life
and Annuity Insurance Company -- Separate Account Three".
SUB-ACCOUNT: Accounts established within the Separate Account with respect to a
Fund.
TERMINATION VALUE: The Contract Value upon termination of the Contract prior to
the Annuity Commencement Date, less any applicable Premium Taxes, the Annual
Maintenance Fee and any applicable contingent deferred sales charges.
UNALLOCATED CONTRACTS: Contracts issued to employers or such other entities as
Contract Owners with no allocation to a specific Participant, as defined herein.
The Plans will be responsible for the individual allocations.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined at the close of the New York Stock
Exchange (currently 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
VARIABLE ANNUITY: An Annuity providing for payments varying in amount in
accordance with the investment experience of the assets of the Separate Account.
4
<PAGE>
FEE TABLE
SUMMARY
Contract Owner Transaction Expenses
(All Sub-Accounts)
<TABLE>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of premium
payments)....................................................... None
Exchange Fee...................................................... $ 0
Deferred Sales Load (as a percentage of amounts withdrawn)
First Year (1)................................................ 6%
Second Year................................................... 6%
Third Year.................................................... 5%
Fourth Year................................................... 5%
Fifth Year.................................................... 4%
Sixth Year.................................................... 3%
Seventh Year.................................................. 2%
Eighth Year................................................... 0%
Annual Contract Fee (2)........................................... $ 30
Annual Expenses-Separate Account (as percentage of average account
value)
Mortality and Expense Risk.................................... 1.250%
Administration Fees........................................... 0.150%
Total......................................................... 1.400%
</TABLE>
Annual Fund Operating Expenses (3)
(as percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
---------- -------- ----------
<S> <C> <C> <C>
The Money Market Portfolio...................... 0.500% 0.310% 0.810%
The North American Government Securities
Portfolio..................................... 0.650% 1.850% 2.500%
The Diversified Income Portfolio................ 0.400% 0.930% 1.330%
The Balanced Portfolio.......................... 0.400% 0.930% 1.330%
The Utilities Portfolio......................... 0.650% 0.780% 1.430%
The Dividend Growth Portfolio................... 0.630% 0.200% 0.830%
The Value-Added Market Portfolio................ 0.500% 0.960% 1.460%
The Core Equity Portfolio....................... 0.850% 1.650% 2.500%
The American Value Portfolio.................... 0.630% 0.330% 0.960%
The Global Equity Portfolio..................... 0.100% 1.590% 1.690%
The Developing Growth Portfolio................. 0.500% 0.740% 1.240%
The Emerging Markets Portfolio.................. 1.250% 1.250% 2.500%
</TABLE>
- ------------------------------
(1) Length of time from premium payment.
(2) The Annual Contract Fee is a single $30 charge on a Contract. It is deducted
proportionally from the investment options in use at the time of the charge.
Pursuant to requirements of the 1940 Act, the Annual Contract Fee has been
reflected in the Examples by a method intended to show the "average" impact
of the Annual Contract Fee on an investment in the Separate Account. The
Annual Contract Fee is deducted only when the accumulated value is $50,000
or less. In the Example, the Annual Contract Fee is approximated as a 0.08%
annual asset charge based on the experience of the Contracts.
(3) The Investment Manager has agreed to waive the management fee and to
reimburse the Fund for all other expenses, except for any brokerage fees and
a portion of organizational expenses. The above fees represent the
management fees and operating expenses that would have been charged by the
Fund had the agreement not been made. For the period January 1, 1996 through
December 31, 1996, the Investment Manager will continue to waive the
management fee and to reimburse the operating expenses to the extent they
exceed 0.50% of daily net assets of the Portfolio or until such time as the
respective Portfolio has $50 million of net assets, whichever comes first.
EXAMPLE
<TABLE>
<CAPTION>
If you surrender your contract If you annuitize at the end of If you do not surrender your
at the end of the applicable the applicable time period: You contract: You would pay the
time period: You would pay the would pay the following following expenses on a $1,000
following expenses on a $1,000 expenses on a $1,000 investment, assuming a 5%
investment, assuming a 5% investment, assuming a 5% annual return on assets:
annual return on assets: annual 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>
The Money Market Portfolio... $ 82 $ 118 $ 156 $ 249 $ 21 $ 67 $ 115 $ 248 $ 22 $ 68 $ 116 $ 249
The North American Government
Securities Portfolio....... 99 169 241 412 38 118 200 411 39 119 201 412
The Diversified Income
Portfolio.................. 87 134 183 302 26 83 142 301 27 84 143 302
The Balanced Portfolio....... 87 134 183 302 26 83 142 301 27 84 143 302
The Utilities Portfolio...... 88 137 188 312 27 86 147 311 28 87 148 312
The Dividend Growth
Portfolio.................. 82 118 157 251 21 67 116 250 22 68 117 251
The Value-Added Market
Portfolio.................. 89 138 189 315 28 87 148 314 29 88 149 315
The Core Equity Portfolio.... 99 169 241 412 38 118 200 411 39 119 201 412
The American Value
Portfolio.................. 83 122 164 265 23 71 123 264 23 72 124 265
The Global Equity
Portfolio.................. 91 145 201 337 30 94 160 337 31 95 161 337
The Developing Growth
Portfolio . 86 131 178 293 26 80 137 292 26 81 138 293
The Emerging Markets
Portfolio.................. 99 169 241 412 38 118 200 411 39 119 201 412
</TABLE>
The purpose of this table is to assist the Contract Owner in understanding
various costs and expenses that a Contract Owner will bear directly or
indirectly. The table reflects expenses of the Separate Account and Funds.
Premium taxes may also be applicable.
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
5
<PAGE>
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
The following information, in so far as it relates to the period ended
December 31, 1995, has been examined by Arthur Andersen LLP, independent public
accountants, whose report thereon is included in the Statement of Additional
information, which is incorporated by reference to this Prospectus.
<TABLE>
<CAPTION>
1995 1994
------------- ---------
<S> <C> <C>
MONEY MARKET FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.056 $10.00(a)
Accumulation unit value at end of period.......... $10.521 $10.056
Number accumulation units outstanding at end of
period (in thousands)........................... 3,864,747 112,689
NORTH AMERICAN GOVERNMENT SECURITIES FUND
SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.041 $10.000(a)
Accumulation unit value at end of period.......... $10.536 $10.041
Number accumulation units outstanding at end of
period (in thousands)........................... 107,468 2,180
BALANCED FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.040 $10.000(a)
Accumulation unit value at end of period.......... $12.164 $10.040
Number accumulation units outstanding at end of
period (in thousands)........................... 1,219,604 69,227
UTILITIES FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.045 $10.000(a)
Accumulation unit value at end of period.......... $12.685 $10.045
Number accumulation units outstanding at end of
period (in thousands)........................... 1,356,083 39,538
DIVIDEND GROWTH FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $9.975 $10.000(a)
Accumulation unit value at end of period.......... $13.787 $9.975
Number accumulation units outstanding at end of
period (in thousands)........................... 5,393,161 128,053
VALUE-ADDED MARKET FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $9.904 $10.000(a)
Accumulation unit value at end of period.......... $12.418 $9.904
Number accumulation units outstanding at end of
period (in thousands)........................... 1,783,215 25,201
CORE EQUITY FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.047 $10.000(a)
Accumulation unit value at end of period.......... $11.224 $10.047
Number accumulation units outstanding at end of
period (in thousands)........................... 315,517 21,434
AMERICAN VALUE FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.049 $10.000(a)
Accumulation unit value at end of period.......... $13.770 $10.049
Number accumulation units outstanding at end of
period (in thousands)........................... 2,605,789 71,807
GLOBAL EQUITY FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $9.950 $10.000(a)
Accumulation unit value at end of period.......... $11.162 $9.950
Number accumulation units outstanding at end of
(in thousands).................................. 1,424,567 110,033
DEVELOPING GROWTH FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.138 $10.000(a)
Accumulation unit value at end of period.......... $15.123 $10.138
Number accumulation units outstanding at end of
period (in thousands)........................... 1,077,770 27,4729
EMERGING MARKETS FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.037 $10.000(a)
Accumulation unit value at end of period.......... $9.841 $10.037
Number accumulation units outstanding at end of
period (in thousands)........................... 388,600 34,571
DIVERSIFIED INCOME FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.056 10.000(a)
Accumulation unit value at end of period.......... $10.607 10.056
Number accumulation units outstanding at end of
period (in thousands)........................... 774,696 29,991
</TABLE>
- ------------------------
(a) Inception Date September 14, 1994
6
<PAGE>
SUMMARY
WHAT IS THE CONTRACT AND HOW MAY I PURCHASE ONE?
The Contract offered is a tax deferred Variable Annuity Contract (see
"Taxation of Annuities in General," page 23). Generally, the Contract is
purchased by completing an application or an order to purchase a Contract and
submitting it, along with the initial Premium Payments, to ITT Hartford for its
approval. The minimum initial Premium Payment is $1,000 with a minimum
allocation to any Fund of $500. Certain plans may make smaller initial and
subsequent periodic premium payments. Subsequent Premium Payments, if made, must
be a minimum of $500. Generally, a Contract Owner may exercise his right to
cancel the Contract within 10 days of delivery of the Contract by returning the
Contract to ITT Hartford at its Home Office. If the Contract Owner exercises his
right to cancel, ITT Hartford will return either the Contract Value or the
original Premium Payments to the Contract Owner. The duration of the right to
cancel period and ITT Hartford's obligation to either return the Contract Value
or the original Premium will depend on state law (see "Right to Cancel Period").
WHO MAY PURCHASE THE CONTRACT?
Any individual, group or trust may purchase the Contracts, including any
trustee or custodian for a retirement plan which qualifies for special Federal
tax treatment under the Internal Revenue Code ("Qualified Contracts"). These
Contracts are also available for IRA's. (See "Federal Tax Considerations"
commencing on page 22 and Appendix I commencing on page 29.)
WHAT TYPES OF INVESTMENTS ARE AVAILABLE UNDER THE CONTRACT?
The underlying investments for the Contract are shares of the Dean Witter
Select Dimensions Investment Series, an open-end diversified series investment
company with multiple portfolios ("Portfolio") as follows: the Money Market
Portfolio, the North American Government Securities Portfolio, the Diversified
Income Portfolio, the Balanced Portfolio, the Utilities Portfolio, the Dividend
Growth Portfolio, the Value-Added Market Portfolio, the Core Equity Portfolio,
the American Value Portfolio, the Global Equity Portfolio, the Developing Growth
Portfolio, and the Emerging Markets Portfolio and such other Portfolios as shall
be offered from time to time, and the Fixed Account, or a combination of the
Portfolios and the Fixed Account. (See "The Portfolios" commencing on page 12
and "The Fixed Account" commencing on page 11.)
WHAT ARE THE CHARGES UNDER THE CONTRACTS?
SALES EXPENSES
There is no deduction for sales expenses from Premium Payments when made.
However, a contingent deferred sales charge may be assessed against Contract
Values when they are surrendered. (See "Contingent Deferred Sales Charges"
commencing on page 18.)
The length of time from receipt of a Premium Payment to the time of
surrender determines the contingent deferred sales charge. For this purpose,
Premium Payments will be deemed to be surrendered in the order in which they are
received and all surrenders will be first from Premium Payments and then from
other Contract values. The charge is a percentage of the amount withdrawn (not
to exceed the aggregate amount of the Premium Payments made). The charge is as
follows:
<TABLE>
<CAPTION>
LENGTH OF TIME
CHARGE FROM PREMIUM PAYMENT
------ --------------------
(NUMBER OF YEARS)
<S> <C>
6% 1
6% 2
5% 3
5% 4
4% 5
3% 6
2% 7
0% 8 or more
</TABLE>
No contingent deferred sales charge will be assessed in the event of death
of the Annuitant or Contract Owner, or upon the exercise of the withdrawal
privilege or if Contract Values are applied to an Annuity option
7
<PAGE>
provided for under the Contract (except that a surrender out of Annuity Option
Four will be subject to a contingent deferred sales charge where applicable).
(See "Contingent Deferred Sales Charges" commencing on page 18.)
FREE WITHDRAWAL PRIVILEGE. Withdrawals of up to 10% per Contract Year, on a
noncumulative basis, of the Premium Payments made to a Contract may be made
without the imposition of the contingent deferred sales charge during the first
seven Contract years. (See "Contingent Deferred Sales Charges" commencing on
page 18). Certain plans or programs may have different withdrawal privileges.
MORTALITY AND EXPENSE RISKS
For assuming the mortality and expense risks under the Contract, ITT
Hartford will impose a 1.25% per annum charge against all Contract Values held
in the Sub-Accounts. (See "Mortality and Expense Risk Charge," page 19).
ANNUAL ADMINISTRATION AND MAINTENANCE FEE
The Contract provides for administration and Contract maintenance charges.
For administration, the charge is .15% per annum against all Contract Values
held in the Separate Account. For Contract maintenance, the charge is $30
annually. (See "Administration and Maintenance Fees," page 20). Contracts with a
Contract value of $50,000 or more at time of Contract Anniversary will not be
assessed this charge.
PREMIUM TAXES
A deduction will be made for Premium Taxes for Contracts sold in certain
states. (See "Premium Taxes," page 20.)
CHARGES BY THE PORTFOLIOS
The Portfolios are subject to certain fees, charges and expenses. (See the
Prospectus for the Fund accompanying this Prospectus.)
CAN I GET MY MONEY IF I NEED IT?
Subject to any applicable charges, the Contract may be surrendered, or
portions of the value of such Contract may be withdrawn, at any time prior to
the Annuity Commencement Date. However, if less than $500 remains in a Contract
as a result of a withdrawal, ITT Hartford may terminate the Contract in its
entirety. (See "Redemption/Surrender of a Contract," page 16; see also "Federal
Tax Considerations," page 22, for a discussion of federal tax consequences,
including a 10% penalty tax that may apply upon surrender or withdrawal.)
DOES THE CONTRACT PAY ANY DEATH BENEFITS?
A Death Benefit is provided in the event of death of the Annuitant or
Contract Owner or Joint Contract Owner before Annuity payments have commenced.
(See "Death Benefit," page 17.)
WHAT ARE THE AVAILABLE ANNUITY OPTIONS UNDER THE CONTRACT?
There are five available Annuity options under the Contract which are
described on page 21. The Annuity Commencement Date may not be deferred beyond
the Annuitant's 90th birthday except in certain states where the Annuity
Commencement Date may not be deferred beyond the Annuitant's 85th birthday. If a
Contract Owner does not elect otherwise, the Contract Value less applicable
premium taxes will be applied on the Annuity Commencement Date under the second
option to provide a life annuity with 120 monthly payments certain.
DOES THE CONTRACT OWNER HAVE ANY VOTING RIGHTS UNDER THE CONTRACT?
Contract Owners will have the right to vote on matters affecting an
underlying Portfolio to the extent that proxies are solicited by such Portfolio.
If a Contract Owner does not vote, ITT Hartford shall vote such interests in the
same proportion as shares of the Portfolio for which instructions have been
received by ITT Hartford. (See "Voting Rights," page 27.)
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PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance related information
concerning its Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
Each Portfolio may include total return in advertisements or other sales
material.
When a Sub-Account advertises its total return, it will usually be
calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period (assuming the deduction of any contingent
deferred sales charge which would be payable if the investment were redeemed at
the end of the period).
The North American Government Securities Portfolio and Diversified Income
Portfolio may advertise yield in addition to total return. The yield will be
computed in the following manner: The net investment income per unit earned
during a recent one month period is divided by the unit value on the last day of
the period. This figure reflects the recurring charges at the Separate Account
level including the Contract Maintenance Fee.
The Money Market Portfolio 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 reflect the recurring charges at the Separate Account
level including the Contract Maintenance Fee.
Total return at the Separate Account level includes all Contract charges:
sales charges, mortality and expense risk charges, and the Contract maintenance
fee, and is therefore lower than total return at the Fund level, with no
comparable charges. Likewise, yield at the Separate Account level includes all
recurring charges (except sales charges), and is therefore lower than yield at
the Portfolio level, with no comparable charges.
ITT Hartford may provide information on various topics to Contract Owners
and prospective Contract Owners in advertising, sales literature or other
materials. These topics may include the relationship between sectors of the
economy and the economy as a whole and its effect on various securities markets,
investment strategies and techniques (such as value investing, dollar cost
averaging and asset allocation), the advantages and disadvantages of investing
in tax-advantaged and taxable instruments, customer profiles and hypothetical
purchase scenarios, financial management and tax and retirement planning, and
other investment alternatives, including comparisons between the Contracts and
the characteristics of and market for such alternatives.
INTRODUCTION
This Prospectus has been designed to provide you with the necessary
information to make a decision on purchasing a tax deferred Variable Annuity
Contract offered by ITT Hartford and funded by the Fixed Account and/or a series
of the Separate Account. Please read the Glossary of Special Terms on pages 3
and 4 prior to reading this Prospectus to familiarize yourself with the terms
being used.
THE CONTRACT
The Dean Witter Select Dimensions Plan is a tax deferred Variable Annuity
Contract. Payments for the Contract will be held in the Fixed Account and/or a
series of the Separate Account. Initially there are no deductions from your
Premium Payments (except for Premium Taxes, if applicable) so your entire
Premium Payment is put to work in the investment Sub-Account(s) of your choice
or the Fixed Account. Each Sub-Account invests in a different underlying
Portfolio with its own distinct investment objectives. You pick the Sub-
Account(s) with the investment objectives that meet your needs. You may select
one or more Sub-Accounts and/or the Fixed Account and determine the percentage
of your Premium Payment that is put into a Sub-
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Account or the Fixed Account. You may also transfer assets among the
Sub-Accounts and the Fixed Account so that your investment program meets your
specific needs over time. There are minimum requirements for investing in each
Sub-Account and the Fixed Account which are described later in this Prospectus.
In addition, there are certain other limitations on withdrawals and transfers of
amounts in the Sub-Accounts and the Fixed Account as described in this
Prospectus. See "Charges Under the Contract" for a description of the charges
for redeeming a Contract and other charges made under the Contract.
Generally, the Contract contains the five optional forms of Annuity
described later in this Prospectus. Options 2, 4 and 5 are available with
respect to Qualified Contracts only if the guaranteed payment period is less
than the life expectancy of the Annuitant at the time the option becomes
effective. Such life expectancy shall be computed on the basis of the mortality
table prescribed by the IRS, or if none is prescribed, the mortality table then
in use by ITT Hartford.
The Contract Owner may select an Annuity Commencement Date and an Annuity
option which may be on a fixed or variable basis, or a combination thereof. The
Annuity Commencement Date may not be deferred beyond the Annuitant's 90th
birthday except in certain states where the Annuity Commencement Date may not be
deferred beyond the Annuitant's 85th birthday.
The Annuity Commencement Date and/or the Annuity option may be changed from
time to time, but any such change must be made at least 30 days prior to the
date on which payments are scheduled to begin. If you do not elect otherwise,
payments will begin at the Annuitant's age 90 under Option 2 with 120 monthly
payments certain (Option 1 for contracts issued in Texas).
When an Annuity is effected under a Contract, unless otherwise specified,
Contract Values held in the Sub-Accounts will be applied to provide a Variable
Annuity based on the pro rata amount in the various Sub-Accounts. Fixed Account
Contract Values will be applied to provide a Fixed Annuity. Variable Annuity
payments will vary in accordance with the investment performance of the
Sub-Accounts you have selected. The Contract allows the Contract Owner to change
the Sub-Accounts on which variable payments are based after payments have
commenced once every three (3) months. Any Fixed Annuity allocation may not be
changed.
The Contract offered under this Prospectus may be purchased by any
individual ("Non-Qualified Contract") or by an individual, trustee or custodian
for a retirement plan qualified under Sections 401(a) or 403(a) of the Internal
Revenue Code; annuity purchase plans adopted by public school systems and
certain tax-exempt organizations according to Section 403(b) of the Internal
Revenue Code; Individual Retirement Annuities adopted according to Section 408
of the Internal Revenue Code; employee pension plans established for employees
by a state, a political subdivision of a state, or an agency or instrumentality
of either a state or a political subdivision of a state, and certain eligible
deferred compensation plans as defined in Section 457 of the Internal Revenue
Code ("Qualified Contracts").
RIGHT TO CANCEL PERIOD
If you are not satisfied with your purchase you may surrender the Contract
by returning it within ten days (or longer in some states) after you receive it.
A written request for cancellation must accompany the Contract. In such event,
ITT Hartford will, without deduction for any charges normally assessed
thereunder, pay you an amount equal to the Contract Value on the date of receipt
of the request for cancellation. You bear the investment risk during the period
prior to the Company's receipt of request for cancellation. ITT Hartford will
refund the premium paid only for individual retirement annuities (if returned
within seven days of receipt) and in those states where required by law.
THE SEPARATE ACCOUNT
The Separate Account was established on June 13, 1994, in accordance with
authorization by the Board of Directors of ITT Hartford. It is the Separate
Account in which ITT Hartford sets aside and invests the assets attributable to
variable annuity contracts, including the contracts sold under this Prospectus.
Although the Separate Account is an integral part of ITT Hartford, it is
registered as a unit investment trust under the Investment Company Act of 1940.
This registration does not, however, involve supervision by the Commission of
the management or the investment practices or policies of the Separate Account
or ITT Hartford. The Separate Account meets the definition of "separate account"
under federal securities law.
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Under Connecticut law, the assets of the Separate Account attributable to
the Contracts offered under this Prospectus are held for the benefit of the
owners of, and the persons entitled to payments under, those Contracts. Income,
gains, and losses, whether or not realized, from assets allocated to the
Separate Account, are, in accordance with the Contracts, credited to or charged
against the Separate Account. Also, the assets in the Separate Account are not
chargeable with liabilities arising out of any other business ITT Hartford may
conduct. So Contract Values allocated to the Sub-Accounts will not be affected
by the rate of return of ITT Hartford's General Account, nor by the investment
performance of any of ITT Hartford's other separate accounts. However, the
obligations arising under the Contracts are general obligations of ITT Hartford.
Your investment in the Separate Account is allocated to one or more
Sub-Accounts as per your specifications. Each Sub-Account is invested
exclusively in the shares of one underlying Portfolio. Net Premium Payments and
proceeds of transfers between Portfolios are applied to purchase shares in the
appropriate Fund at net asset value determined as of the end of the Valuation
Period during which the payments were received or the transfer made. All
distributions from the Portfolios are reinvested at net asset value. The value
of your investment will therefore vary in accordance with the net income and the
market value of the Portfolios of the underlying Portfolio. During the Variable
Annuity payout period, both your Annuity payments and reserve values will vary
in accordance with these factors.
ITT Hartford does not guarantee the investment results of the Portfolios or
any of the underlying investments. There is no assurance that the value of a
Contract during the years prior to retirement or the aggregate amount of the
Variable Annuity payments will equal the total of Premium Payments made under
the Contract. Since each underlying Portfolio has different investment
objectives and policies, each is subject to different risks. These risks are
more fully described in the accompanying Fund Prospectus.
ITT Hartford reserves the right, subject to compliance with the law, to
substitute the shares of any other registered investment company for the shares
of any Portfolio held by the Separate Account. Substitution may occur only if
shares of the Portfolio(s) become unavailable or if there are changes in
applicable law or interpretations of law. Current law requires notification to
you of any such substitution and approval of the Commission.
The Separate Account may be subject to liabilities arising from a Series of
the Separate Account whose assets are attributable to other variable annuity
contracts or variable life insurance policies offered by the Separate Account
which are not described in this Prospectus.
THE FIXED ACCOUNT
THAT PORTION OF THE CONTRACT RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN
ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT,
AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION. THE FOLLOWING DISCLOSURE ABOUT
THE FIXED ACCOUNT MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF
THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURE.
Premium Payments and Contract Values allocated to the Fixed Account become a
part of the general assets of ITT Hartford. ITT Hartford invests the assets of
the General Account in accordance with applicable laws governing investments of
Insurance Company General Accounts.
Currently, ITT Hartford guarantees that it will credit interest at a rate of
not less than 3% per year, compounded annually, to amounts allocated to the
Fixed Account under the Contracts. However, ITT Hartford reserves the right to
change the rate according to state insurance law. ITT Hartford may credit
interest at a rate in excess of 3% per year; however, ITT Hartford is not
obligated to credit any interest in excess of 3% per year. There is no specific
formula for the determination of excess interest credits. Some of the factors
that the Company may consider in determining whether to credit excess interest
to amounts allocated to the Fixed Account and the amount thereof, are general
economic trends, rates of return currently available and anticipated on the
Company's investments, regulatory and tax requirements and competitive factors.
ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3%
PER
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YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF THE COMPANY. THE OWNER ASSUMES
THE RISK THAT INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE
MINIMUM GUARANTEE OF 3% FOR ANY GIVEN YEAR.
THE COMPANY
ITT Hartford Life and Annuity Insurance Company ("ITT Hartford"), formerly
ITT Life Insurance Corporation, was originally incorporated under the laws of
Wisconsin on January 9, 1956. ITT Hartford was redomiciled to Connecticut on May
1, 1996. It is a stock life insurance company engaged in the business of writing
both individual and group life insurance and annuities in all states including
the District of Columbia, except New York. The offices of ITT Hartford are
located in Minneapolis, Minnesota; however, its mailing address is P.O. Box
5085, Hartford, Connecticut 06102-5085.
ITT Hartford is a wholly owned subsidiary of Hartford Life Insurance
Company. ITT Hartford is ultimately 100% owned by Hartford Fire Insurance
Company, one of the largest multiple lines insurance carriers in the United
States. On December 20, 1995, Hartford Fire Insurance Company became an
independent, publicly traded corporation.
ITT Hartford is rated A+ (superior) by A.M. Best and Company, Inc. on the
basis of its financial soundness and operating performance. ITT Hartford is
rated AA+ by both Standard & Poor's and Duff and Phelps on the basis of its
claims paying ability.
These ratings do not apply to the performance of the Separate Account.
However, the Contractual obligations under this variable annuity are the general
corporate obligations of ITT Hartford. These ratings do apply to ITT Hartford's
ability to meet its insurance obligations under the Contract.
THE PORTFOLIOS
The underlying investment for the Contracts are shares of the Dean Witter
Select Dimensions Investment Series ("Fund"), an open-end diversified series
investment company with multiple portfolios. The underlying Portfolio
corresponding to each Sub-Account and their investment objectives are described
below. ITT Hartford reserves the right, subject to compliance with the law, to
offer additional portfolios with differing investment objectives. The Portfolios
may not be available in all states.
MONEY MARKET PORTFOLIO
Seeks high current income, preservation of capital and liquidity by
investing in the following money market instruments: U.S. Government
securities, obligations of U.S. regulated banks and savings institutions
having total assets of more than $1 billion, or less than $1 billion if such
are fully federally insured as to principal (the interest may not be insured)
and high grade corporate debt obligations maturing in thirteen months or less.
NORTH AMERICAN GOVERNMENT SECURITIES PORTFOLIO
Seeks to earn a high level of current income while maintaining relatively
low volatility of principal, by investing primarily in investment grade
fixed-income securities issued or guaranteed by the U.S., Canadian or Mexican
governments.
DIVERSIFIED INCOME PORTFOLIO
Seeks, as a primary objective, to earn a high level of current income and,
as a secondary objective, to maximize total return, but only to the extent
consistent with its primary objective, by equally allocating its assets among
three separate groupings of fixed-income securities. Up to one-third of the
securities in which the Diversified Income Portfolio may invest will include
securities rated Baa/BBB or lower. See the Special Considerations for
Investments for High Yield Securities disclosed in the Fund prospectus.
BALANCED PORTFOLIO
Seeks to achieve high total return through a combination of income and
capital appreciation, by investing in a diversified portfolio of common stocks
and investment grade fixed-income securities.
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UTILITIES PORTFOLIO
Seeks to provide current income and long-term growth of income and capital
by investing in equity and fixed-income securities of companies in the public
utilities industry.
DIVIDEND GROWTH PORTFOLIO
Seeks to provide reasonable current income and long-term growth of income
and capital by investing primarily in common stock of companies with a record
of paying dividends and the potential for increasing dividends.
VALUE-ADDED MARKET PORTFOLIO
Seeks to achieve a high level of total return on its assets through a
combination of capital appreciation and current income, by investing, on an
equally-weighted basis, in a diversified portfolio of common stocks of the
companies which are represented in the Standard & Poor's 500 Composite Stock
Price Index.
CORE EQUITY PORTFOLIO
Seeks long-term growth of capital by investing primarily in common stocks
and securities convertible into common stocks issued by domestic and foreign
companies.
AMERICAN VALUE PORTFOLIO
Seeks long-term capital growth consistent with an effort to reduce
volatility, by investing principally in common stock of companies in
industries which, at the time of the investment, are believed to be
undervalued in the marketplace.
GLOBAL EQUITY PORTFOLIO
Seeks a high level of total return on its assets primarily through long-term
capital growth and, to a lesser extent, from income, through investments in
all types of common stocks and equivalents (such as convertible securities and
warrants), preferred stocks and bonds and other debt obligations of domestic
and foreign companies and governments and international organizations.
DEVELOPING GROWTH PORTFOLIO
Seeks long-term capital growth by investing primarily in common stocks of
smaller and medium-sized companies that, in the opinion of the Investment
Manager, have the potential for growing more rapidly than the economy and
which may benefit from new products or services, technological developments or
changes in management.
EMERGING MARKETS PORTFOLIO
Seeks long-term capital appreciation by investing primarily in equity
securities of companies in emerging market countries. The Emerging Markets
Portfolio may invest up to 35% of its total assets in high risk fixed-income
securities that are rated below investment grade or are unrated (commonly
referred to as "junk bonds"). See the special considerations for investments
in high yield securities disclosed in the Fund prospectus.
The Portfolios are managed in styles similar to other investment companies
whose shares are generally offered to the public, or by TCW Funds Management,
Inc., the Sub-Adviser to certain of the Portfolios. The Portfolios of these
other investment companies may, however, employ different investment practices
and may invest in securities different from those in which their counterpart
Portfolios invest, and consequently will not have identical portfolios or
experience identical investment results.
The Portfolios are available only to serve as the underlying investment for
variable annuity and variable life contracts. A full description of the
Portfolios, their investment objectives, policies and restrictions, risks,
charges and expenses and other aspects of their operation is contained in the
accompanying Fund Prospectus which should be read in conjunction with this
Prospectus before investing, and in the Fund Statement of Additional Information
which may be ordered without charge from Dean Witter Select Dimensions
Investment Series.
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It is conceivable that in the future it may be disadvantageous for variable
annuity separate accounts and variable life insurance separate accounts to
invest in the Portfolios simultaneously. Although ITT Hartford and the Fund do
not currently foresee any such disadvantages either to variable annuity contract
owners or to variable life insurance policyowners, the Fund's Board of Trustees
would monitor events in order to identify any material conflicts between such
Contract Owners and policyowners and to determine what action, if any, should be
taken in response thereto. If the Board of Trustees of the Fund were to conclude
that separate Portfolios should be established for variable life and variable
annuity separate accounts, the variable annuity Contract holders would not bear
any expenses attendant upon establishment of such separate funds.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"),
a Delaware Corporation, whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. The Investment Manager, which was
incorporated in July, 1992, is a wholly-owned subsidiary of Dean Witter,
Discover & Co., ("DWDC"), a balanced financial services organization providing a
broad range of nationally marketed credit and investment products.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. Inter-Capital has retained its wholly-owned subsidiary, Dean Witter
Services Company Inc., to perform the aforementioned administrative services for
the Fund. For its services, the Portfolios pay the Investment Manager a monthly
fee. See the accompanying Fund Prospectus for a more complete description of the
Investment Manager and the respective fees of the Portfolios.
With regard to the North American Government Securities Portfolio, the
Balanced Portfolio, the Core Equity Portfolio and the Emerging Markets
Portfolio, under a Sub-Advisory Agreement between TCW Funds Management, Inc.
(the "Sub-Adviser") and the Investment Manager, the Sub-Adviser provides these
Portfolios with investment advice and portfolio management, in each case subject
to the overall supervision of the Investment Manager. The Sub-Adviser's address
is 865 South Figueroa Street, Suite 1800, Los Angeles, California 90017.
The Fund's Board of Trustees reviews the various services provided by or
under the direction of the Investment Manager (or by the Sub-Adviser) to ensure
that the Fund's general investment policies and programs are being properly
carried out and that administrative services are being provided to the Fund in a
satisfactory manner.
OPERATION OF THE
CONTRACT/ACCUMULATION PERIOD
PREMIUM PAYMENTS
The balance of each initial Premium Payment remaining after the deduction of
any applicable Premium Tax is credited to your Contract within two business days
of receipt of a properly completed application or an order to purchase a
Contract and the initial Premium Payment by ITT Hartford at its Home Office,
P.O. Box 5085, Hartford, CT 06102-5085. It will be credited to the
Sub-Account(s) and/or the Fixed Account in accordance with your election. If the
application or other information is incomplete when received, the balance of
each initial Premium Payment, after deduction of any applicable Premium Tax,
will be credited to the Sub-Account(s) or the Fixed Account within five business
days of receipt or the entire Premium Payment will be immediately returned
unless you have been informed of the delay and request that the Premium Payment
not be returned.
Subsequent Premium Payments are priced on the Valuation Day received by ITT
Hartford in its Home Office or other designated administrative office.
The number of Accumulation Units in each Sub-Account to be credited to a
Contract will be determined by dividing the portion of the Premium Payment being
credited to each Sub-Account by the value of an Accumulation Unit in that
Sub-Account on that date.
The minimum initial Premium Payment is $1,000. Subsequent Premium Payments,
if made, must be a minimum of $500. Certain plans may make smaller initial and
subsequent periodic payments. Each Premium Payment may be split among the
various Sub-Accounts and the Fixed Account subject to minimum amounts then in
effect.
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Hartford Securities Distribution Company, Inc. ("HSD") serves as principal
underwriter for the securities issued with respect to the Separate Account. HSD
is a wholly-owned subsidiary of Hartford Life Insurance Company. 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. The principal business address of HSD is the same as ITT Hartford.
VALUE OF ACCUMULATION UNITS
The Accumulation Unit value for each Sub-Account will vary to reflect the
investment experience of the applicable Portfolio and will be determined on each
Valuation Day by multiplying the Accumulation Unit value of the particular
Sub-Account on the preceding Valuation Day by a "Net Investment Factor" for that
Sub-Account for the Valuation Period then ended. The "Net Investment Factor" for
each of the Sub-Accounts is equal to the net asset value per share of the
corresponding Portfolio at the end of the Valuation Period (plus the per share
amount of any dividends or capital gains distributed by that Portfolio if the
ex-dividend date occurs in the Valuation Period then ended) divided by the net
asset value per share of the corresponding Portfolio at the beginning of the
Valuation Period. You should refer to the Fund Prospectus which accompanies this
Prospectus for a description of how the assets of each Portfolio are valued
since each determination has a direct bearing on the Accumulation Unit value of
the Sub-Account and therefore the value of a Contract. The Accumulation Unit
value is affected by the performance of the underlying Portfolio(s), expenses
and deduction of the charges described in this Prospectus.
The shares of the Portfolio are valued at net asset value on each Valuation
Day. A description of the valuation methods used in valuing Portfolio shares may
be found in the accompanying Prospectus of the Fund.
VALUE OF THE FIXED ACCOUNT
ITT Hartford will determine the value of the Fixed Account by crediting
interest to amounts allocated to the Fixed Account. The minimum Fixed Account
interest rate is 3%, compounded annually. ITT Hartford may credit a lower
minimum interest rate according to state law. ITT Hartford also may credit
interest at rates greater than the minimum Fixed Account interest rate.
VALUE OF THE CONTRACT
The value of the Sub-Account investments under your Contract at any time
prior to the commencement of Annuity payments can be determined by multiplying
the total number of Accumulation Units credited to your Contract in each
Sub-Account by the then current Accumulation Unit values for the applicable
Sub-Account. The value of the Fixed Account under your Contract will be the
amount allocated to the Fixed Account plus interest credited. You will be
advised at least semi-annually of the number of Accumulation Units credited to
each Sub-Account, the current Accumulation Unit values, the Fixed Account Value,
and the total value of your Contract.
TRANSFERS AMONG SUB-ACCOUNTS
You may transfer the values of your Sub-Account allocations from one or more
Sub-Accounts to another free of charge. However, ITT Hartford reserves the right
to limit the number of transfers to twelve (12) per Contract Year, with no two
(2) transfers occurring on consecutive Valuation Days. Transfers by telephone
may be made by a Contract Owner or by the attorney-in-fact pursuant to a power
of attorney by calling (800) 862-6668 or by the agent of record by calling (800)
862-7155. Telephone transfers may not be permitted by some states for their
residents who purchase variable annuities.
The policy of ITT Hartford and its agents and affiliates is that they will
not be responsible for losses resulting from acting upon telephone requests
reasonably believed to be genuine. ITT Hartford will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine;
otherwise, ITT Hartford may be liable for any losses due to unauthorized or
fraudulent instructions. The procedures ITT Hartford follows for transactions
initiated by telephone include requirements that callers provide certain
information for identification purposes. All transfer instructions by telephone
are tape recorded.
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ITT Hartford may permit the Contract Owner to preauthorize transfers between
the Sub-Accounts and the Fixed Account under certain circumstances. Transfers
between the Sub-Accounts may be made both before and after Annuity payments
commence (limited to once a quarter) provided that the minimum allocation to any
Sub-Account may not be less than $500. No minimum balance is presently required
in any Sub-Account.
The right to reallocate Contract Values between the Sub-Accounts is subject
to modification if ITT Hartford determines, in its sole discretion, that the
exercise of that right by one or more Contract Owners is, or would be, to the
disadvantage of other Contract Owners. Any modification could be applied to
transfers to or from some or all of the Sub-Accounts and could include, but not
be limited to, the requirement of a minimum time period between each transfer,
not accepting transfer requests of an agent acting under a power of attorney on
behalf of more than one Contract Owner, or limiting the dollar amount that may
be transferred between the Sub-Accounts and the Fixed Account by a Contract
Owner at any one time. Such restrictions may be applied in any manner reasonably
designed to prevent any use of the transfer right which is considered by ITT
Hartford to be to the disadvantage of other Contract Owners.
TRANSFERS BETWEEN THE FIXED ACCOUNT AND THE SUB-ACCOUNTS
Subject to the restrictions set forth above, transfers from the Fixed
Account into a Sub-Account may be made at any time during the Contract Year. The
maximum amount which may be transferred from the Fixed Account during any
Contract Year is the greater of 30% of the Fixed Account balance as of the last
Contract Anniversary or the greatest amount of any prior transfer from the Fixed
Account. If ITT Hartford permits preauthorized transfers from the Fixed Account
to the Sub-Accounts, this restriction is inapplicable. However, if any interest
rate is renewed at a rate at least one percentage point less than the previous
rate, the Contract Owner may elect to transfer up to 100% of the Portfolios
receiving the reduced rate within sixty days of notification of the interest
rate decrease. Generally, transfers may not be made from any Sub-Account into
the Fixed Account for the six-month period following any transfer from the Fixed
Account into one or more of the Sub-Accounts. ITT Hartford reserves the right to
defer transfers from the Fixed Account for up to six months from the date of
request.
REDEMPTION/SURRENDER OF A CONTRACT
At any time prior to the Annuity Commencement Date, you have the right,
subject to any IRS provisions applicable thereto, to surrender the value of the
Contract in whole or in part. Surrenders are not permitted after Annuity
payments commence EXCEPT that a full surrender is allowed when payments for a
designated period (Option 4 and 5) are selected as the Annuity option.
FULL SURRENDERS. At any time prior to the Annuity Commencement Date (and
after the Annuity Commencement Date with respect to values applied to Option 4),
the Contract Owner has the right to terminate the Contract. In such event, the
Termination Value of the Contract may be taken in the form of a lump sum cash
settlement. The Termination Value of the Contract is equal to the Contract Value
less any applicable Premium Taxes, the Contract Maintenance Fee, if applicable,
and any applicable contingent deferred sales charges. The Termination Value may
be more or less than the amount of the Premium Payments made to a Contract.
PARTIAL SURRENDERS. The Contract Owner may make a partial surrender of
Contract Values at any time prior to the Annuity Commencement Date so long as
the amount surrendered is at least equal to the minimum amount rules then in
effect. Currently, there is no minimum amount rule in effect. However, ITT
Hartford may institute minimum amount rules at some future time. Additionally,
if the remaining Contract Value following a surrender is less than $500 (and,
for Texas contracts, there were no Premium Payments made during the preceding
two contract years), ITT Hartford may terminate the Contract and pay the
Termination Value.
Certain plans or programs may have different withdrawal privileges. ITT
Hartford may permit the Contract Owner to preauthorize partial surrenders
subject to certain limitations then in effect.
THERE ARE CERTAIN RESTRICTIONS ON SECTION 403(B) TAX SHELTERED ANNUITIES. AS
OF DECEMBER 31, 1988, ALL SECTION 403(B) ANNUITIES HAVE LIMITS ON FULL AND
PARTIAL SURRENDERS. CONTRIBUTIONS TO THE CONTRACT MADE AFTER DECEMBER 31, 1988
AND ANY INCREASES IN CASH VALUE AFTER DECEMBER 31, 1988 MAY NOT BE DISTRIBUTED
UNLESS THE CONTRACT OWNER/EMPLOYEE HAS A) ATTAINED AGE 59 1/2, B) TERMINATED
EMPLOYMENT, C) DIED, D) BECOME DISABLED OR E) EXPERIENCED FINANCIAL HARDSHIP.
DISTRIBUTIONS DUE TO FINANCIAL HARDSHIP OR SEPARATION FROM SERVICE MAY STILL
BE SUBJECT TO A PENALTY TAX OF 10%.
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ITT HARTFORD WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A
WITHDRAWAL IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR
SITUATION; OR IN MONITORING WITHDRAWAL REQUESTS REGARDING PRE OR POST JANUARY 1,
1989 ACCOUNT VALUES.
ANY SUCH FULL OR PARTIAL SURRENDER DESCRIBED ABOVE MAY RESULT IN ADVERSE TAX
CONSEQUENCES TO THE CONTRACT OWNER. THE CONTRACT OWNER, THEREFORE, SHOULD
CONSULT WITH HIS TAX ADVISER BEFORE UNDERTAKING ANY SUCH SURRENDER. (SEE
"FEDERAL TAX CONSIDERATIONS" COMMENCING ON PAGE 22.)
Payment on any request for a full or partial surrender from the Sub-Accounts
and/or the Fixed Account will be made as soon as possible and in any event no
later than seven days after the written request is received by ITT Hartford at
its Home Office, Attn: Individual Annuity Services, P.O. Box 5085, Hartford, CT
06102-5085. ITT Hartford may defer payment of any amounts from the Fixed Account
for up to six months from the date of the request for surrender. If ITT Hartford
defers payment for more than 30 days, ITT Hartford will pay interest of at least
3% per annum on the amount deferred. In requesting a partial withdrawal you
should specify the Fixed Account and/or the Sub-Account(s) from which the
partial withdrawal is to be taken. Otherwise, such withdrawal and any applicable
contingent deferred sales charges will be effected on a pro rata basis according
to the value in the Fixed Account and each Sub-Account under a Contract. Within
this context, the contingent deferred sales charges are taken from the Premium
Payments in the order in which they were received: from the earliest Premium
Payments to the latest Premium Payments. (See "Contingent Deferred Sales
Charges," page 18.)
DEATH BENEFIT
The Contracts provide that in the event the Annuitant dies before the
Annuity Commencement Date, the Contingent Annuitant will become the Annuitant.
If the Annuitant dies before the Annuity Commencement Date and either (a) there
is no designated Contingent Annuitant, (b) the Contingent Annuitant predeceases
the Annuitant, or (c) if any Contract Owner dies before the Annuity Commencement
Date, the Beneficiary as determined under the Contract Control Provisions will
receive the Death Benefit as determined on the date of receipt of due proof of
death by ITT Hartford in its Home Office. With regard to Joint Contract Owners,
after the death of a joint Contract Owner prior to the Annuity Commencement
Date, the Beneficiary will be the surviving Contract Owner notwithstanding that
the beneficiary designation may be different.
GUARANTEED DEATH BENEFIT -- If, upon death prior to the Annuity Commencement
Date, the Annuitant or Contract Owner, as applicable, had not attained his 90th
birthday, the Beneficiary will receive the greatest of (a) the Contract Value
determined as of the day written proof of death of such person is received by
ITT Hartford, or (b) 100% of the total Premium Payments made to such contract,
reduced by any prior surrenders, or (c) the Maximum Anniversary Value
immediately preceding the date of death. The Maximum Anniversary Value is equal
to the greatest Anniversary Value attained from the following:
As of the receipt of due proof of death, the Company will calculate an
Anniversary Value for each Contract Anniversary prior to the deceased's attained
age 81. The Anniversary Value is equal to the Contract Value on a Contract
Anniversary, increased by the dollar amount of any premium payment made since
that anniversary and reduced by the dollar amount of any partial surrenders
since that anniversary.
If the deceased, the Annuitant or Contract Owner, as applicable, had
attained age 90, then the Death Benefit will equal the Contract Value.
PAYMENT OF DEATH BENEFIT -- Death Benefit proceeds will remain invested in
the Separate Account in accordance with the allocation instructions given by the
Contract Owner until the proceeds are paid or ITT Hartford receives new
instructions from the Beneficiary. The Death Benefit may be taken in one sum,
payable within 7 days after the date Due Proof of Death is received, or under
any of the settlement options then being offered by the Company provided,
however, that: (a) in the event of the death of any Contract Owner prior to the
Annuity Commencement Date, the entire interest in the Contract will be
distributed within 5 years after the death of the Contract Owner and (b) in the
event of the death of any Contract Owner or Annuitant which occurs on or after
the Annuity Commencement Date, any remaining interest in the Contract will be
paid at least as rapidly as under the method of distribution in effect at the
time of death, or, if the benefit is payable over a period not extending beyond
the life expectancy of the Beneficiary or over the life of the Beneficiary, such
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distribution must commence within one year of the date of death. The proceeds
due on the death may be applied to provide variable payments, fixed payments, or
a combination of variable and fixed payments. However, in the event of the
Contract Owner's death where the sole Beneficiary is the spouse of the Contract
Owner and the Annuitant or Contingent Annuitant is living, such spouse may
elect, in lieu of receiving the death benefit, to be treated as the Contract
Owner. The Contract Value and the Maximum Anniversary Value of the Contract will
be unaffected by treating the spouse as the Contract Owner.
If the Contract is owned by a corporation or other non-individual, the Death
Benefit payable upon the death of the Annuitant prior to the Annuity
Commencement Date will be payable only as one sum or under the same settlement
options and in the same manner as if an individual Contract Owner died on the
date of the Annuitant's death.
There may be postponement in the payment of Death Benefits whenever (a) the
New York Stock Exchange is closed, except for holidays or weekends, or trading
on the New York Stock Exchange is restricted as determined by the Securities and
Exchange Commission; (b) the Securities and Exchange Commission permits
postponement and so orders; or (c) the Securities and Exchange Commission
determines that an emergency exists making valuation of the amounts or disposal
of securities not reasonably practicable.
GROUP UNALLOCATED CONTRACTS -- For Group Unallocated Contracts, ITT Hartford
requires that detailed accounting of cumulative purchase payments, cumulative
gross surrenders, and current Contract Value attached to each Plan Participant
be submitted on an annual basis by the Contract Owner. Failure to submit
accurate data satisfactory to ITT Hartford will give ITT Hartford the right to
terminate this extension of benefits.
CHARGES UNDER THE CONTRACT
CONTINGENT DEFERRED SALES CHARGES
There is no deduction for sales expenses from Premium Payments when made.
However, a contingent deferred sales charge may be assessed against Contract
Values when they are surrendered.
The length of time from receipt of a Premium Payment to the time of
surrender determines the contingent deferred sales charge. Premium payments will
be deemed to be surrendered in the order in which they were received.
DURING THE FIRST SEVEN CONTRACT YEARS
During the first seven contract years, all surrenders will be first from
Premium Payments and then from other Contract Values. If an amount equal to all
premium payments has been surrendered, a contingent deferred sales charge will
not be assessed against the surrender of the remaining Contract Value.
AFTER THE SEVENTH CONTRACT YEAR
After the seventh contract year, all surrenders will first be from earnings
and then from premium payments. A contingent deferred sales charge will not be
assessed against the surrender of earnings. If an amount equal to all earnings
has been surrendered, a contingent deferred sales charge will not be assessed
against premium payments received more than seven years prior to surrender, but
will be assessed against premium payments received less than seven years prior
to surrender.
The charge is a percentage of the amount withdrawn (not to exceed the
aggregate amount of the Premium Payments made) and equals:
<TABLE>
<CAPTION>
LENGTH OF TIME
CHARGE FROM PREMIUM PAYMENT
------ --------------------
(NUMBER OF YEARS)
<S> <C>
6% 1
6% 2
5% 3
5% 4
4% 5
3% 6
2% 7
0% 8 or more
</TABLE>
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The contingent deferred sales charges are used to cover expenses relating to
the sale and distribution of the Contracts, including commissions paid to any
distribution organization and its sales personnel, the cost of preparing sales
literature and other promotional activities. To the extent that these charges do
not cover such distribution expenses, the expenses will be borne by ITT Hartford
from its general assets, including surplus. The surplus might include profits
resulting from unused mortality and expense risk charges.
During the first seven Contract Years, on a non-cumulative basis, a Contract
Owner may make a partial surrender of Contract Values of up to 10% of the
aggregate Premium Payments made to the contract (as determined on the date of
the requested withdrawal) without the application of the contingent deferred
sales charge. After the seventh Contract year, the Contract Owner may make a
partial surrender of 10% of premium payments made during the seven years prior
to the surrender and 100% of the Contract Value less the premium payments made
during the seven years prior to the surrender. The amounts not subject to sales
charges are known as the Annual Withdrawal Amount. The Annual Withdrawal Amount
is the amount which can be withdrawn in any Contract Year prior to incurring
surrender charges. An Extended Withdrawal Privilege rider allows an Annuitant
who attains age 70 1/2 under a Qualified Plan to withdraw an amount in excess of
the Annual Withdrawal Amount to comply with IRS minimum distribution rules.
The contingent deferred sales charges which cover expenses relating to the
sale and distribution of the Contracts may be reduced for certain sales of the
Contracts under circumstances which may result in savings of such sales and
distribution expenses. Therefore, the contingent deferred sales charges may be
reduced if the Contracts are sold to certain employee and professional groups.
In addition, there may be other circumstances of which ITT Hartford is not
presently aware which could result in reduced sales or distribution expenses.
Reductions in these charges will not be unfairly discriminatory against any
Contract Owner.
ITT Hartford may offer certain employer sponsored savings plans, in its
discretion reduced fees and charges including, but not limited to, the
contingent deferred sales charges, the mortality and expense risk charge and the
maintenance fee for certain sales under circumstances which may result in
savings of certain costs and expenses. Reductions in these fees and charges will
not be unfairly discriminatory against any Contract Owner.
MORTALITY AND EXPENSE RISK CHARGE
Although Variable Annuity payments made under the Contracts will vary in
accordance with the investment performance of the underlying Portfolio shares
held in the Sub-Account(s), the payments will not be affected by (a) ITT
Hartford's actual mortality experience among Annuitants before or after the
Annuity Commencement Date or (b) ITT Hartford's actual expenses, if greater than
the deductions provided for in the Contracts because of the expense and
mortality undertakings by ITT Hartford.
For assuming these risks under the Contracts, ITT Hartford will make a daily
charge at the rate of 1.25% per annum against all Contract Values held in the
Sub-Accounts during the life of the Contract, including the payout period,
(estimated at .90% for mortality and .35% for expense).
The mortality undertaking provided by ITT Hartford under the Contracts,
assuming the selection of one of the forms of life Annuities, is to make monthly
Annuity payments (determined in accordance with the 1983(a) Individual Annuity
Mortality Table and other provisions contained in the Contract) to Annuitants
regardless of how long an Annuitant may live, and regardless of how long all
Annuitants as a group may live. ITT Hartford also assumes the liability for
payment of a minimum Death Benefit under the Contract.
The mortality undertakings are based on ITT Hartford's determination of
expected mortality rates among all Annuitants. If actual experience among
Annuitants during the Annuity payment period deviates from ITT Hartford's
actuarial determination of expected mortality rates among Annuitants because, as
a group, their longevity is longer than anticipated, ITT Hartford must provide
amounts from its general Portfolios to fulfill its Contract obligations. ITT
Hartford will bear the loss in such a situation. Also, in the event of the death
of an Annuitant or Contract Owner before the commencement of Annuity payments,
whichever is earlier, ITT Hartford can, in periods of declining value,
experience a loss resulting from the assumption of the mortality risk relative
to the minimum Death Benefit.
In providing an expense undertaking, ITT Hartford assumes the risk that the
contingent deferred sales charges and the Administration and Maintenance Fees
for maintaining the Contracts prior to the Annuity Commencement Date may be
insufficient to cover the actual cost of providing such items.
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ADMINISTRATION AND MAINTENANCE FEES
ITT Hartford will deduct certain fees from Contract Values to reimburse it
for expenses relating to the administration and maintenance of the Contract and
the Fixed Account. For Contract maintenance, ITT Hartford will deduct an annual
fee of $30 on each Contract Anniversary on or before the Annuity Commencement
Date. The deduction will be made pro rata according to the value in each
Sub-Account and the Fixed Account under a Contract. If during a Contract Year
the Contract is surrendered for its full value, ITT Hartford will deduct the
Contract Maintenance Fee at the time of such surrender. For administration, ITT
Hartford makes a daily charge at the rate of .15% per annum against all Contract
Values held in the Separate Account during both the accumulation and annuity
phases of the Contract. There is not necessarily a relationship between the
amount of administrative charge imposed on a given Contract and the amount of
expenses that may be attributable to that Contract; expenses may be more or less
than the charge.
The types of expenses incurred by the Separate Account include, but are not
limited to, expenses of issuing the Contract and expenses for confirmations,
Contract quarterly statements, processing of transfers and surrenders,
responding to Contract Owner inquiries, reconciling and depositing cash
receipts, calculation and monitoring daily Sub-Account unit values, Separate
Account reporting, including semiannual and annual reports and mailing and
tabulation of shareholder proxy solicitations.
You should refer to the Fund Prospectus for a description of deductions and
expenses paid out of the assets of the Portfolios.
PREMIUM TAXES
A deduction is also made for Premium Tax, if applicable, imposed by a state
or other governmental entity. Certain states impose a Premium Tax, currently
ranging up to 3.5%. Some states assess the tax at the time purchase payments are
made; others assess the tax at the time of annuitization. ITT Hartford will pay
Premium Taxes at the time imposed under applicable law. At its sole discretion,
ITT Hartford may deduct Premium Taxes at the time ITT Hartford pays such taxes
to the applicable taxing authorities, at the time the Contract is surrendered,
or at the time the Contract annuitizes.
ANNUITY BENEFITS
You select an Annuity Commencement Date and an Annuity option which may be
on a fixed or variable basis, or a combination thereof. The Annuity Commencement
Date will not be deferred beyond the Annuitant's 90th birthday except for
certain states where deferral past age 85 is not permitted. The Annuity
Commencement Date and/or the Annuity option may be changed from time to time,
but any change must be at least 30 days prior to the date on which Annuity
payments are scheduled to begin. The contract allows the Contract Owner to
change the Sub-Accounts on which variable payments are based after payments have
commenced once every three (3) months. Any Fixed Annuity allocation may not be
changed.
ANNUITY OPTIONS
The Contract contains the five optional Annuity forms described below.
Options 2, 4 and 5 are available to Qualified Contracts only if the guaranteed
payment period is less than the life expectancy of the Annuitant at the time the
option becomes effective. Such life expectancy shall be computed on the basis of
the mortality table prescribed by the IRS, or if none is prescribed, the
mortality table then in use by the ITT Hartford. With respect to Non-Qualified
Contracts, if you do not elect otherwise, payments in most states will
automatically begin at the Annuitant's age 90 (with the exception of states that
do not allow deferral past age 85) under Option 2 with 120 monthly payments
certain. For Qualified Contracts and contracts issued in Texas, if you do not
elect otherwise, payments will begin automatically at the Annuitant's age 90
under Option 1 to provide a life Annuity.
Under any of the Annuity options excluding Options 4 and 5, no surrenders
are permitted after Annuity payments commence. Only full surrenders are allowed
out of Option 4 and any such surrender will be subject to contingent deferred
sales charges, if applicable. Full or partial withdrawals may be made from
Option 5 at any time and contingent deferred sales charges will not be applied.
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OPTION 1: LIFE ANNUITY
A life Annuity is an Annuity payable during the lifetime of the Annuitant
and terminating with the last payment preceding the death of the Annuitant. This
option offers the largest payment amount of any of the life Annuity options
since there is no guarantee of a minimum number of payments nor a provision for
a death benefit payable to a Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity payment,
two if he died before the date of the third Annuity payment, etc.
OPTION 2: LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that payments will be made for a minimum of 120,
180 or 240 months, as elected. If, at the death of the Annuitant, payments have
been made for less than the minimum elected number of months, then the present
value as of the date of the Annuitant's death, of any remaining guaranteed
payments will be paid in one sum to the Beneficiary or Beneficiaries designated
unless other provisions have been made and approved by the company.
OPTION 3: JOINT AND LAST SURVIVOR ANNUITY
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
Based on the options currently offered by ITT Hartford, the Annuitant may elect
that the payment to the survivor be less than the payment made during the joint
lifetime of the Annuitant and a designated second person.
It would be possible under this option for an Annuitant and designated
second person to receive only one payment in the event of the common or
simultaneous death of the parties prior to the due date for the second payment
and so on.
OPTION 4: PAYMENTS FOR A DESIGNATED PERIOD
An amount payable monthly for the number of years selected which may be from
5 to 30 years. Under this option, you may, at any time, surrender the contract
and receive, within seven days, the Termination Value of the Contract as
determined by ITT Hartford.
In the event of the Annuitant's death prior to the end of the designated
period, the present value as of the date of the Annuitant's death, of any
remaining guaranteed payments will be paid in one sum to the Beneficiary or
Beneficiaries designated unless other provisions have been made and approved by
the Company.
Option 4 is an option that does not involve life contingencies and thus no
mortality guarantee. Charges made for the mortality undertaking under the
contracts thus provide no real benefit to a Contract Owner.
OPTION 5: DEATH BENEFIT REMAINING WITH ITT HARTFORD
Proceeds from the Death Benefit may be left with ITT Hartford for a period
not to exceed five years from the date of the Contract Owner's death prior to
the Annuity Commencement Date. These proceeds will remain in the Sub-Account(s)
to which they were allocated at the time of death unless the Beneficiary elects
to reallocate them. Full or partial withdrawals may be made at any time. In the
event of withdrawals, the remaining value will equal the Contract Value of the
proceeds left with ITT Hartford, minus any withdrawals.
ITT Hartford may offer other annuity options from time to time.
THE ANNUITY UNIT AND VALUATION
The value of the Annuity Unit for each Sub-Account in the Separate Account
for any day is determined by multiplying the value for the preceding day by the
product of (1) the net investment factor (See "Valuation of Accumulation Units,"
commencing on page 15) for the day for which the Annuity Unit value is being
calculated and (2) a factor to neutralize the assumed investment rate of 5.00%
per annum discussed below.
DETERMINATION OF PAYMENT AMOUNT
When Annuity payments are to commence, the value of the Contract is
determined as the sum of the value of the Fixed Account no earlier than the
close of business on the fifth Valuation Day preceding the date
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<PAGE>
the first Annuity payment is due plus the product of the value of the
Accumulation Unit of each Sub-Account on that same day, and the number of
Accumulation Units credited to each Sub-Account as of the date the Annuity is to
commence.
The Contract contains tables indicating the minimum dollar amount of the
first monthly payment under the optional forms of Annuity for each $1,000 of
value of a Sub-Account under a Contract. The first monthly payment varies
according to the form and type of Annuity selected. The Contract contains
Annuity tables derived from the 1983(a) Individual Annuity Mortality Table with
ages set back one year and with an assumed investment rate ("A.I.R.") of 3% per
annum for the Fixed Annuity and 5% per annum for the Variable Annuity.
The total first monthly Variable Annuity payment is determined by
multiplying the value (expressed in thousands of dollars) of a Sub-Account (less
any applicable Premium Taxes) by the amount of the first monthly payment per
$1,000 of value obtained from the tables in the Contracts.
Fixed Annuity payments are determined at annuitization by multiplying the
values allocated to the Fixed Account (less applicable Premium Taxes) by a rate
to be determined by ITT Hartford which is no less than the rate specified in the
Annuity tables in the Contract. The Annuity payment will remain level for the
duration of the Annuity.
The amount of the first monthly Variable Annuity payment, determined as
described above, is divided by the value of an Annuity Unit for the appropriate
Sub-Account no earlier than the close of business on the fifth Valuation Day
preceding the day on which the payment is due in order to determine the number
of Annuity Units represented by the first payment. This number of Annuity Units
remains fixed during the Annuity payment period, and in each subsequent month
the dollar amount of the Variable Annuity payment is determined by multiplying
this fixed number of Annuity Units by the then current Annuity Unit value.
THE A.I.R. ASSUMED IN THE MORTALITY TABLES WOULD PRODUCE LEVEL VARIABLE
ANNUITY PAYMENTS IF THE INVESTMENT RATE REMAINED CONSTANT. IN FACT, PAYMENTS
WILL VARY UP OR DOWN AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE A.I.R.
The Annuity Unit value used in calculating the amount of the Variable
Annuity payments will be based on an Annuity Unit value determined as of the
close of business on a day no earlier than the fifth Valuation Day preceding the
date of the Annuity payment.
FEDERAL TAX CONSIDERATIONS
WHAT ARE SOME OF THE FEDERAL TAX CONSEQUENCES WHICH AFFECT THESE CONTRACTS?
A. GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED AND THE TYPE OF PLAN UNDER
WHICH THE CONTRACT IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A PERSON,
TRUSTEE OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A CONTRACT DESCRIBED
HEREIN.
It should be understood that any detailed description of the Federal income
tax consequences regarding the purchase of these Contracts cannot be made in
this Prospectus and that special tax rules may be applicable with respect to
certain purchase situations not discussed herein. In addition, no attempt is
made here to consider any applicable state or other tax laws. For detailed
information, a qualified tax adviser should always be consulted. The discussion
here and in Appendix I, commencing on page 29, is based on ITT Hartford's
understanding of current Federal income tax laws as they are currently
interpreted.
B. TAXATION OF ITT HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of ITT Hartford which is taxed as a
life insurance company in accordance with the Internal Revenue Code (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
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determining the value of the Accumulation and Annuity Units (See "Value of
Accumulation Units" commencing on page 15). 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 Internal Revenue Code governs the taxation of annuities in
general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC.
Section 72 contains provisions for Contract Owners which are non-natural
persons. Non-natural persons include corporations, trusts, and partnerships. The
annual net increase in the value of the Contract is currently includable in the
gross income of a non-natural person unless the non-natural person holds the
Contract as an agent for a natural person. There is an exception from current
inclusion for certain annuities held by structured settlement companies, certain
annuities held by an employer with respect to a terminated qualified retirement
plan and certain immediate annuities. A non-natural person which is a tax-exempt
entity for Federal tax purposes will not be subject to income tax as a result of
this provision.
If the Contract Owner is not an individual, the primary Annuitant shall be
treated as the Contract Owner for purposes of making distributions which are
required to be made upon the death of the Contract Owner. If there is a change
in the primary Annuitant, such change shall be treated as the death of the
Contract Owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract
until an amount is received or deemed received, e.g., in the form of a lump sum
payment (full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are
summarized briefly below. Also summarized are special rules affecting
distributions from Contracts obtained in a tax-free exchange for other annuity
contracts or life insurance contracts which were purchased prior to August 14,
1982.
A. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not includable
in gross income equal the "investment in the contract" under Section
72 of the Code.
ii. To the extent that the value of the Contract (ignoring any surrender
charges except on a full surrender) exceeds the "investment in the
contract," such excess constitutes the "income on the contract."
iii. Any amount received or deemed received prior to the Annuity
Commencement Date (e.g., upon a partial surrender) is deemed to come
first from any such "income on the contract" and then from
"investment in the contract," and for these purposes such "income on
the contract" shall be computed by reference to any aggregation rule
in subparagraph 2.c. below. As a result, any such amount received or
deemed received (1) shall be includable in gross income to the extent
that such amount does not exceed any such "income on the contract,"
and (2) shall not be includable in gross income to the extent that
such amount does exceed any such "income on the contract." If at the
time that any amount is received or deemed received there is no
"income on the contract" (e.g., because the gross value of the
Contract does not exceed the "investment in the contract" and no
aggregation rule applies), then such amount received or deemed
received will not be includable in gross income, and will simply
reduce the "investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the
assignment or pledge of any portion of the value of the Contract
shall be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b.
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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. ITT 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 for the life (or life expectancy) of the
recipient (or the joint lives or life expectancies of the recipient
and the recipient's Beneficiary).
5. Distributions of amounts which are allocable to the "investment in
the contract" prior to August 14, 1982 (see next subparagraph e.).
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<PAGE>
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. The
election and payments must begin within a year of the death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for
the benefit of his or her spouse, and the Annuitant or Contingent
Annuitant is living, such spouse shall be treated as the Contract Owner of
such portion for purposes of section i. above.
3. DIVERSIFICATION REQUIREMENTS.
Section 817 of the Code provides that a variable annuity contract will not
be treated as an annuity contract for any period during which the investments
made by the separate account or underlying fund are not adequately diversified
in accordance with regulations prescribed by the Treasury Department. If a
Contract is not treated as an annuity contract, the Contract Owner will be
subject to income tax on the annual increases in cash value.
The Treasury Department has issued diversification regulations which
generally require, among other things, that no more than 55% of the value of the
total assets of the segregated asset account underlying a variable contract is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. In determining whether the
diversification standards are met, all securities of
25
<PAGE>
the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In
addition, in the case of government securities, each government agency or
instrumentality shall be treated as a separate issuer.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may comply within a reasonable period and avoid the
taxation of contract income on an ongoing basis. However, either the company or
the Contract Owner must agree to pay the tax due for the period during which the
diversification requirements were not met.
ITT Hartford monitors the diversification of investments in the separate
accounts and tests for diversification as required by the Code. ITT Hartford
intends to administer all contracts subject to the diversification requirements
in a manner that will maintain adequate diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT.
In order for a variable annuity contract to qualify for tax deferral, assets
in the segregated asset accounts supporting the variable contract must be
considered to be owned by the insurance company and not by the variable contract
owner. The Internal Revenue Service ("IRS") has issued several rulings which
discuss investor control. The IRS has ruled that incidents of ownership by the
contract owner, such as the ability to select and control investments in a
separate account, will cause the contract owner to be treated as the owner of
the assets for tax purposes.
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted that the temporary regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary regulations
provide that in appropriate cases a segregated asset account may include
multiple sub-accounts, but do not specify the extent to which policyholders may
direct their investments to particular sub-accounts without being treated as the
owners of the underlying assets. Guidance on this and other issues will be
provided in regulations or revenue rulings under Section 817(d), relating to the
definition of variable contract." The final regulations issued under Section 817
did not provide guidance regarding investor control, and as of the date of this
prospectus, no other such guidance has been issued. Further, ITT Hartford does
not know if or in what form such guidance will be issued. In addition, although
regulations are generally issued with prospective effect, it is possible that
regulations may be issued with retroactive effect. Due to the lack of specific
guidance regarding the issue of investor control, there is necessarily some
uncertainty regarding whether a Contract Owner could be considered the owner of
the assets for tax purposes. ITT Hartford reserves the right to modify the
contracts, as necessary, to prevent Contract Owners from being considered the
owners of the assets in the separate accounts.
D. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will
be subject to Federal income tax withholding, pursuant to Section 3405 of the
Code. The application of this provision is summarized below:
1. NON-PERIODIC DISTRIBUTIONS.
The portion of a non-periodic distribution which constitutes taxable income
will be subject to Federal income tax withholding unless the recipient elects
not to have taxes withheld. If an election not to have taxes withheld is not
provided, 10% of the taxable distribution will be withheld as Federal income
tax. Election forms will be provided at the time distributions are requested. If
the necessary election forms are not submitted to ITT Hartford, ITT Hartford
will automatically withhold 10% of the taxable distribution.
2. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN
ONE YEAR).
The portion of a periodic distribution which constitutes taxable income will
be subject to Federal income tax withholding as if the recipient were married
claiming three exemptions. A recipient may elect not to have income taxes
withheld or have income taxes withheld at a different rate by providing a
completed election form. Election forms will be provided at the time
distributions are requested.
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<PAGE>
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I commencing on page for information relative
to the types of plans for which it may be used and the general explanation of
the tax features of such plans.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to annuity purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will generally be
subject to U.S. federal income tax and withholding on annuity distributions at a
30% rate, unless a lower treaty rate applies. In addition, purchasers may be
subject to state premium tax, other state and/or municipal taxes, and taxes that
may be imposed by the purchaser's country of citizenship or residence.
Prospective purchasers are advised to consult with a qualified tax advisor
regarding U.S., state, and foreign taxation with respect to an annuity purchase.
GENERAL MATTERS
ASSIGNMENT
Ownership of a Contract described herein 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 qualified retirement plan involved. An assignment of a
Non-Qualified Contract may subject the assignment proceeds to income taxes and
certain penalty taxes. (See "Taxation of Annuities in General -- Non-Tax
Qualified Purchasers," page .)
MODIFICATION
ITT Hartford reserves the right to modify the Contract, but only if such
modification: (i) is necessary to make the Contract or the Separate Account
comply with any law or regulation issued by a governmental agency to which ITT
Hartford is subject; or (ii) is necessary to assure continued qualification of
the Contract under the Code or other federal or state laws relating to
retirement annuities or annuity Contracts; or (iii) is necessary to reflect a
change in the operation of the Separate Account or the Sub-Account(s) or (iv)
provides additional Separate Account options or (v) withdraws Separate Account
options. In the event of any such modification ITT Hartford will provide notice
to the Contract Owner or to the payee(s) during the Annuity period. ITT Hartford
may also make appropriate endorsement in the Contract to reflect such
modification.
DELAY OF PAYMENTS
There may be postponement of a surrender payment or death benefit whenever
(a) the New York Stock Exchange is closed, except for holidays or weekends, or
trading on the New York Stock Exchange is restricted as determined by the
Commission; (b) the Commission permits postponement and so orders; or (c) the
Commission determines that an emergency exists making valuation or disposal of
securities not reasonably practicable.
VOTING RIGHTS
ITT Hartford is the legal owner of all Fund shares held in the Separate
Account. As the owner, ITT Hartford has the right to vote at the Funds'
shareholder meetings. However, to the extent required by federal securities laws
or regulations, ITT Hartford will:
1. Vote all Fund shares attributable to a Contract according to instructions
received from the Contract Owner, and
2. Vote shares attributable to a Contract for which no voting instructions
are received in the same proportion as shares for which instructions are
received.
If any federal securities laws or regulations, or their present
interpretation change to permit ITT Hartford to vote Fund shares in its own
right, ITT Hartford may elect to do so.
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<PAGE>
ITT Hartford will notify you of any Portfolio shareholders' meeting if the
shares held for your account may be voted at such meetings. ITT Hartford will
also send proxy materials and a form of instruction by means of which you can
instruct ITT Hartford with respect to the voting of the Portfolio shares held
for your account.
In connection with the voting of Portfolio shares held by it, ITT Hartford
will arrange for the handling and tallying of voting instructions received from
Contract Owners. ITT Hartford as such, shall have no right, except as
hereinafter provided, to vote any Fund shares held by it hereunder which may be
registered in its name or the names of its nominees. ITT Hartford will, however,
vote the Portfolio shares held by it in accordance with the instructions
received from the Contract Owners for whose accounts the Fund shares are held.
If a Contract Owner desires to attend any meeting at which shares held for the
Contract Owner's benefit may be voted, the Contract Owner may request ITT
Hartford to furnish a proxy or otherwise arrange for the exercise of voting
rights with respect to the Portfolio shares held for such Contract Owner's
account. In the event that the Contract Owner gives no instructions or leaves
the manner of voting discretionary, ITT Hartford will vote such shares of the
appropriate Portfolio in the same proportion as shares of that Portfolio for
which instructions have been received. During the Annuity period under a
Contract the number of votes will decrease as the assets held to Portfolio
Annuity benefits decrease.
DISTRIBUTION OF THE CONTRACTS
The securities will be sold by insurance and variable annuity agents of ITT
Hartford who are registered representatives of Dean Witter Reynold Inc. ("Dean
Witter"). Dean Witter 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 ITT Hartford and will not be more than 6% of
Premium Payments.
From time to time, ITT Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
OTHER CONTRACTS OFFERED
In addition to the Contracts described in this Prospectus, it is
contemplated that other forms of group or individual Variable Annuities may be
sold providing benefits which vary in accordance with the investment experience
of the Separate Account.
CUSTODIAN OF SEPARATE ACCOUNT ASSETS
The assets of the Separate Account are held by ITT Hartford under a
safekeeping arrangement.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or
to which the assets of the Separate Account are subject. ITT Hartford and Dean
Witter are engaged in various matters of routine litigation which in their
judgments are not of material importance in relation to their respective total
assets.
LEGAL COUNSEL
Counsel with respect to federal laws and regulations applicable to the issue
and sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
Esquire, Associate General Counsel and Secretary, ITT Hartford Life Insurance
Companies, P.O. Box 2999, Hartford, Connecticut 06104-2999.
EXPERTS
The financial statements incorporated by reference in this Prospectus and
elsewhere in the registration statement have been audited by Arthur Anderson
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance on the authority of said firm as
experts in accounting and auditing in giving said report. Reference is made to
said report of ITT Hartford Life and Annuity Insurance Company (the depositor),
which includes an explanatory paragraph with respect to changing the valuation
method in determining aggregate reserves for future benefits. The principal
business address of Arthur Anderson LLP is One Financial Plaza, Hartford,
Connecticut 06103.
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ADDITIONAL INFORMATION
Inquiries will be answered by calling your representative or by writing:
ITT Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Telephone: (800) 862-6668
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APPENDIX I
INFORMATION REGARDING TAX-QUALIFIED PLANS
The tax rules applicable to tax qualified contract owners, including
restrictions on contributions and distributions, taxation of distributions and
tax penalties, vary according to the type of plan as well as the terms and
conditions of the plan itself. Various tax penalties may apply to contributions
in excess of specified limits, to distributions in excess of specified limits,
distributions which do not satisfy certain requirements and certain other
transactions with respect to qualified plans. Accordingly, this summary provides
only general information about the tax rules associated with use of the Contract
by a qualified plan. Contract owners, plan participants and beneficiaries are
cautioned that the rights and benefits of any person to benefits are controlled
by the terms and conditions of the plan regardless of the terms and conditions
of the Contract. Some qualified plans are subject to distribution and other
requirements which are not incorporated into ITT Hartford's administrative
procedures. Owners, participants and beneficiaries are responsible for
determining that contributions, distributions and other transactions comply with
applicable law. Because of the complexity of these rules, owners, participants
and beneficiaries are encouraged to consult their own tax advisors as to
specific tax consequences.
A. QUALIFIED PENSION PLANS
Provisions of the Code permit eligible employers to establish pension or
profit sharing plans (described in Section 401(a) and 401(k), if applicable, and
exempt from taxation under Section 501(a) of the Code), and Simplified Employee
Pension Plans (described in Section 408(k)). Such plans are subject to
limitations on the amount that may be contributed, the persons who may be
eligible and the time when distributions must commence. Corporate employers
intending to use these contracts in connection with such plans should seek
competent advice.
B. TAX SHELTERED ANNUITIES UNDER SECTION 403(B)
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations specified
in Section 501(c)(3) of the Code to purchase annuity contracts, and, subject to
certain limitations, exclude such contributions from gross income. Generally,
such contributions may not exceed the lesser of $9,500 or 20% of the employees
"includable compensation" for his most recent full year of employment, subject
to other adjustments. Special provisions may allow some employees to elect a
different overall limitation.
Tax-sheltered annuity programs under Section 403(b) are subject to a
PROHIBITION AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO
CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT unless such
distribution is made:
(1) after the participating employee attains age 59 1/2;
(2) upon separation from service;
(3) upon death or disability, or
(4) in the case of hardship.
The above restrictions apply to distributions of employee contributions made
after December 31, 1988, earnings on those contributions, and earnings on
amounts attributable to employee contributions held as of December 31, 1988.
They do not apply to distributions of any employer or other after-tax
contributions, employee contributions made on or before December 31, 1988, and
earnings credited to employee contributions before December 31, 1988.
C. DEFERRED COMPENSATION PLANS UNDER SECTION 457
Employees and independent contractors performing services for such employers
may contribute on a before tax basis to the Deferred Compensation Plan of their
employer in accordance with the employer's plan and Section 457 of the Code.
Section 457 places limitations on contributions to Deferred Compensation Plans
maintained by a State ("State" means a State, a political sub-division of a
State, and an agency or instrumentality of a State or political sub-division of
a State) or other tax-exempt organization. Generally, the limitation is
30
<PAGE>
33 1/3% of includable compensation (25% of gross compensation) or $7,500,
whichever is less. The plan may also provide for additional "catch-up" deferrals
during the three taxable years ending before a Participant attains normal
retirement age.
An employee electing to participate in a plan should understand that his
rights and benefits are governed strictly by the terms of the plan, that the
employer is legal owner of any contract issued with respect to the plan and that
deferred amounts will be subject to the claims of the employer's creditors. The
employer as owner of the contract(s) retains all voting and redemption rights
which may accrue to the contract(s) issued with respect to the plan. The
participating employee should look to the terms of his plan for any charges in
regard to participating therein other than those disclosed in this Prospectus.
Distributions from a Section 457 Deferred Compensation Plan are prohibited
unless made after the participating employee attains the age specified in the
plan, separates from service, dies, becomes permanently and totally disabled or
suffers an unforeseeable financial emergency. Present federal tax law does not
allow tax-free transfers or rollovers for amounts accumulated in a Section 457
plan except for transfers to other Section 457 plans in limited cases.
D. INDIVIDUAL RETIREMENT ANNUITIES UNDER SECTION 408
Section 408 of the Code permits eligible individuals to establish individual
retirement programs through the purchase of Individual Retirement Annuities
("IRAs"). IRAs are subject to limitations on the amount that may be contributed,
the contributions that may be deducted from taxable income, the persons who may
be eligible and the time when distributions may commence. Also, distributions
from certain qualified plans may be "rolled-over" on a tax-deferred basis into
an IRA.
E. TAX PENALTIES
Distributions from retirement plans are generally taxed under Section 72 of
the Code. Under these rules, a portion of each distribution may be excludable
from income. The excludable amount is the portion of the distribution which
bears the same ratio as the after-tax contributions bear to the expected return.
1. PREMATURE DISTRIBUTION
Distributions from a qualified plan before the Participant attains age
59 1/2 are generally subject to an additional tax equal to 10% of the taxable
portion of the distribution. The 10% penalty does not apply to distributions
made after the employee's death, on account of disability and distributions in
the form of a life annuity and, except in the case of an IRA, certain
distributions after separation from service at or after age 55 and certain
distributions for eligible medical expenses. A life annuity is defined as a
scheduled series of substantially equal periodic payments for the life or life
expectancy of the Participant (or the joint lives or life expectancies of the
Participant and Beneficiary).
2. MINIMUM DISTRIBUTION TAX
If the amount distributed is less than the minimum required distribution for
the year, the Participant is subject to a 50% tax on the amount that was not
properly distributed.
An individual's interest in a retirement plan must generally be distributed
or begin to be distributed not later than April 1 of the calendar year in which
the individual attains age 70 1/2 ("required beginning date"). The required
beginning date with respect to certain government plans may be further deferred.
The entire interest of the Participant must be distributed beginning no later
than this required begi nning date over a period which may not extend beyond a
maximum of the life expectancy of the Participant and a designated Beneficiary.
Each annual distribution must equal or exceed a "minimum distribution amount"
which is determined by dividing the account balance by the applicable life
expectancy. This account balance is generally based upon the account value as of
the close of business on the last day of the previous calendar year. In
addition, minimum distribution incidental benefit rules may require a larger
annual distribution.
If an individual dies before reaching his or her required beginning date,
the individual's entire interest must generally be distributed within five years
of the individuals' death. However, this rule will be deemed satisfied, if
distributions begin before the close of the calendar year following the
individual's death to a designated Beneficiary (or over a period not extending
beyond the life expectancy of the beneficiary). If the Beneficiary is the
individual's surviving spouse, distributions may be delayed until the individual
would have attained age 70 1/2.
31
<PAGE>
If an individual dies after reaching his or her required beginning date or
after distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect at
the time of the individual's death.
3. EXCESS DISTRIBUTION TAX
If the aggregate distributions from all IRAs and certain other qualified
plans in a calendar year exceed the greater of (i) $150,000, or (ii) $112,500 as
indexed for inflation ($155,000 as of January 1, 1996), a penalty tax of 15% is
generally imposed on the excess portion of the distribution.
4. WITHHOLDING
Periodic distributions from a qualified plan lasting for a period of 10 or
more years are generally subject to voluntary income tax withholding. The
recipient of periodic distributions may generally elect not to have withholding
apply or to have income taxes withheld at a different rate by providing a
completed election form. Otherwise, the amount withheld on such distributions is
determined at the rate applicable to wages as if the recipient were married
claiming three exemptions.
Nonperiodic distributions from an IRA are subject to income tax withholding
at a flat 10% rate. The recipient may elect not to have withholding apply.
Nonperiodic distributions from other qualified plans are generally subject
to mandatory income tax withholding at the flat rate of 20% unless such
distributions are:
(1) the non-taxable portion of the distribution;
(2) required minimum distributions;
(3) eligible rollover distributions.
Eligible rollover distributions are direct payments to an IRA or to another
qualified employer plan.
Any distribution from plans described in Section 457 of the Code is subject
to regular wage withholding rules.
32
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TABLE OF CONTENTS
TO
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION PAGE
- ----------------------------------------------------------------------------------------------------------------- -----
<S> <C>
INTRODUCTION.....................................................................................................
DESCRIPTION OF ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY...................................................
SAFEKEEPING OF ASSETS............................................................................................
INDEPENDENT PUBLIC ACCOUNTANTS...................................................................................
DISTRIBUTION OF CONTRACTS........................................................................................
ANNUITY/PAYOUT PERIOD............................................................................................
Annuity Payments...............................................................................................
The Annuity Unit and Valuation.................................................................................
Determination of Payment Amount................................................................................
CALCULATION OF YIELD AND RETURN..................................................................................
PERFORMANCE COMPARISONS..........................................................................................
FINANCIAL STATEMENTS.............................................................................................
</TABLE>
33
<PAGE>
This form must be completed for all tax sheltered annuities.
SECTION 403(B)(11) ACKNOWLEDGMENT FORM
The Hartford 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, 1989 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:
a. attained age 59 1/2
b. terminated employment
c. died, or
d. become disabled.
Distributions of post December 31, 1988 contributions may also be made if you
have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made because of financial
hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Hartford Variable Annuity. Please refer to your
Plan.
Please complete the following and return to:
ITT Hartford Life and Annuity Insurance Company
Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Name of Contract Owner/Participant: ____________________________________________
Address: _______________________________________________________________________
City or Plan/School District: __________________________________________________
Date: __________________________________________________________________________
<PAGE>
To Obtain a Statement of Additional
Information, please complete the form below and
mail to:
ITT Hartford Life and Annuity Insurance
Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Please send a Statement of Additional
Information for Separate Account Three to me at
the following address:
_________________________________________
Name
_________________________________________
Address
_________________________________________
City/State Zip Code
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT THREE
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 ITT Hartford Life and Annuity
Insurance Company, Attn: Annuity Marketing Services, P.O. Box 5085, Hartford,
CT 06102-5085.
Date of Prospectus: May 1, 1996
Date of Statement of Additional Information: May 1, 1996
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DESCRIPTION OF ITT HARTFORD LIFE
AND ANNUITY INSURANCE COMPANY. . . . . . . . . . . . . . . . . . . . . . .
SAFEKEEPING OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . .
ANNUITY/PAYOUT PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . .
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Annuity Unit and Valuation.. . . . . . . . . . . . . . . . . . . .
Determination of Payment Amount. . . . . . . . . . . . . . . . . . . .
CALCULATION OF YIELD AND RETURN. . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
INTRODUCTION
The tax deferred Variable Annuity Contracts described in the prospectus are
designed to provide Annuity benefits to individuals who have established or wish
to establish retirement programs which may or may not qualify for special
Federal income tax treatment. The Annuitant under these Contracts may receive
Annuity benefits in accordance with the Annuity option selected and the
retirement program, if any, under which the Contracts have been purchased.
Annuity payments under a Contract will begin on a particular future date which
may be selected at any time under the Contract or automatically when the
Annuitant reaches age 90, except in certain states where deferral past age 85 is
not permitted. There are several alternative annuity payment options available
under the Contract (see "Annuity Options," page of the Prospectus).
The Premium Payments under a Contract, less any applicable Premium Taxes, will
be applied to the Separate Account and/or the Fixed Account. Accordingly, the
net Premium Payment under the Contract will be applied to purchase interests in
one or more of the following twelve portfolios of the Dean Witter Select
Dimensions Investment Series, an open-end diversified series investment company:
the Money Market Portfolio, the North American Government Securities Portfolio,
the Diversified Income Portfolio, the Balanced Portfolio, the Utilities
Portfolio, the Dividend Growth Portfolio, the Value-Added Market Portfolio, the
Core Equity Portfolio, the American Value Portfolio, the Global Equity
Portfolio, the Developing Growth Portfolio, and the Emerging Markets Portfolio.
Shares of the Portfolios are purchased by the Separate Account without the
imposition of any additional sales charge. The value of a Contract depends on
the value of the shares of the Portfolio held by the Separate Account pursuant
to that Contract. As a result, the Contract Owner bears the investment risk
since market value of the shares may increase or decrease.
The Contracts provide that in the event the Annuitant dies before the selected
Annuity Commencement Date, the Contingent Annuitant will become the Annuitant.
If the Annuitant dies before the Annuity Commencement Date and there is no
designated Contingent Annuitant, or the Contingent Annuitant predeceases the
Annuitant, or if the Contract Owner dies before the Annuity Commencement Date,
the Beneficiary will receive the Contract Value determined on the date of
receipt of due proof of death by ITT Hartford Life and Annuity Insurance Company
("ITT Hartford") in its Home Office. If, upon death prior to the Annuity
Commencement Date, the Annuitant or Contract Owner, as applicable, had not
attained his 90th birthday, the Beneficiary will receive the greater of (a) the
Contract Value determined as of the day written proof of death of such person is
received by ITT Hartford, or (b) 100% of the total Premium Payments made to such
Contract, reduced by any prior surrenders, or (c) the Contract Value on the
Specified Contract Anniversary immediately preceding the date of death,
increased by the dollar amount of any Premium Payments made and reduced by the
dollar amount of any partial surrenders since the immediately preceding
Specified Contract Anniversary.
<PAGE>
-2-
DESCRIPTION OF ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
ITT Hartford Life and Annuity Insurance Company ("ITT Hartford"), formerly ITT
Life Insurance Corporation, was originally incorporated under the laws of
Wisconsin on January 9, 1956. ITT Hartford was redomiciled to Connecticut on
May 1, 1996. It is a stock life insurance company engaged in the business of
writing both individual and group life insurance and annuities in all states
including the District of Columbia, except New York. The offices of ITT
Hartford are located in Minneapolis, Minnesota; however, its mailing address is
P.O. Box 5085, Hartford, Connecticut 06102-5085.
ITT Hartford is a wholly owned subsidiary of Hartford Life Insurance Company.
ITT Hartford is ultimately 100% owned by Hartford Fire Insurance Company, one of
the largest multiple lines insurance carriers in the United States. On December
20, 1995, Hartford Fire Insurance Company became an independent, publicly traded
corporation.
ITT Hartford is rated A+ (superior) by A.M. Best and Company, Inc. on the basis
of its financial soundness and operating performance. ITT Hartford is rated AA+
by both Standard & Poor's and Duff and Phelps on the basis of its claims paying
ability.
These ratings do not apply to the performance of the Separate Account. However,
the contractual obligations under this variable annuity are the general
corporate obligations of ITT Hartford. These ratings do apply to ITT Hartford's
ability to meet its insurance obligations under the contract.
SAFEKEEPING OF ASSETS
The assets of the Separate Account are held by ITT Hartford under a safekeeping
arrangement.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, One Financial Plaza, Hartford, Connecticut 06103,
independent public accountants, will perform an annual audit of the Separate
Account. The financial statements and schedules included in this Statement of
Additional Information and elsewhere in the Registration Statement have been
audited by Arthur Andersen LLP as indicated in their reports with respect
thereto and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report. Reference is made
to said report of ITT Hartford Life and Annuity Insurance Company (the
depositor), which includes an explanatory paragraph with respct to changing
the valuation method in determining aggregate reserves for future benefits.
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 a wholly-owned subsidiary of Hartford Life Insurance Company. The principal
business address of HSD is the same as ITT
<PAGE>
-3-
Hartford.
The securities will be sold by insurance and Variable Annuity agents of ITT
Hartford who are registered representatives of Dean Witter Reynold Inc. ("Dean
Witter"). Dean Witter is registered with the Securities and Exchange Commission
under the Securities Exchange Act of 1934 as a Broker-Dealer and is a member of
the National Association of Securities Dealers, Inc. ("NASD").
Prior to June 26, 1995, the Principal Underwriter for the Separate Account was
Hartford Equity Sales Company, Inc., an NASD member Broker-Dealer.
The offering of the Separate Account Contracts is continuous.
ANNUITY/PAYOUT PERIOD
ANNUITY PAYMENTS
Variable Annuity payments are determined on the basis of (1) a mortality table
set forth in the Conttracts and the type of Annuity payment option selected, and
(2) the investment performance of the investment medium selected. Fixed Annuity
payments are based on the Annuity tables contained in the Contracts, and will
remain level for the duration of the Annuity.
The amount of the Annuity payments will not be affected by adverse mortality
experience or by an increase in expenses in excess of the expense deduction for
which provision has been made (see "Mortality and Expense Risk Charge," page____
of the prospectus).
For a Variable Annuity, the Annuitant will be paid the value of a fixed number
of Annuity Units each month. The value of such units and the amounts of the
monthly Variable Annuity payments will, however, reflect investment income
occurring after retirement, and thus the Variable Annuity payments will vary
with the investment experience of the Portfolio shares selected.
THE ANNUITY UNIT AND VALUATION
The value of the Annuity Unit for each Sub-Account in the Separate Account for
any day is determined by multiplying the value for the preceding day by the
product of (1) the net investment factor (see "Valuation of Accumulation Units,"
page____ of the prospectus) for the day for which the Annuity Unit value is
being calculated, and (2) a factor to neutralize the assumed investment rate
discussed below.
<PAGE>
-4-
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
1. Net Investment Factor for period. . . . . . . . . . . . . . . 1.011225
2. Adjustment for 4% Assumed Investment Rate . . . . . . . . . . .999892
3. 2x1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.011116
4. Annuity Unit value, beginning of period . . . . . . . . . . . .995995
5. Annuity Unit value, end of period (3x4) . . . . . . . . . . . 1.007066
DETERMINATION OF PAYMENT AMOUNT
When Annuity payments are to commence, the value of the Contract is determined
as the sum of the value of the Fixed Account no earlier than the close of
business on the fifth Valuation Day preceding the date the first Annuity payment
is due plus the product of the value of the Accumulation Unit of each
Sub-Account on that same day, and the number of Accumulation Units credited to
each Sub-Account as of the date the Annuity is to commence.
The Contract contains tables indicating the minimum dollar amount of the first
monthly payment under the optional forms of Annuity for each $1,000 of value of
a Sub-Account under a Contract. The first monthly payment varies according to
the form and type of Annuity selected. The Contracts contain Annuity tables
derived from the 1983a Individual Annuity Mortality Table with ages set back one
year with an assumed investment rate ("A.I.R.") of 3.00% per annum for a Fixed
Annuity and 5.00% per annum for a Variable Annuity. The total first monthly
Variable Annuity payment is determined by multiplying the value (expressed in
thousands of dollars) of a Sub-Account (less any applicable Premium Taxes) by
the amount of the first monthly payment per $1,000 of value obtained from the
tables in the Contracts.
Fixed Annuity payments are determined at annuitization by multiplying the values
allocated to the Fixed Account by a rate to be determined by ITT Hartford which
is no less than the rate specified in the Annuity tables in the Contract. The
Annuity payment will remain level for the duration of the Annuity.
The amount of the first monthly Variable Annuity payment, determined as
described above, is divided by the value of an Annuity Unit for the appropriate
Sub-Account no earlier than the close of business on the fifth Valuation Day
preceding the day on which the payment is due in order to determine the number
of Annuity Units represented by the first payment. This number of Annuity Units
remains fixed during the Annuity Period, and in each subsequent month the dollar
amount of the Variable Annuity payment is determined by multiplying this fixed
number of Annuity Units by the then current Annuity Unit value.
The A.I.R. assumed in the mortality tables would produce level Variable Annuity
payments if the investment rate remained constant. In fact, payments will vary
up or down as the investment rate varies up or down from the A.I.R.
<PAGE>
-5-
The Annuity payments will be made on the fifteenth day of each month following
selection. The Annuity Unit value used in calculating the amount of the
Variable Annuity payments will be based on an Annuity Unit value determined as
of the close of business on a day no earlier than the fifth Valuation Day
preceding the date of the Annuity payment.
CALCULATION OF YIELD AND RETURN
YIELD OF THE MONEY MARKET PORTFOLIO SUB-ACCOUNT. As summarized in the
Prospectus under the heading "Performance Related Information," the yield of the
Sub-Account for a seven day period (the "base period") will be computed by
determining the "net change in value" of a hypothetical account having a balance
of one unit at the beginning of the period, dividing the net change in account
value by the value of the account at the beginning of the base period to obtain
the base period return, and multiplying the base period return by 365/7 with the
resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include net investment income of
the account (accrued dividends as declared by the underlying funds, less expense
and Contract charges of the account) for the period, but will not include
realized gains or losses or unrealized appreciation or depreciation on the
underlying fund shares.
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from the
result, according to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
The Money Market Portfolio Sub-Account's yield and effective yield will vary in
response to fluctuations in interest rates and in the expenses of the
Sub-Account.
CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the heading
"Performance Related Information", total return is a measure of the change in
value of an investment in a Sub-Account over the period covered. The formula
for total return used herein includes three steps: (1) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of units owned at the end of the period by the unit
value per unit on the last trading day of the period; (2) assuming redemption at
the end of the period and deducting any applicable contingent deferred sales
charge and (3) dividing this account value for the hypothetical investor by the
initial $1,000 investment and annualizing the result for periods of less than
one year. Total return will be calculated for one year, five years, and ten
years or some other relevant periods if a Sub-Account has not been in existence
for at least ten years.
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
<PAGE>
-6-
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. The total return and yield may also be used to compare
the performance of the Sub-Accounts against certain widely acknowledged outside
standards or indices for stock and bond market performance. Index performance
is not representative of the performance of the Sub-Account to which it is
compared and is not adjusted for commissions and other costs. Portfolio
holdings of the Sub-Account will differ from those of the index to which it is
compared. Performance comparison indices include the following:
The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics, is a
commonly used measure of the rate of inflation. The index shows the average
change in the cost of selected consumer goods and services and does not
represent a return on an investment vehicle.
The Dow Jones Industrial Average is an unmanaged list of 30 common stocks
frequently used as a general measure of stock market performance. Its
performance figures reflect changes of market prices and reinvestment of all
distributions.
Lehman Brothers Corporate Bond Index is an unmanaged list of publicly issued,
fixed-rate, non-convertible investment-grade domestic corporate debt securities
frequently used as a general measure of the performance of fixed-income
securities. The average quality of bonds included in the index may be higher
than the average quality of those bonds in which High Yield Fund customarily
invests. The index does not include bonds in certain of the lower rating
classifications in which the Fund may invest. The performance figures of the
index reflect changes in market prices and reinvestment of all interest
payments.
The Lehman Brothers Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
The Lehman Brothers Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value 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 High Yield Fund invests. Its performance figures
reflect changes in market prices and reinvestment of all interest payments.
Morgan Stanley Capital International World Index is an unmanaged list of
approximately 1,450 equity securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand and the Far East, with all
values expressed in U.S. dollars. Performance figures
<PAGE>
-7-
reflect changes in market prices and reinvestment of distributions net of
withholding taxes. The securities in the index change over time to maintain
representativeness.
The NASDAQ-OTC Industrial Average (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded. Its performance figures reflect changes of market prices but do not
reflect reinvestment of cash dividends.
Salomon Brothers Long-Term High-Grade Corporate Bond Index is an unmanaged list
of publicly traded corporate bonds having a rating of at least AA by Standard &
Poor's or Aa by Moody's and is frequently used as general measure of the
performance of fixed-income securities. The average quality of bonds included
in the index may be higher than the average quality of those bonds in which PCM
High Yield customarily invests. The index does not include bonds in certain of
the lower rating classifications in which the Fund may invest. Performance
figures for the index reflect changes of market prices and reinvestment of all
distributions.
The Salomon Brothers 7-10 Year Government Bond Index is an unmanaged list of
U.S. Government and government agency securities with maturities of 7 to 10
years. Performance figures for the index reflect changes of market prices and
reinvestment of all interest payments.
The Standard & Poor's Composite Index of 500 stocks (the "S&P 500") is a market
value-weighted and unmanaged index showing changes in the aggregate market value
of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40 financial services
concerns. The S&P 500 represents about 80% of the market value of all issues
traded on the New York Stock Exchange. Its performance figures reflect changes
of market prices and reinvestment of all regular cash dividends.
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.
The manner in which total return and yield will be calculated for public use is
described above.
<PAGE>
SELECT DIMENSIONS
ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
SEPARATE ACCOUNT THREE
<PAGE>
Separate Account Three
ITT HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF NET ASSETS & LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NORTH
AMERICAN
GOVERNMENT
MONEY SECURITIES BALANCED UTILITIES
MARKET FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Investment
Series:
Money Market Fund
Shares 40,662,903
Cost $40,662,903
Market Value......... $40,662,903 -- -- --
North American
Government Securities
Fund
Shares 111,335
Cost $ 1,123,236
Market Value......... -- $1,132,276 -- --
Balanced Fund
Shares 1,247,681
Cost $14,010,006
Market Value......... -- -- $14,834,923 --
Utilities Fund
Shares 1,392,853
Cost $15,890,883
Market Value......... -- -- -- $17,201,735
Dividend Growth Fund
Shares 5,490,302
Cost $68,080,167
Market Value......... -- -- -- --
Value Added Market Fund
Shares 1,809,107
Cost $21,014,230
Market Value......... -- -- -- --
Core Equity Fund
Shares 319,915
Cost $ 3,442,937
Market Value......... -- -- -- --
American Value Fund
Shares 2,617,184
Cost $32,908,728
Market Value......... -- -- -- --
Global Equity Fund
Shares 1,446,916
Cost $15,336,722
Market Value......... -- -- -- --
Developing Growth Fund
Shares 1,086,581
Cost $14,920,088
Market Value......... -- -- -- --
Emerging Markets Fund
Shares 395,078
Cost $ 3,876,301
Market Value......... -- -- -- --
Diversified Income Fund
Shares 804,010
Cost $ 8,096,309
Market Value......... -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... 76,895 922 51,364 54,941
Receivable from fund
shares sold........... -- -- -- --
--------------- ------------ ----------- -------------
Total Assets........... 40,739,798 1,133,198 14,886,287 17,256,676
--------------- ------------ ----------- -------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... -- -- -- --
Payable for fund shares
purchased............. 76,894 927 51,355 55,302
--------------- ------------ ----------- -------------
Total Liabilities...... 76,894 927 51,355 55,302
--------------- ------------ ----------- -------------
Net Assets (variable
annuity contract
liabilities).......... $40,662,904 $1,132,271 $14,834,932 $17,201,374
--------------- ------------ ----------- -------------
--------------- ------------ ----------- -------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL
SUB-ACCOUNTS:
Units Owned by
Participants.......... 3,864,747 107,468 1,219,604 1,356,083
Unit Price............. $ 10.521492 $10.535876 $12.163732 $ 12.684605
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND VALUE ADDED CORE EQUITY AMERICAN DEVELOPING
GROWTH FUND MARKET FUND FUND VALUE FUND GLOBAL EQUITY FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ------------- ----------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Investment
Series:
Money Market Fund
Shares 40,662,903
Cost $40,662,903
Market Value......... -- -- -- -- -- --
North American
Government Securities
Fund
Shares 111,335
Cost $ 1,123,236
Market Value......... -- -- -- -- -- --
Balanced Fund
Shares 1,247,681
Cost $14,010,006
Market Value......... -- -- -- -- -- --
Utilities Fund
Shares 1,392,853
Cost $15,890,883
Market Value......... -- -- -- -- -- --
Dividend Growth Fund
Shares 5,490,302
Cost $68,080,167
Market Value......... $74,338,690 -- -- -- -- --
Value Added Market Fund
Shares 1,809,107
Cost $21,014,230
Market Value......... -- $22,143,468 -- -- -- --
Core Equity Fund
Shares 319,915
Cost $ 3,442,937
Market Value......... -- -- $ 3,541,464 -- -- --
American Value Fund
Shares 2,617,184
Cost $32,908,728
Market Value......... -- -- -- $35,881,597 -- --
Global Equity Fund
Shares 1,446,916
Cost $15,336,722
Market Value......... -- -- -- -- $15,901,607 --
Developing Growth Fund
Shares 1,086,581
Cost $14,920,088
Market Value......... -- -- -- -- -- $16,298,711
Emerging Markets Fund
Shares 395,078
Cost $ 3,876,301
Market Value......... -- -- -- -- -- --
Diversified Income Fund
Shares 804,010
Cost $ 8,096,309
Market Value......... -- -- -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... 136,416 54,005 14,340 68,814 61,623 21,510
Receivable from fund
shares sold........... -- -- -- -- -- --
--------------- ------------ ------------- ----------- ------------------ ---------------
Total Assets........... 74,475,106 22,197,473 3,555,804 35,950,411 15,963,230 16,320,221
--------------- ------------ ------------- ----------- ------------------ ---------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... -- -- -- -- -- --
Payable for fund shares
purchased............. 137,214 54,010 14,346 68,866 61,611 21,513
--------------- ------------ ------------- ----------- ------------------ ---------------
Total Liabilities...... 137,214 54,010 14,346 68,866 61,611 21,513
--------------- ------------ ------------- ----------- ------------------ ---------------
Net Assets (variable
annuity contract
liabilities).......... $74,337,892 $22,143,463 $ 3,541,458 $35,881,545 $15,901,619 $16,298,708
--------------- ------------ ------------- ----------- ------------------ ---------------
--------------- ------------ ------------- ----------- ------------------ ---------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL
SUB-ACCOUNTS:
Units Owned by
Participants.......... 5,393,161 1,783,215 315,517 2,605,789 1,424,567 1,077,770
Unit Price............. $13.787374 $ 12.417722 $ 11.224309 $13.769935 $ 11.162419 $ 15.122619
<CAPTION>
EMERGING MARKETS DIVERSIFIED INCOME
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------------
<S> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Investment
Series:
Money Market Fund
Shares
Cost
Market Value......... -- --
North American
Government Securities
Fund
Shares
Cost
Market Value......... --
Balanced Fund
Shares
Cost
Market Value......... -- --
Utilities Fund
Shares
Cost
Market Value......... -- --
Dividend Growth Fund
Shares
Cost
Market Value......... -- --
Value Added Market Fund
Shares
Cost
Market Value......... -- --
Core Equity Fund
Shares
Cost
Market Value......... -- --
American Value Fund
Shares
Cost
Market Value......... -- --
Global Equity Fund
Shares
Cost
Market Value......... -- --
Developing Growth Fund
Shares
Cost
Market Value......... -- --
Emerging Markets Fund
Shares
Cost
Market Value......... $ 3,824,355 --
Diversified Income Fund
Shares
Cost
Market Value......... -- $ 8,216,979
Due from ITT Hartford
Life and Annuity
Insurance Company..... 21,948 43,270
Receivable from fund
shares sold........... -- --
------------------ ------------------
Total Assets........... 3,846,303 8,260,249
------------------ ------------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... -- --
Payable for fund shares
purchased............. 21,959 43,270
------------------ ------------------
Total Liabilities...... 21,959 43,270
------------------ ------------------
Net Assets (variable
annuity contract
liabilities).......... $ 3,824,344 $ 8,216,979
------------------ ------------------
------------------ ------------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL
SUB-ACCOUNTS:
Units Owned by
Participants.......... 388,600 774,696
Unit Price............. $ 9.841336 $ 10.606720
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
<PAGE>
SEPARATE ACCOUNT THREE
ITT HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NORTH
AMERICAN
GOVERNMENT
MONEY SECURITIES BALANCED UTILITIES
MARKET FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 841,146 $ 21,028 $ 167,023 $ 167,844
EXPENSES:
Mortality and expense
undertakings.......... (201,291) (6,048 ) (75,162 ) (69,739 )
--------------- ------------ ----------- -------------
Net investment
income.............. 639,855 14,980 91,861 98,105
--------------- ------------ ----------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- 21 3,651 1,504
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 8,961 822,659 1,309,995
--------------- ------------ ----------- -------------
Net gains (losses) on
investments......... -- 8,982 826,310 1,311,499
--------------- ------------ ----------- -------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 639,855 $ 23,962 $ 918,171 $ 1,409,604
--------------- ------------ ----------- -------------
--------------- ------------ ----------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND VALUE ADDED CORE EQUITY AMERICAN DEVELOPING
GROWTH FUND MARKET FUND FUND VALUE FUND GLOBAL EQUITY FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ------------- ----------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 564,242 $ 155,397 $ 23,178 $ 142,619 $ 127,609 $ 75,027
EXPENSES:
Mortality and expense
undertakings.......... (298,670) (88,956 ) (18,842) (135,514) (75,989) (61,934)
--------------- ------------ ------------- ----------- -------- ---------------
Net investment
income.............. 265,572 66,441 4,336 7,105 51,620 13,093
--------------- ------------ ------------- ----------- -------- ---------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (16,328) 3,791 (1,489) 3,381 987 9,785
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 6,252,310 1,125,137 97,871 2,960,702 562,561 1,376,027
--------------- ------------ ------------- ----------- -------- ---------------
Net gains (losses) on
investments......... 6,235,982 1,128,928 96,382 2,964,083 563,548 1,385,812
--------------- ------------ ------------- ----------- -------- ---------------
Net increase
(decrease) in net
assets resulting
from operations..... $6,501,554 $ 1,195,369 $ 100,718 $ 2,971,188 $ 615,168 $ 1,398,905
--------------- ------------ ------------- ----------- -------- ---------------
--------------- ------------ ------------- ----------- -------- ---------------
<CAPTION>
EMERGING MARKETS DIVERSIFIED INCOME
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 35,634 $ 141,172
EXPENSES:
Mortality and expense
undertakings.......... (22,001) (40,152)
-------- --------
Net investment
income.............. 13,633 101,020
-------- --------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (1,257) 1,092
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (52,783) 119,949
-------- --------
Net gains (losses) on
investments......... (54,040) 121,041
-------- --------
Net increase
(decrease) in net
assets resulting
from operations..... $ (40,407) $ 222,061
-------- --------
-------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO ITT HARTFORD LIFE & ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT THREE AND TO THE
OWNERS OF UNITS OF INTEREST THEREIN:
We have audited the accompanying statement of net assets & liabilities of ITT
Hartford Life & Annuity Insurance Company Separate Account Three (the Account)
as of December 31, 1995, and the related statement of operations for the year
ended December 31, 1995 and statements of changes in net assets for the year
ended December 31, 1995 and the period from inception, September 14, 1994, to
December 31, 1994. These financial statements are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ITT Hartford Life & Annuity
Insurance Company Separate Account Three as of December 31, 1995, and the
results of its operations for the year ended December 31, 1995 and changes in
its net assets for the year ended December 31, 1995 and the period from
inception, September 14, 1994, to December 31, 1994, in conformity with
generally accepted accounting principles.
Hartford, Connecticut
February 7, 1996 Arthur Andersen LLP
6
<PAGE>
Separate Account Three
ITT HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NORTH
AMERICAN
GOVERNMENT
MONEY SECURITIES BALANCED UTILITIES
MARKET FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 639,855 $ 14,980 $ 91,861 $ 98,105
Net realized gain
(loss) on security
transactions.......... -- 21 3,651 1,504
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 8,961 822,659 1,309,995
--------------- ------------ ----------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 639,855 23,962 918,171 1,409,604
--------------- ------------ ----------- -------------
UNIT TRANSACTIONS:
Purchases.............. 56,967,713 1,274,912 12,856,387 14,264,648
Net transfers.......... (17,794,789) (178,952 ) 697,577 1,290,090
Surrenders............. (283,062) (9,537 ) (332,221) (160,134)
--------------- ------------ ----------- -------------
Net increase in net
assets resulting from
unit transactions..... 38,889,862 1,086,423 13,221,743 15,394,604
--------------- ------------ ----------- -------------
Total increase in net
assets................ 39,529,717 1,110,385 14,139,914 16,804,208
NET ASSETS:
Beginning of period.... 1,133,187 21,886 695,018 397,166
--------------- ------------ ----------- -------------
End of period.......... $40,662,904 $ 1,132,271 $14,834,932 $ 17,201,374
--------------- ------------ ----------- -------------
--------------- ------------ ----------- -------------
ITT HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FROM INCEPTION (SEPTEMBER 14, 1994) TO DECEMBER 31, 1994
NORTH
AMERICAN
GOVERNMENT
MONEY SECURITIES BALANCED UTILITIES
MARKET FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ----------- -------------
OPERATIONS:
Net investment income
(loss)................ $ 2,873 $ (4 ) $ (152) $ (53)
Net realized gain
(loss) on security
transactions.......... -- 19 2 8
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 79 2,258 857
--------------- ------------ ----------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 2,873 94 2,108 812
UNIT TRANSACTIONS:
Purchases.............. 1,200,999 21,792 704,789 407,086
Net transfers.......... (60,300) -- -- --
Surrenders............. (10,385) -- (11,879) (10,732)
--------------- ------------ ----------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,130,314 21,792 692,910 396,354
--------------- ------------ ----------- -------------
Total increase
(decrease) in net
assets................ 1,133,187 21,886 695,018 397,166
NET ASSETS:
Beginning of period.... -- -- -- --
--------------- ------------ ----------- -------------
End of period.......... $ 1,133,187 $ 21,886 $ 695,018 $ 397,166
--------------- ------------ ----------- -------------
--------------- ------------ ----------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
7
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND VALUE ADDED CORE EQUITY AMERICAN DEVELOPING
GROWTH FUND MARKET FUND FUND VALUE FUND GLOBAL EQUITY FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ------------- ----------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 265,572 $ 66,441 $ 4,336 $ 7,105 $ 51,620 $ 13,093
Net realized gain
(loss) on security
transactions.......... (16,328) 3,791 (1,489) 3,381 987 9,785
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 6,252,310 1,125,137 97,871 2,960,702 562,561 1,376,027
--------------- ------------ ------------- ----------- ------------------ ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 6,501,554 1,195,369 100,718 2,971,188 615,168 1,398,905
--------------- ------------ ------------- ----------- ------------------ ---------------
UNIT TRANSACTIONS:
Purchases.............. 60,696,608 18,013,450 2,831,593 28,794,175 12,926,622 12,424,796
Net transfers.......... 6,571,343 2,886,893 428,776 3,710,153 1,525,052 2,386,662
Surrenders............. (708,897) (201,852) (34,978) (315,577) (260,038) (190,170)
--------------- ------------ ------------- ----------- ------------------ ---------------
Net increase in net
assets resulting from
unit transactions..... 66,559,054 20,698,491 3,225,391 32,188,751 14,191,636 14,621,288
--------------- ------------ ------------- ----------- ------------------ ---------------
Total increase in net
assets................ 73,060,608 21,893,860 3,326,109 35,159,939 14,806,804 16,020,193
NET ASSETS:
Beginning of period.... 1,277,284 249,603 215,349 721,606 1,094,815 278,515
--------------- ------------ ------------- ----------- ------------------ ---------------
End of period.......... $ 74,337,892 $ 22,143,463 $ 3,541,458 $35,881,545 $ 15,901,619 $ 16,298,708
--------------- ------------ ------------- ----------- ------------------ ---------------
--------------- ------------ ------------- ----------- ------------------ ---------------
DIVIDEND VALUE ADDED CORE EQUITY AMERICAN DEVELOPING
GROWTH FUND MARKET FUND FUND VALUE FUND GLOBAL EQUITY FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ------------- ----------- ------------------ ---------------
OPERATIONS:
Net investment income
(loss)................ $ 111 $ (119) $ (50) $ (218) $ 156 $ (145)
Net realized gain
(loss) on security
transactions.......... )(2 (25) 10 -- )(25 50
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 6,214 4,101 656 12,167 2,324 2,596
--------------- ------------ ------------- ----------- ------------------ ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 6,323 3,957 616 11,949 2,455 2,501
UNIT TRANSACTIONS:
Purchases.............. 953,687 215,625 224,714 545,727 928,611 276,071
Net transfers.......... 327,490 30,000 -- 174,045 173,745 10,000
Surrenders............. (10,216) 21 (9,981) (10,115) (9,996) (10,057)
--------------- ------------ ------------- ----------- ------------------ ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,270,961 245,646 214,733 709,657 1,092,360 276,014
--------------- ------------ ------------- ----------- ------------------ ---------------
Total increase
(decrease) in net
assets................ 1,277,284 249,603 215,349 721,606 1,094,815 278,515
NET ASSETS:
Beginning of period.... -- -- -- -- -- --
--------------- ------------ ------------- ----------- ------------------ ---------------
End of period.......... $ 1,277,284 $ 249,603 $ 215,349 $ 721,606 $ 1,094,815 $ 278,515
--------------- ------------ ------------- ----------- ------------------ ---------------
--------------- ------------ ------------- ----------- ------------------ ---------------
<CAPTION>
EMERGING MARKETS DIVERSIFIED INCOME
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------------
<S> <C> <C>
OPERATIONS:
Net investment
income................ $ 13,633 $ 101,020
Net realized gain
(loss) on security
transactions.......... (1,257) 1,092
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (52,783) 119,949
------------------ ------------------
Net increase (decrease)
in net assets
resulting from
operations............ (40,407) 222,061
------------------ ------------------
UNIT TRANSACTIONS:
Purchases.............. 3,281,107 7,211,967
Net transfers.......... 285,332 514,813
Surrenders............. (48,675) (33,450)
------------------ ------------------
Net increase in net
assets resulting from
unit transactions..... 3,517,764 7,693,330
------------------ ------------------
Total increase in net
assets................ 3,477,357 7,915,391
NET ASSETS:
Beginning of period.... 346,987 301,588
------------------ ------------------
End of period.......... $ 3,824,344 $ 8,216,979
------------------ ------------------
------------------ ------------------
EMERGING MARKETS DIVERSIFIED INCOME
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------------
OPERATIONS:
Net investment income
(loss)................ $ (149) $ (70)
Net realized gain
(loss) on security
transactions.......... 41 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 837 721
------------------ ------------------
Net increase (decrease)
in net assets
resulting from
operations............ 729 651
UNIT TRANSACTIONS:
Purchases.............. 356,320 300,934
Net transfers.......... -- --
Surrenders............. (10,062) 3
------------------ ------------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 346,258 300,937
------------------ ------------------
Total increase
(decrease) in net
assets................ 346,987 301,588
NET ASSETS:
Beginning of period.... -- --
------------------ ------------------
End of period.......... $ 346,987 $ 301,588
------------------ ------------------
------------------ ------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
8
<PAGE>
SEPARATE ACCOUNT THREE
ITT HARTFORD LIFE & ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION:
Separate Account Three (the Account) is a separate investment account within
ITT 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 contractholders of the Company in
various mutual funds (the Funds) as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date.
b) SECURITY VALUATION--The investment in shares of the Dean Witter Select
Dimensions Investment Series Mutual Funds is valued at the closing net
asset value per share as determined by the appropriate Fund as of
December 31, 1995.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current law,
no federal income taxes are payable with respect to the operations of
the Account.
d) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS--The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives a maximum annual fee of 1.25% of
the Account's average daily net assets. The Company also provides
administrative services and receives an annual fee of 0.15% of the
Account's average daily net assets.
b) DEDUCTION OF ANNUAL MAINTENANCE FEE--Annual maintenance fees are
deducted through termination of units of interest from applicable
contract owners' accounts, in accordance with the terms of the
contracts.
9
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Board of Directors of
ITT Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory balance sheets of ITT Hartford
Life and Annuity Insurance Company (a Wisconsin corporation and wholly-owned
subsidiary of Hartford Life Insurance Company) (the Company) as of December
31, 1995 and 1994, and the related statutory statements of income, changes in
capital and surplus, and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
statutory-basis financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 1 of notes to statutory financial
statements. When statutory financial statements are presented for purposes
other than for filing with a regulatory agency, generally accepted auditing
standards require that an auditors' report on them state whether they are
presented in conformity with generally accepted accounting principles. The
accounting practices used by the Company vary from generally accepted
accounting principles as explained and quantified in Note 1. In our opinion,
because the differences in accounting practices as described in Note 1 are
material, the statutory financial statements referred to above do not present
fairly, in accordance with generally accepted accounting principles, the
financial position of the Company as of December 31, 1995 and 1994, and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1995.
<PAGE>
However, in our opinion, the statutory financial statements referred to above
present fairly, in all material respects, the financial position of the
Company as of December 31, 1995 and 1994, and the results of operations and
its cash flows for each of the three years in the period ended December 31,
1995 in conformity with statutory accounting practices as described in Note 1.
As discussed in Note 1 of notes to statutory financial statements, the
Company changed its valuation method in determining aggregate reserves for
future benefits.
/s/ Arthur Andersen LLP
Hartford, Connecticut
January 24, 1996
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Premiums and Annuity Considerations $ 165,792 $ 442,173 $ 14,281
Annuity and Other Fund Deposits 1,087,661 608,685 1,986,140
Net Investment Income 78,787 29,012 7,970
Commissions and Expense Allowances on
Reinsurance Ceded 183,380 154,527 60,700
Reserve Adjustment on Reinsurance Ceded 1,879,785 1,266,926 0
Other Revenues 140,796 41,857 369,598
----------- ----------- -----------
TOTAL REVENUES 3,536,201 2,543,180 2,438,689
----------- ----------- -----------
BENEFITS AND EXPENSES
Death and Annuity Benefits 53,029 7,948 3,192
Surrenders and Other Benefit Payments 221,392 181,749 4,955
Commissions and Other Expenses 236,202 186,303 132,169
Increase in Reserves for Future Benefits 94,253 416,748 5,120
Increase in Liability for Premium
and Other Deposit Funds 460,124 182,934 281,024
Net Transfers to Separate Accounts 2,414,669 1,541,419 2,013,183
----------- ----------- -----------
TOTAL BENEFITS AND EXPENSES 3,479,669 2,517,101 2,439,643
----------- ----------- -----------
NET GAIN (LOSS) FROM OPERATIONS
BEFORE FEDERAL INCOME TAX EXPENSE 56,532 26,079 (954)
Federal Income Tax Expense 14,048 24,038 11,270
----------- ----------- -----------
NET GAIN (LOSS) FROM OPERATIONS 42,484 2,041 (12,224)
Net Realized Capital Gains (Losses) 374 (2) 877
----------- ----------- -----------
NET INCOME (LOSS) $ 42,858 $ 2,039 $ (11,347)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of
these financial statements
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------
1995 1994
----------- ------------
<S> <C> <C>
ASSETS
Bonds $ 1,226,489 $ 798,501
Common Stocks 39,776 2,275
Policy Loans 22,521 20,145
Cash and Short-Term Investments 173,304 84,312
Other Invested Assets 13,432 2,519
----------- -----------
TOTAL CASH AND INVESTED ASSETS 1,475,522 907,752
----------- -----------
Investment Income Due and Accrued 18,021 12,757
Premium Balances Receivable 402 467
Receivables from Affiliates 8,182 2,861
Other Assets 25,907 13,749
Separate Account Assets 7,324,910 3,588,077
----------- -----------
TOTAL ASSETS $ 8,852,944 $ 4,525,663
----------- -----------
----------- -----------
LIABILITIES
Aggregate Reserves for Future Benefits $ 542,082 $ 447,284
Policy and Contract Claims 8,223 9,902
Liability for Premium and Other Deposit Funds 948,361 479,202
Asset Valuation Reserve 8,010 2,422
Payable to Affiliates 3,682 7,840
Other Liabilities (220,658) (100,349)
Separate Account Liabilities 7,324,910 3,588,077
----------- -----------
TOTAL LIABILITIES 8,614,610 4,434,378
----------- -----------
CAPITAL AND SURPLUS
Common Stock 2,500 2,500
Gross Paid-In and Contributed Surplus 226,043 114,109
Unassigned Funds 9,791 (25,324)
----------- -----------
TOTAL CAPITAL AND SURPLUS 238,334 91,285
----------- -----------
TOTAL LIABILITIES AND CAPITAL AND SURPLUS $ 8,852,944 $ 4,525,663
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
CAPITAL AND SURPLUS - BEGINNING OF YEAR $ 91,285 $ 88,693 $ 30,027
----------- ----------- -----------
Net Income (Loss) 42,858 2,039 (11,347)
Net Unrealized Gains (Losses) 1,709 (133) (1,198)
Change in Asset Valuation Reserve (5,588) (1,356) 135
Change in Non-Admitted Assets (1,944) (8,599) 1,076
Change in Reserve (calculation basis-see Note 1) 0 10,659 0
Aggregate Write-ins for Surplus (see Note 3) 8,080 (18) 0
Dividends to Shareholder (10,000) 0 0
Paid-in Surplus 111,934 0 70,000
----------- ----------- -----------
Change in Capital and Surplus 147,049 2,592 58,666
----------- ----------- -----------
CAPITAL AND SURPLUS - END OF YEAR $ 238,334 $ 91,285 $ 88,693
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of
these financial statements
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF CASH FLOW
($000)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
OPERATIONS
Premiums, Annuity Considerations and Fund
Deposits $ 1,253,511 $ 1,050,493 $ 2,000,492
Investment Income 78,328 24,519 5,594
Other Income 2,253,466 1,515,700 434,851
----------- ----------- -----------
Total Income 3,585,305 2,590,712 2,440,937
----------- ----------- -----------
Benefits Paid 277,965 181,205 8,215
Federal Income Taxes Paid on Operations 208,423 20,634 9,666
Other Expenses 2,664,385 1,832,905 2,231,477
----------- ----------- -----------
Total Benefits and Expenses 3,150,773 2,034,744 2,249,358
----------- ----------- -----------
NET CASH FROM OPERATIONS 434,532 555,968 191,579
PROCEEDS FROM INVESTMENTS
Bonds 287,941 87,747 88,334
Common Stocks 52 0 0
Other 28 40 23,638
----------- ----------- -----------
NET INVESTMENT PROCEEDS 288,021 87,787 111,972
----------- ----------- -----------
TAX ON CAPITAL GAINS 226 (96) 376
PAID-IN-SURPLUS 111,934 0 70,000
OTHER CASH PROVIDED 28,199 30,554 0
----------- ----------- -----------
TOTAL PROCEEDS 862,460 674,405 373,175
----------- ----------- -----------
COST OF INVESTMENTS ACQUIRED
Bonds 720,521 595,181 314,933
Common Stocks 35,794 808 567
Miscellaneous Applications 2,146 2,523 0
----------- ----------- -----------
TOTAL INVESTMENTS ACQUIRED 758,461 598,512 315,500
----------- ----------- -----------
OTHER CASH APPLIED
Dividends Paid to Stockholder 10,000 0 0
Other 5,007 24,813 24,626
----------- ----------- -----------
TOTAL OTHER CASH APPLIED 15,007 24,813 24,626
----------- ----------- -----------
TOTAL APPLICATIONS 773,468 623,325 340,126
----------- ----------- -----------
NET CHANGE IN CASH AND SHORT-TERM INVESTMENTS 88,992 51,080 33,049
CASH AND SHORT-TERM INVESTMENTS, BEGINNING OF YEAR 84,312 33,232 183
----------- ----------- -----------
CASH AND SHORT-TERM INVESTMENTS, END OF YEAR $ 173,304 $ 84,312 $ 33,232
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
ITT Hartford Life and Annuity Insurance Company (ILA or the Company), formerly
known as ITT Life Insurance Corporation, is a wholly owned subsidiary of
Hartford Life Insurance Company (HLIC), which is an indirect subsidiary of ITT
Hartford Group, Inc. (ITT Hartford), formerly a wholly owned subsidiary of ITT
Corporation (ITT). On December 19, 1995, ITT Corporation distributed all the
outstanding shares of ITT Hartford Group to ITT shareholders of record in an
action known herein as the "Distribution". As a result of the Distribution, ITT
Hartford became an independent, publicly traded company.
ILA offers a complete line of ordinary and universal life insurance, individual
annuities and certain supplemental accident and health benefit coverages.
BASIS OF PRESENTATION
The accompanying ILA statutory basis financial statements were prepared in
conformity with statutory accounting practices prescribed or permitted by the
National Association of Insurance Commissioners (NAIC) and the Insurance
Department of the State of Wisconsin.
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 liabilties and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reported period. Actual results could differ
from those estimates.
Statutory accounting practices and generally accepted accounting principles
(GAAP) differ in certain significant respects. These differences principally
involve:
(1) treatment of policy acquisition costs (commissions, underwriting and selling
expenses, premium taxes, etc.) which are charged to expense when incurred for
statutory purposes rather than on a pro-rata basis over the expected life of the
policy;
(2) recognition of premium revenues, which for statutory purposes are generally
recorded as collected or when due during the premium paying period of the
contract and which for GAAP purposes, generally, for universal life policies and
investment products, are only recorded for policy charges for the cost of
insurance, policy administration and surrender charges assessed to policy
account balances. Also, for GAAP purposes, premiums for traditional life
insurance policies are recognized as revenues when they are due from
policyholders and the retrospective deposit method is used in accounting for
universal life and other types of contracts where the payment pattern is
irregular or surrender charges are a significant source of profit. The
prospective deposit method is used for GAAP purposes where investment margins
are the primary source of profit;
(3) development of liabilities for future policy benefits, which for statutory
purposes predominantly use interest rate and mortality assumptions prescribed by
the NAIC which may vary considerably from interest and mortality assumptions
used for GAAP financial reporting;
(4) providing for income taxes based on current taxable income (tax return) only
for statutory purposes, rather than establishing additional assets or
liabilities for deferred Federal income taxes to recognize the tax effect
related to reporting revenues and expenses in different periods for financial
reporting and tax return purposes;
-1-
<PAGE>
(5) excluding certain GAAP assets designated as non-admitted assets (e.g., past
due agent's balances and furniture and equipment) from the balance sheet for
statutory purposes by directly charging surplus;
(6) establishing accruals for post-retirement and post-employment health care
benefits on an optional basis, immediate recognition or a twenty year phase-in
approach, whereas GAAP liabilities were established at date of adoption;
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset Valuation
Reserve); as well as the deferral and amortization of realized gains and losses,
motivated by changes in interest rates during the period the asset is held, into
income over the remaining life to maturity of the asset sold (Interest
Maintenance Reserve); whereas on a GAAP basis, no such formula reserve is
required and realized gains and losses are recognized in the period the asset is
sold;
(8) the reporting of reserves and benefits net of reinsurance ceded, where risk
transfer has taken place; whereas on a GAAP basis, reserves are reported gross
of reinsurance with reserve credits presented as recoverable assets;
(9) the reporting of fixed maturities at amortized cost, where 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 fixed maturities were classified on a GAAP basis as "available-for-
sale" and accordingly, these investments were reflected at fair value with the
corresponding impact included as a component of Stockholder's Equity designated
as "Unrealized Gain/Loss on Investments, Net of Tax". For statutory reporting
purposes, Net Unrealized Loss on Investments represents unrealized gains or
losses on common stock and other bonds reported at fair value; and
(10) separate account liabilties are valued on the Commissioner's Annuity
Reserve Valuation Method (CARVM), with the surplus generated recorded as a
liability to the general account (and a contra liability on the balance sheet of
the general account), whereas GAAP liabilities are valued at account value.
As of December 31, 1995, 1994 and 1993, the significant differences between
statutory and GAAP basis
net income and capital and surplus for the Company are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
GAAP Net Income: $ 38,821 $23,295 $ 6,071
Amortization and deferral
of policy acquisition costs (174,341) (117,863) (147,700)
Benefit reserve adjustment 31,392 30,912 14,059
Deferred taxes 2,801 (9,267) (7,123)
Separate accounts 146,635 75,941 110,547
Coinsurance 0 3,472 11,578
Other, net (2,450) (4,451) 1,221
Statutory Net Income (Loss) $ 42,858 $ 2,039 $(11,347)
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
GAAP Capital and Surplus $ 455,541 $ 199,785 $ 198,408
<S> <C> <C> <C>
Deferred policy
acquisition costs (596,542) (422,201) (304,338)
Benefit reserve adjustment 74,782 85,191 43,621
Deferred taxes 1,493 13,257 13,706
Separate accounts 333,123 186,488 110,547
Asset valuation reserve (8,010) (2,422) (1,066)
Coinsurance 0 0 22,642
Unrealized gain (loss) on bonds (1,696) 21,918 0
Adjustment relating
to Lyndon contribution (41,277) 0 0
Other, net 20,920 9,269 5,173
Statutory Capital and Surplus $ 238,334 $ 91,285 $ 88,693
</TABLE>
AGGREGATE RESERVES AND LIABILITIES FOR PREMIUM AND OTHER DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits were
computed in accordance with presently accepted actuarial standards. Reserves
for life insurance policies are generally based on the 1958 and 1980
Commissioner's Standard Ordinary Mortality Tables at various rates ranging from
2.5% to 6.0%. 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 Commissioner's Annuity Reserve Valuation Method (CARVM).
Accident and health reserves are established using a two year preliminary term
method and morbidity tables based on Company experience.
ILA has established separate accounts to segregate the assets and liabilities of
certain annuity contracts that must be segregated from the Company's general
assets under the terms of the contracts. The assets consist primarily of
marketable securities reported at market value. Premiums, benefits and expenses
of these contracts are reported in the Statutory Statements of Income.
During 1994, the Company changed the valuation method on aggregate reserves for
future benefits resulting in a $10.7 million increase in surplus. The new
valuation method is in accordance with presently accepted actuarial standards.
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds which are deemed
ineligible to be held at amortized cost by the National Association of Insurance
Commissioners (NAIC) Securities Valuation Office (SVO) are carried at the
appropriate SVO published value. When a permanent reduction in the value of
publicly traded securities occurs, the decrease is reported as a realized loss
and the carrying value is adjusted accordingly. Common stocks are carried at
market value with the difference from cost reflected in surplus. Other invested
assets are generally recorded at fair value.
Changes in unrealized capital gains and losses on common stock are reported as
additions to or reductions of surplus. The Asset Valuation Reserve is designed
to provide a standardized reserve process for realized and unrealized losses due
to the default and equity risks associated with invested assets. The reserve
increased by $5,588, $1,356 and $135 in 1995, 1994 and 1993, 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
remaining life of the mortgage loan or bond sold. Realized capital gains and
losses, net of taxes, not included in IMR are reported in the Statutory
Statements of Income. Realized investment gains and losses are determined
-3-
<PAGE>
on a specific identification basis. The amount of net capital gains reclassified
from the IMR was $39 in 1995 and the amount of net capital losses was $67 and
$264 in 1994 and 1993, respectively. The amount of income amortized was $256,
$114 and $178 in 1995, 1994 and 1993, respectively.
OTHER LIABILITIES
The amount reflected in other liabilities includes a receivable from the
separate accounts of $333.1, $186.5 million in 1995 and 1994, respectively. The
balances are classified in accordance with NAIC accounting practices.
2. INVESTMENTS:
(a) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Interest income from fixed
maturity securities $ 76,100 $ 28,335 $ 7,541
Interest income from policy loans 1,504 454 124
Interest and dividends from
other investments 2,288 1,069 481
Gross investment income 79,892 29,858 8,146
Less: investment expenses 1,105 846 176
Net investment income $ 78,787 $ 29,012 $ 7,970
</TABLE>
(b) UNREALIZED GAINS (LOSSES) ON COMMON STOCKS
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Gross unrealized gains at
end of year $ 1,724 $ 75 $ 148
Gross unrealized losses at
end of year 0 (60) 0
Net unrealized gains 1,724 15 148
Balance at beginning of year 15 148 93
Change in net unrealized gains on
common stocks $ 1,709 $ (133) $ 55
</TABLE>
(c) UNREALIZED GAINS (LOSSES) ON BONDS AND SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Gross unrealized gains at
end of year $ 22,251 $ 986 $ 5,916
Gross unrealized losses at
end of year (1,374) (34,718) (684)
Net unrealized gains (losses)
after tax 20,877 (33,732) 5,232
Balance at beginning of year (33,732) 5,232 2,287
Change in net unrealized gains
(losses) on bonds and
short-term investments $ 54,609 $ (38,964) $ 2,945
</TABLE>
-4-
<PAGE>
(d) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Bonds and short term investments $ 156 $ (101) $ (316)
Common stocks 52 0 0
Real estate and other 0 34 1,316
----
Realized gains (losses) 208 (67) 1,000
Capital gains (benefit) taxes (205) 2 386
----
Net realized capital gains (losses)
after tax 413 (69) 614
Less: IMR capital gains (losses) 39 (67) (263)
----
Net realized capital gains (losses) $ 374 $ (2) $ 877
</TABLE>
(e) OFF-BALANCE SHEET INVESTMENTS
The Company had no significant financial instruments with off-balance sheet risk
as of December 31, 1995 and 1994.
(f) CONCENTRATION OF CREDIT RISK
Excluding U.S. government and government agency investments, the Company is not
exposed to any significant concentration of credit risk.
(g) BONDS, SHORT-TERM AND COMMON STOCK INVESTMENTS
<TABLE>
<CAPTION>
1995
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities:
- - guaranteed and sponsored 44,268 14 (248) 44,034
- - guaranteed and
sponsored - asset backed 176,160 4,644 (682) 180,122
States, municipalities and
political subdivisions 16,948 38 (6) 16,980
International governments 5,402 441 0 5,843
Public utilities 108,083 1,652 (90) 109,645
All other corporate 374,058 8,145 (248) 381,955
All other
corporate - asset backed 410,197 5,841 (89) 415,949
Short-term investments 139,011 18 0 139,029
Certificates of deposit 91,373 1,458 (11) 92,820
Total 1,365,500 22,251 (1,374) 1,386,377
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
1995
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Common Stock - Unaffiliated 2,668 555 0 3,223
Common Stock - Affiliated 35,384 1,169 0 36,553
Total Common Stock 38,052 1,724 0 39,776
</TABLE>
<TABLE>
<CAPTION>
1994
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities:
- - guaranteed and sponsored 175,925 0 (12,059) 163,866
- - guaranteed and
sponsored - asset backed 142,318 382 (4,911) 137,789
States, municipalities and
political subdivisions 10,409 0 (603) 9,806
International governments 2,248 0 (69) 2,179
Public utilities 29,509 31 (1,271) 28,269
All other corporate 257,301 246 (9,452) 248,095
All other
corporate - asset backed 112,390 327 (4,066) 108,651
Short-term investments 56,365 0 0 56,365
Certificates of deposit 68,401 0 (2,287) 66,114
Total 854,866 986 (34,718) 821,134
</TABLE>
<TABLE>
<CAPTION>
1994
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Common Stock - Unaffiliated 2,260 75 (60) 2,275
</TABLE>
The amortized cost and estimated market value of bonds and short-term
investments at December 31, 1995 by management's anticipated maturity are shown
below. Asset backed securities are distributed to maturity year based on ILA's
estimate of the rate of future prepayments of principal over the remaining life
of the securities. Expected maturities differ from contractual maturities
reflecting borrowers' rights to call or prepay their obligations.
-6-
<PAGE>
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
Maturity
--------
<S> <C> <C>
Due in one year or less 439,793 442,327
Due after one year through five years 840,088 855,741
Due after five years through ten years 80,820 83,432
Due after ten years 4,799 4,877
Total 1,365,500 1,386,377
</TABLE>
Proceeds from sales of investments in bonds and short-term investments during
1995, 1994 and 1993 were $313,961, $117,912 and $333,023, respectively,
resulting in gross realized gains of $1,419, $518 and $937, respectively, and
gross realized losses of $1,263, $624 and $1,255, respectively, before
transfers to IMR. The Company had realized gains of $52 during 1995 from a
capital gain distribution.
(h) FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
Balance sheet items: (in millions) 1995 1994
------------------ -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Assets
Fixed maturites 1,366 1,386 855 821
Common stocks 40 40 2 2
Policy loans 23 23 20 20
Miscellaneous 13 13 2 2
Liabilities
Liabilities on investment contracts 1,031 981 534 526
</TABLE>
The carrying amounts for policy loans approximates fair value. The
liabilities are determined by forecasting future cash flows discounted at
current market rates.
3. RELATED PARTY TRANSACTIONS:
Transactions between the Company and its affiliates within ITT Hartford relate
principally to tax settlements, reinsurance, service fees, capital contributions
and payments of dividends.
On June 30, 1995, the assets of Lyndon Insurance Company were contributed to
ILA. As a result, ILA received approximately $365 million in fixed maturities,
equity securities and cash, $28 million in policy reserves, $187 million of
current tax liability, $26 million in IMR, $8 million in AVR (offset by an
aggregate write-in to surplus), and $4 million of other liabilities. The assets
in excess of liabilities of $112 were recorded as an increase to paid-in
surplus.
For additional information, see Note 5.
4. FEDERAL INCOME TAXES:
The Company is included in the consolidated Federal income tax return of ITT
Hartford and its includable subsidiaries. Allocation of taxes is based
primarily upon separate company tax return calculations with current credit for
net losses used in consolidation except that increases resulting from
consolidation are
-7-
<PAGE>
allocated in proportion to separate return amounts. Intercompany Federal income
tax balances are generally settled quarterly with Hartford Fire Insurance
Company (Hartford Fire), a subsidiary of ITT Hartford. Federal income taxes paid
by the Company were $215,921, $20,538, and $10,042 in 1995, 1994 and 1993,
respectively. The effective tax rate was 25%, 92%, and 1,181% in 1995, 1994, and
1993 respectively. The following schedule provides a reconciliation of the
effective tax rate (in millions).
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Tax provision (benefit) at US statutory rate 20 9 (1)
Tax acquisiton deferred costs 8 8 10
Statutory to tax reserves 3 5 0
Investments and other (17) 2 2
Federal income tax expense 14 24 11
</TABLE>
5. CAPITAL AND SURPLUS AND SHAREHOLDER DIVIDEND RESTRICTIONS:
The maximum amount of dividends which can be paid, without prior approval, by
State of Wisconsin insurance companies to shareholders is subject to
restrictions relating to statutory surplus. Dividends are paid as determined by
the Board of Directors and are not cumulative. ILA paid dividends of $10 million
to its parent, HLIC, in 1995. No dividends were paid in 1994 and 1993. As a
result of the distribution by ITT, the assets of ITT Lyndon Insurance Company
(Lyndon) were contributed to ILA in June 1995. Substantially all the business
was removed from Lyndon prior to the contribution. The amount of assets which
exceeded liabilities at the contribution date ($112 million) was included in
paid-in capital.
6. PENSION PLANS AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:
The Company's employees are included in ITT Hartford's non-contributory defined
benefit pension plans. These plans provide pension benefits that are based on
years of service and the employee's compensation during the last ten years of
employment. The Company's funding policy is to contribute annually an amount
between the minimum funding requirements set forth in the Employee Retirement
Income Security Act of 1974 and the maximum amount that can be deducted for
Federal income tax purposes. Generally, pension costs are funded through the
purchase of HLIC's group pension contracts. Pension expense was $1,034, $1,211,
and $765 in 1995, 1994 and 1993, respectively. Liabilities for the plan are held
by Hartford Fire.
The Company also participates in ITT Hartford 's Investment and Savings Plan,
which includes a deferred compensation option under IRC section 401(k) and
an ESOP allocation under IRC section 404(k). The liabilities for these plans are
included in the financial statements of Hartford Fire. The cost to ILA was not
material in 1995, 1994 and 1993.
The Company's employees are included in Hartford Fire's contributory defined
health care and life insurance benefit plans. These plans provide health care
and life insurance benefits for retired employees. Substantially all employees
may become eligible for those benefits if they reach normal or early retirement
age while still working for the Company. The Company has prefunded a portion of
the health care and life insurance obligations through trust funds where such
prefunding can be accomplished on a tax effective basis. Amounts allocated by
Hartford Fire for post-retirement health care and life insurance benefits
expense (not including provisions for accrual of post-retirement benefit
obligations) are immaterial.
The assumed rate of future increases in the per capita cost of health care (the
health care trend rate) was 10.1% for 1995, decreasing ratably to 6% in the year
2001. Increasing the health care trend rates by one percent per year would have
an immaterial impact on the accumulated post-retirement benefit obligation and
the annual expense. The cost to ILA was not material in 1995, 1994 and 1993.
Post-employment benefits are primarily comprised of obligations to provide
medical and life insurance to employees on long term disability. Post-
employment benefit expense was not material in 1995, 1994 and 1993.
-8-
<PAGE>
7. REINSURANCE:
The Company cedes insurance to non-affiliated insurers in order to limit its
maximum loss. Such transfer does not relieve ILA of its primary liability. ILA
also assumes insurance from other insurers.
Life insurance net retained premiums were comprised of the following:
For the years ended december 31
-------------------------------
1995.00 1994.00 1993.00
Direct premiums 159,918 133,180 131,586
Premiums assumed 13,299 960 841
Premiums ceded 7,425 (308,033) 118,146
Premiums and annuity considerations 165,792 442,173 14,281
In December 1994 the Company ceded to a third party, on a modified coinsurance
basis, 80% of the variable annuity business written in 1994. The ceded business
includes both general and separate account liabilities. As a result of the
agreement ILA transferred approximately $1,352 million in assets and
liabilities. The financial impact of the cession was an increase of
approximately $15 million to net income and surplus.
In November 1994, the Company ceded, on a modified coinsurance basis, 30% of
the separate account variable annuity business distributed by Paine Webber to
Paine Webber Life Insurance Company (PWLIC). As a result of the agreement, ILA
transferred approximately $24 million in assets and liabilities to PWLIC. The
financial impact of the cession was an increase of approximately $765 to net
income and surplus.
In October 1994, the agreement, effective December 1990, which required ILA to
coinsure 90% of all existing and new business, excluding variable annuity
business, written by the Company to HLIC, was terminated. As a result of the
termination, ILA received approximately $430 million in assets and liabilities
from HLIC. The impact of the transaction was a decrease of approximately $15
million to net income and surplus.
In November 1993, ILA acquired, through an assumption reinsurance transaction,
substantially all of the individual fixed and variable annuity business of
Hartford Life and Accident, an affiliate. As a result of this transaction, the
assets and liabilities of the Company increased approximately $1 billion,
substantially all of which was transferred to the separate accounts of the
Company. The remaining assets and liabilities (approximately $41 million) were
transferred in October 1995. The impact of these transactions on net income and
surplus was not significant.
8. SEPARATE ACCOUNTS:
The Company maintains separate account assets and liabilties totaling $7.3
billion and $3.6 billion at December 31, 1995 and 1994, respectively. Separate
account assets are reported at fair value and separate account liabilities are
determined in accordance with the Commissioners Annuity Reserve Valuation
Method (CARVM), which approximates the market value less applicable surrender
charges. Separate account assets are segregated from other investments, the
policyholder assumes the investment risk, and the investment income and gains
and losses accrue directly to the policyholder. Separate account management
fees, net of minimum guarantees, were $72 million, $42 million, and $6 million
in 1995, 1994, and 1993, respectively.
-9-
<PAGE>
9. COMMITMENTS AND CONTINGENCIES:
As of December 31, 1995, the Company had no material contingent liabilities, nor
had the Company committed any surplus funds for any contingent liabilities or
arrangements. The Company is involved in various legal actions which have
arisen in the course normal of its business. In the opinion of management, the
ultimate liability with respect to such lawsuits as well as other contingencies
is not considered to be material in relation to the results of operations and
financial position of the Company.
Under insurance guaranty laws in most states, insurers doing business therein
can be assessed up to prescribed limits for policyholder losses incurred by
insolvent companies. The amount of any future assessments on ILA under these
laws cannot be reasonably estimated. Most of the laws do provide, however, that
an assessment may be excused or deferred if it would threaten an insurer's own
financial strength. Additionally, guaranty fund assessments are used to reduce
state premium taxes paid by the company in certain states. ILA paid guaranty
fund assessments of $1,684, $583, and $495 in 1995, 1994, and 1993,
respectively.
-10-
<PAGE>
PART C
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) The resolution authorizing the Separate Account is incorporated
by reference to Post Effective No. 2, to the Registration
Statement File No. 33-80732, dated May 1, 1995.
(2) Not applicable. ITT Hartford maintains custody of all assets.
(3) (a) Principal Underwriter Agreement is incorporated herein.
(3) (b) Form of Dealer Agreement is incorporated herein.
(4) The Individual Flexible Premium Variable Annuity is incorporated
by reference as stated above.
(5) The form of Application is incorporated by reference as stated
above.
(6) (a) Certificate of Incorporation of ITT Hartford Life and
Annuity Insurance Company is incorporated herein.
(6) (b) Bylaws of ITT Hartford Life and Annuity Insurance
Company is incorporated herein.
(7) Not applicable.
(8) Participation Agreement is incorporated by reference as stated
above.
(9) Legal opinion is incorporated herein.
(10) Consent of Arthur Andersen LLP is incorporated herein.
(11) No financial statements are omitted.
(12) Not applicable.
(13) Not applicable
(14) A financial data schedule is incorporated herein.
<PAGE>
-2-
Item 25. Directors and Officers of the Depositor
Joan M. Andrew Vice President
Wendell J. Bossen Vice President
Gregory A. Boyko Vice President
Peter W. Cummins Vice President
Ann M. deRaismes Vice President
James R. Dooley Vice President
Timothy M. Fitch Vice President
Donald R. Frahm Director
Bruce D. Gardner Director
Joseph H. Gareau Executive Vice President & Chief
Investment Officer, Director
Donald J. Gillette Vice President
Lynda Godkin Associate General Counsel & Corporate
Secretary
Lois W. Grady Vice President
David A. Hall Senior Vice President & Actuary
Joseph Kanarek Vice President, Director
Robert A. Kerzner Vice President
LaVern L. Kohlhof Vice President & Secretary
William B. Malchodi, Jr. Vice President & Directory of Taxes
Thomas M. Marra Executive Vice President, Director
<PAGE>
-3-
Steven L. Matthiesen Vice President
Joseph J. Noto Vice President
Craig D. Raymond Vice President & Chief Actuary
David T. Schrandt Vice President, Treasurer
Lowndes A. Smith President & Chief Executive Officer,
Director
Lizabeth H. Zlatkus Vice President, Director
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Exhibit 26 is incorporated herein.
Item 27. Number of Contract Owners
As of December 31, 1995, there were ____ contract owners.
Item 28. Indemnification
Under Section 33-320a of the Connecticut General Statutes, the
Registrant must indemnify a director or officer against judgments,
fines, penalties, amounts paid in settlement and reasonable expenses,
including attorneys' fees, for actions brought or threatened to be
brought against him in his capacity as a director or officer when it
is determined by certain disinterested parties that he acted in good
faith and in a manner he reasonably believed to be in the best
interests of the Registrant. In any criminal action or proceeding, it
also must be determined that the director or officer had no reason to
believe his conduct was unlawful. The director or officer must also
be indemnified when he is successful on the merits in the defense of a
proceeding or in circumstances where a court determines that he is
fairly and reasonably entitled to be indemnified, and the court
approves the amount. In shareholder derivative suits, the director or
officer must be finally adjudged not to have breached his duty to the
Registrant or a court must determine that he is fairly and reasonably
entitled to be indemnified and must approve the amount. In a claim
based upon the director's or officer's purchase or sale of the
Registrant's securities, the director or officer may
<PAGE>
-4-
obtain indemnification only if a court determines that, in view of all
the circumstances, he is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall determine.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-320a.
The directors and officers of Hartford Life and Hartford Securities
Distribution Company, Inc. ("HSD") are covered under a directors and
officers liability insurance policy issued to ITT Hartford Group, Inc.
and its subsidiaries. Such policy will reimburse the Registrant for
any payments that it shall make to directors and officers pursuant to
law and will, subject to certain exclusions contained in the policy,
further pay any other costs, charges and expenses and settlements and
judgments arising from any proceeding involving any director or
officer of the Registrant in his past or present capacity as such, and
for which he may be liable, except as to any liabilities arising from
acts that are deemed to be uninsurable.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 29. Principal Underwriters
(a) HSD acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - Separate Account One
Hartford Life Insurance Company - Separate Account Two
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account I)
<PAGE>
-5-
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
ITT Hartford Life and Annuity Insurance Company - Separate Account One
ITT Hartford Life and Annuity Insurance Company - Putnam Capital
Manager Trust Separate Account Two
ITT Hartford Life and Annuity Insurance Company - Separate Account
Three
ITT Hartford Life and Annuity Insurance Company - Separate Account
Five
ITT Hartford Life and Annuity Insurance Company - Separate Account Six
(b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
------------------- -----------------------
Donald E. Waggaman, Jr. Treasurer
Bruce D. Gardner Secretary
George R. Jay Controller
Lowndes A. Smith President
Item 30. Location of Accounts and Records
Accounts and records are maintained by ITT Hartford.
<PAGE>
-6-
Item 31. Management Services
None
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.
The Registrant is relying on the no-action letter issued by the Division of
Investment Management to American Council of Life Insurance, Ref. No. IP-6-88,
November 28, 1988. The Registrant has complied with the four provisions of the
no-action letter.
33-80732
IHLA/Sep. Acct. Three - DW
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
POWER OF ATTORNEY
Bruce D. Gardner
Joseph H. Gareau
Joseph Kanarek
Thomas M. Marra
Lowndes A. Smith
Lizabeth H. Zlatkus
do hereby jointly and severally authorize Lynda Godkin and/or Scott K.
Richardson to sign as their agent, any Registration Statement, pre-effective
amendment, post-effective amendment and any application for exemptive relief of
the ITT Hartford Life and Annuity Insurance Company under the Securities Act of
1933 and/or the Investment Company Act of 1940.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
/s/ Bruce D. Gardner Dated: 10/19/95
- ----------------------------------- ---------------------------
Bruce D. Gardner
/s/ Joseph H. Gareau Dated: 10/19/95
- ----------------------------------- ---------------------------
Joseph H. Gareau
/s/ Joseph Kanarek Dated: 10/19/95
- ----------------------------------- ---------------------------
Joseph Kanarek
/s/ Thomas M. Marra Dated: 10/19/95
- ----------------------------------- ---------------------------
Thomas M. Marra
/s/ Lowneds A. Smith Dated: 10/19/95
- ----------------------------------- ---------------------------
Lowndes A. Smith
/s/ Lizabeth H. Zlatkus Dated: 10/19/95
- ----------------------------------- ---------------------------
Lizabeth H. Zlatkus
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and duly caused this Registration Statement to be
signed on its behalf, in the City of Hartford, and State of Connecticut on
this 15 day of April, 1996.
ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY - SEPARATE ACCOUNT THREE
(Registrant)
*By: /s/ Thomas M. Marra *By: /s/ Lynda Godkin
----------------------------------------- ------------------
Thomas M. Marra, Executive Vice President Lynda Godkin
Attorney-in-Fact
ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
(Depositor)
*By: /s/ Thomas M. Marra
------------------------------------------
Thomas M. Marra, Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons and in
the capacity and on the date indicated.
Donald R. Frahm, Chairman and
Chief Executive Officer, Director *
Bruce D. Gardner, Director *
Joseph H. Gareau, Executive Vice
President and Chief Investment
Officer, Director *
John P. Ginnetti, Executive Vice
President, Director *
Thomas M. Marra, Executive Vice By: /s/ Lynda Godkin
President, Director * ------------------------
Leonard E. Odell, Jr., Senior Lynda Godkin
Vice President, Director * Attorney-In-Fact
Lowndes A. Smith, President,
Chief Operating Officer, Dated: April 15, 1996
Director * ---------------------
Raymond P. Welnicki, Senior Vice
President, Director *
Lizabeth H. Zlatkus, Vice President
Director *
DW/HL/33-80732
<PAGE>
PRINCIPAL UNDERWRITER AGREEMENT
THIS AGREEMENT, dated as of the June 26, 1995, made by and between ITT HARTFORD
LIFE AND ANNUITY INSURANCE COMPANY ("ILA" or the "Sponsor"), a corporation
organized and existing under the laws of the State of Wisconsin, and HARTFORD
SECURITIES DISTRIBUTION COMPANY, INC. ("HSD"), a corporation organized and
existing under the laws of the State of Connecticut,
WITNESSETH:
WHEREAS, the Board of Directors of ILA has made provision for the establishment
of a separate account within ILA in accordance with the laws of the State of
Wisconsin, which separate account was organized and is established and
registered as a unit investment trust type investment company with the
Securities and Exchange Commission under the Investment Company Act of 1940
("1940 Act"), as amended, and which is designated ITT Hartford Life and
Annuity Insurance Company Separate Account Three (referred to as the "UIT");
and
WHEREAS, HSD offers to the public a certain Flexible Premium Variable Annuity
Insurance Contract (the "Contract") issued by ILA with respect to the UIT units
of interest thereunder which are registered under the Securities Act of 1933
("1933 Act"), as amended; and
WHEREAS, HSD has previously agreed to act as distributor in connection with
offers and sales of the Contract under the terms and conditions set forth in
this Principal Underwriter Agreement.
NOW THEREFORE, in consideration of the mutual agreements made herein, ILA and
HSD agree as follows:
I.
HSD'S DUTIES
1. HSD, as successor principal underwriter to Hartford Equity Sales Company,
Inc. for the Contract, will use its best efforts to effect offers and sales
of the Contract through broker-dealers that are members of the National
Association of Securities Dealers, Inc. and whose registered
representatives are duly licensed as insurance agents of ILA. HSD is
responsible for compliance with all applicable requirements of the 1933
Act, as amended, the Securities Exchange Act of 1934 ("1934 Act"), as
amended, and the 1940 Act, as amended, and the rules and regulations
relating to the sales and distribution of the Contract, the need for which
arises out of its duties as principal underwriter of said Contract and
relating to the creation of the UIT.
<PAGE>
2. HSD agrees that it will not use any prospectus, sales literature, or any
other printed matter or material or offer for sale or sell the Contract if
any of the foregoing in any way represent the duties, obligations, or
liabilities of ILA as being greater than, or different from, such duties,
obligations and liabilities as are set forth in this Agreement, as it may
be amended from time to time.
3. HSD agrees that it will utilize the then currently effective prospectus
relating to the UIT's Contracts in connection with its selling efforts.
As to the other types of sales materials, HSD agrees that it will use only
sales materials which conform to the requirements of federal and state
insurance laws and regulations and which have been filed, where necessary,
with the appropriate regulatory authorities.
4. HSD agrees that it or its duly designated agent shall maintain records of
the name and address of, and the securities issued by the UIT and held by,
every holder of any security issued pursuant to this Agreement, as required
by the Section 26(a)(4) of the 1940 Act, as amended.
5. HSD's services pursuant to this Agreement shall not be deemed to be
exclusive, and it may render similar services and act as an underwriter,
distributor, or dealer for other investment companies in the offering of
their shares.
6. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations and duties hereunder on the part of
HSD, HSD shall not be subject to liability under a Contract for any act or
omission in the course, or connected with, rendering services hereunder.
II.
1. The UIT reserves the right at any time to suspend or limit the public
offering of the Contracts upon 30 days' written notice to HSD, except where
the notice period may be shortened because of legal action taken by any
regulatory agency.
2. The UIT agrees to advice HSD immediately:
(a) Of any request by the Securities and Exchange Commission for amendment
of its 1933 Act registration statement or for additional information;
(b) Of the issuance by the Securities and Exchange Commission of any stop
order suspending the effectiveness of the 1933 Act registration
statement relating to units of interest issued with respect to the UIT
or of the initiation of any proceedings for that purpose;
<PAGE>
(c) Of the happening of any material event, if known, which makes untrue
any statement in said 1933 Act registration statement or which
requires a change therein in order to make any statement therein not
misleading.
ILA will furnish to HSD such information with respect to the UIT and the
Contracts in such form and signed by such of its officers and directors and
HSD may reasonably request and will warrant that the statements therein
contained when so signed will be true and correct. ILA will also furnish,
from time to time, such additional information regarding the UIT's
financial condition as HSD may reasonably request.
III.
COMPENSATION
In accordance with an Expense Reimbursement Agreement between ILA and HSD, HSD
is obligated to reimburse HSD for all operating expenses associated with the
services provided on behalf of the UIT under this Principal Underwriter
Agreement. No additional compensation is payable in excess of that required
under the Expense Reimbursement Agreement.
IV.
RESIGNATION AND REMOVAL OF PRINCIPAL UNDERWRITER
HSD may resign as a Principal Underwriter hereunder, upon 120 days' prior
written notice to ILA. However, such resignation shall not become effective
until either the UIT has been completely liquidated and the proceeds of the
liquidation distributed through ILA to the Contract owners or a successor
Principal Underwriter has been designated and has accepted its duties.
V.
MISCELLANEOUS
1. This Agreement may not be assigned by any of the parties hereto without the
written consent of the other party.
2. All notices and other communications provided for hereunder shall be in
writing and shall be delivered by hand or mailed first class, postage
prepaid, addressed as follows:
(a) If to ILA - ITT Hartford Life and Annuity Insurance Company,
P.O. Box 2999, Hartford, Connecticut 06104.
(b) If to HSD - Hartford Securities Distribution Company, Inc.,
P.O. Box 2999, Hartford, Connecticut 06104.
<PAGE>
or to such other address as HSD or ILA shall designate by written notice
to the other.
3. This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of which shall be deemed one
instrument, and an executed copy of this Agreement and all amendments
hereto shall be kept on file by the Sponsor and shall be open to inspection
any time during the business hours of the Sponsor.
4. This Agreement shall inure to the benefit of and be binding upon the
successor of the parties hereto.
5. This Agreement shall be construed and governed by and according to the laws
of the State of Connecticut.
6. This Agreement may be amended from time to time by the mutual agreement and
consent of the parties hereto.
7. (a) This Agreement shall become effective June 26, 1995 and shall continue
in effect for a period of two years from that date and, unless sooner
terminated in accordance with 7(b) below, shall continue in effect
from year to year thereafter provided that its continuance is
specifically approved at least annually by a majority of the members
of the Board of Directors of ILA.
(b) This Agreement (1) may be terminated at any time, without the payment
of any penalty, either by a vote of a majority of the members of the
Board of Directors of ILA on 60 days' prior written notice to HSD;
(2) shall immediately terminate in the event of its assignment and (3)
may be terminated by HSD on 60 days' prior written notice to ILA, but
such termination will not be effective until ILA shall have an
agreement with one or more persons to act as successor principal
underwriter of the Contracts. HSD hereby agrees that it will continue
to act as successor principal underwriter until its successor or
successors assume such undertaking.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
(Seal) ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
BY: /s/ Thomas M. Marra
--------------------------
Thomas M. Marra
Senior Vice President
Attest: HARTFORD SECURITIES DISTRIBUTION
COMPANY, INC.
/s/ Lynda Godkin BY: /s/ George Jay
- ------------------- ------------------------
Lynda Godkin George Jay
Secretary Controller
<PAGE>
BROKER-DEALER SALES AND
SUPERVISION AGREEMENT
This Broker-Dealer Sales and Supervision Agreement ("Agreement")
dated ____________________ is made by and between Hartford Life Insurance
Company and ITT Hartford Life and Annuity Insurance Company (referred to
collectively as "Companies"), Hartford Securities Distribution Company, Inc.
("Distributor"), a broker-dealer registered with the Securities and Exchange
Commission ("SEC") under the Securities and Exchange Act of 1934 ("1934 Act")
and a member of the National Association of Securities Dealers, Inc. ("NASD")
and __________________________________, who is also a broker-dealer registered
with the SEC under the 1934 Act and a member of the NASD ("Broker-Dealer"), and
any and all undersigned insurance agency affiliates ("Affiliates") of Broker-
Dealer.
WHEREAS, Companies offer certain variable life insurance policies and variable
and modified guaranteed annuity contracts which are deemed to be securities
under the Securities Act of 1933 (the "Registered Products"); and
WHEREAS, Companies wish to appoint the Broker-Dealer and Affiliates as agents of
the Companies for the solicitation and procurement of applications for
Registered Products; and
WHEREAS, Distributor is the principal underwriter of the Registered Products;
and
WHEREAS, Distributor anticipates having registered representatives who are
associated with Broker-Dealer ("Registered Representatives"), who are NASD
registered and are duly licensed under applicable state insurance law and
appointed as life insurance agents of Companies solicit and sell the Registered
Products; and
WHEREAS, Distributor acknowledges that the Broker-Dealer will provide certain
supervisory and administrative services to Registered Representatives who are
associated with the Broker-Dealer in connection with the solicitation, service
and sale of the Registered Products; and
WHEREAS, Broker-Dealer agrees to provide the aforementioned supervisory services
to its Registered Representatives who have been appointed by the Companies to
sell the Registered Products.
NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties agree to the following:
I. APPOINTMENT OF THE BROKER-DEALER
The Companies hereby appoint Broker-Dealer as an agent of the Companies for
the solicitation and procurement of applications for the Registered
Products offered by the Companies, as outlined in Exhibit A attached
herein, in all states in which the Companies are authorized to do business
and in which Broker-Dealer or any Affiliates are properly licensed.
Distributor hereby authorizes Broker-Dealer under the securities laws to
supervise Registered Representatives in connection with the solicitation,
service and sale of the Registered Products.
II. AUTHORITY OF THE BROKER-DEALER
<PAGE>
Broker-Dealer has the authority to represent Distributor and Companies only
to the extent expressly granted in this Agreement. Broker-Dealer and any
Registered Representatives shall not hold themselves out to be employees of
Companies or Distributor in any dealings with the public. Broker-Dealer
and any Registered Representatives shall be independent contractors as to
Distributor or Companies. Nothing contained herein is intended to create a
relationship of employer and employee between Broker-Dealer and Distributor
or Companies or between Registered Representatives and Distributor or
Companies.
III. BROKER-DEALER REPRESENTATION
Broker-Dealer represents that it is a registered broker-dealer under the
1934 Act, a member in good standing of the NASD, and is registered as a
broker-dealer under state law to the extent necessary to perform the duties
described in this Agreement. Broker-Dealer represents that its Registered
Representatives, who will be soliciting applications for the Registered
Products, will be duly registered representatives associated with Broker-
Dealer and that they will be representatives in good standing with
accreditation as required by the NASD to sell the Registered Products.
Broker-Dealer agrees to abide by all rules and regulations of the NASD,
including its Rules of Fair Practice, and to comply with all applicable
state and federal laws and the rules and regulations of authorized
regulatory agencies affecting the sale of the Registered Products.
IV. BROKER-DEALER OBLIGATIONS
(a) TRAINING AND SUPERVISION
Broker-Dealer has full responsibility for the training and
supervision of all Registered Representatives associated with
Broker-Dealer and any other persons who are engaged directly or
indirectly in the offer or sale of the Registered Products. Broker-
Dealer shall, during the term of this Agreement, establish and
implement reasonable procedures for periodic inspection and
supervision of sales practices of its Registered Representatives.
If a Registered Representative ceases to be a Registered
Representative of Broker-Dealer, is disqualified for continued
registration or has their registration suspended by the NASD or
otherwise fails to meet the rules and standards imposed by Broker-
Dealer, Broker-Dealer shall immediately notify such Registered
Representative that he or she is no longer authorized to solicit
applications, on behalf of the Companies, for the sale of Registered
Products. Broker-Dealer shall immediately notify Distributor of
such termination or suspension.
(b) SOLICITATION
Broker-Dealer agrees to supervise its Registered Representatives so
that they will only solicit applications in states where the
Registered Products are approved for sale in accordance with
applicable state and federal laws. Broker-Dealer shall be notified
by Companies or Distributor of the availability of the Registered
Products in each state.
(c) NO CHURNING
Broker-Dealer and any Registered Representatives shall not make any
misrepresentation or incomplete comparison of products for the
purpose of inducing a policyholder to lapse, forfeit or surrender
its insurance in favor of purchasing a Registered Product.
(d) PROSPECTUS DELIVERY AND SUITABILITY REQUIREMENTS
Broker-Dealer shall ensure that its Registered Representatives
comply with the prospectus delivery requirements under the
Securities Act of 1933. In addition, Broker-Dealer shall ensure
that its Registered Representatives shall not make recommendations
to an applicant to purchase a Registered Product in the absence of
reasonable grounds to believe that the
2
<PAGE>
purchase is suitable for such applicant, as outlined in the
suitability requirements of the 1934 Act and the NASD Rules of Fair
Practice. Broker-Dealer shall ensure that each application
obtained by its Registered Representatives shall bear evidence of
approval by one of its principals indicating that the application
has been reviewed for suitability.
(e) PROMOTIONAL MATERIAL
Broker-Dealer and its Registered Representatives are not authorized
to provide any information or make any representation in connection
with this Agreement or the solicitation of the Registered Products
other than those contained in the prospectus or other promotional
material produced or authorized by Companies or Distributor.
Broker-Dealer agrees that if it develops any promotional material
for sales, training, explanatory or other purposes in connection
with the solicitation of applications for Registered Products,
including generic advertising and/or training materials which may be
used in connection with the sale of Registered Products, it will
obtain the prior written consent of Distributor, and where
appropriate, approval of Companies, such approval not to be
unreasonably withheld.
(f) RECORD KEEPING
Broker-Dealer is responsible for maintaining the records of its
Registered Representatives. Broker-Dealer shall maintain such other
records as are required of it by applicable laws and regulations.
The books, accounts and records maintained by Broker-Dealer that
relate to the sale of the Registered Products, or dealings with the
Companies, Distributor and/or Broker-Dealer shall be maintained so
as to clearly and accurately disclose the nature and details of each
transaction.
Broker-Dealer acknowledges that all the records maintained by
Broker-Dealer relating to the solicitation, service or sale of the
Registered Products subject to this Agreement, including but not
limited to applications, authorization cards, complaint files and
suitability reviews, shall be available to Companies and Distributor
upon request during normal business hours. Companies and
Distributor may retain copies of any such records which Companies
and Distributor, in their discretion, deems necessary or desirable
to keep.
(g) REFUND OF COMPENSATION
Broker-Dealer agrees to repay Companies the total amount of any
compensation which may have been paid to it within thirty (30)
business days of notice of the request for such refund should
Companies for any reason return any premium on a Registered Product
which was solicited by a Registered Representative of Broker-Dealer.
(h) PREMIUM COLLECTION
Broker-Dealer only has the authority to collect initial premiums
unless specifically set forth in the applicable commission schedule.
Unless previously authorized by Distributor, neither Broker-Dealer
nor any of its Registered Representatives shall have any right to
withhold or deduct any part of any premium it shall receive for
purposes of payment of commission or otherwise.
V. COMPANIES AND/OR DISTRIBUTOR OBLIGATIONS
(a) PROSPECTUS/PROMOTIONAL MATERIAL
Companies and/or Distributor will provide Broker-Dealer with
reasonable quantities of the currently effective prospectus for the
Registered Products and appropriate sales promotional
3
<PAGE>
material which has been filed with the NASD, and applicable state
insurance departments.
(b) COMPENSATION
Distributor will pay Broker-Dealer as full compensation for all
services rendered by Broker-Dealer under this Agreement, commissions
and/or service fees in the amounts, in the manner and for the period
of time as set forth in the Commission Schedules attached to this
Agreement or subsequently made a part hereof, and which are in
effect at the time such Registered Products are sold. The manner of
commission payments (I.E. fronted or trail) is not subject to change
after the effective date of a contract for which the compensation is
payable.
Distributor or Companies may change the Commission Schedules
attached to this Agreement at any time. Such change shall become
effective only when Distributor or Companies provide the Broker-
Dealer with written notice of the change. No such change shall
affect any contracts issued upon applications received by Companies
at Companies' Home Office prior to the effective date of such
change.
Distributor agrees to identify to Broker-Dealer for each such
payment, the name of the Registered Representative of Broker-Dealer
who solicited each contract covered by the payment. Distributor
will not compensate Broker-Dealer for any Registered Product which
is tendered for redemption after acceptance of the application. Any
chargebacks will be assessed against the Broker-Dealer of record at
the time of the redemption.
Distributor will only compensate Broker-Dealer or Affiliates, as
outlined below, for those applications accepted by Companies, and
only after receipt by Companies at Companies' Home Office or at such
other location as Companies may designate from time to time for its
various lines of business, of the required premium and compliance by
Broker-Dealer with any outstanding contract and prospectus delivery
requirements.
In the event that this Agreement terminates for fraudulent
activities or due to a material breach by the Broker-Dealer,
Distributor will only pay to Broker-Dealer or Affiliate commissions
or other compensation earned prior to discovery of events requiring
termination. No further commissions or other compensation shall
thereafter be payable.
(c) COMPENSATION PAYABLE TO AFFILIATES
If Broker-Dealer is unable to comply with state licensing
requirements because of a legal impediment which prohibits a non-
domiciliary corporation from becoming a licensed insurance agency or
prohibits non-resident ownership of a licensed insurance agency,
Distributor agrees to pay compensation to Broker-Dealer's
contractually affiliated insurance agency, a wholly-owned life
agency affiliate of Broker-Dealer, or a Registered Representative or
principal of Broker-Dealer who is properly state licensed. As
appropriate, any reference in this Agreement to Broker-Dealer shall
apply equally to such Affiliate. Distributor agrees to pay
compensation to an Affiliate subject to Affiliates agreement to
comply with the requirements of Exhibit B, attached hereto.
VI. TERMINATION
(a) This Agreement may be terminated by any party by giving thirty (30)
days' notice in writing to the other party.
(b) Such notice of termination shall be mailed to the last known address
of Broker-Dealer appearing on Companies' records, or in the event of
termination by Broker-Dealer, to the Home Office of Companies at
P.O. Box 2999, Hartford, Connecticut 06104-2999.
4
<PAGE>
(c) Such notice shall be an effective notice of termination of this
Agreement as of the time the notice is deposited in the United
States mail or the time of actual receipt of such notice if
delivered by means other than mail.
(d) This Agreement shall automatically terminate without notice upon the
occurrence of any of the events set forth below:
(1) Upon the bankruptcy or dissolution of Broker-Dealer.
(2) When and if Broker-Dealer commits fraud or gross negligence in the
performance of any duties imposed upon Broker-Dealer by this
Agreement or wrongfully withholds or misappropriates, for Broker-
Dealer's own use, funds of Companies, its policyholders or
applicants.
(3) When and if Broker-Dealer materially breaches this Agreement or
materially violates state insurance or Federal securities laws and
administrative regulations of a state in which Broker-Dealer
transacts business.
(4) When and if Broker-Dealer fails to obtain renewal of a necessary
license in any jurisdiction, but only as to that jurisdiction.
(e) The parties agree that on termination of this Agreement, any
outstanding indebtedness to Companies shall become immediately due
and payable.
VII. GENERAL PROVISIONS
(a) COMPLAINTS AND INVESTIGATIONS
Broker-Dealer shall cooperate with Distributor and Companies in the
investigation and settlement of all complaints or claims against
Broker-Dealer and/or Distributor or Companies relating to the
solicitation or sale of the Registered Products under this
Agreement. Broker-Dealer, Distributor and Companies each shall
promptly forward to the other any complaint, notice of claim or
other relevant information which may come into either one's
possession. Broker-Dealer, Distributor and Companies agree to
cooperate fully in any investigation or proceeding in order to
ascertain whether Broker-Dealer's, Distributor's or Companies'
procedures with respect to solicitation or servicing is consistent
with any applicable law or regulation.
In the event any legal process or notice is served on Broker-Dealer
in a suit or proceeding against Distributor or Companies, Broker-
Dealer shall forward forthwith such process or notice to Companies
at its Home Office in Hartford, Connecticut, by certified mail.
(b) WAIVER
The failure of Distributor or Companies to enforce any provisions of
this Agreement shall not constitute a waiver of any such provision.
The past waiver of a provision by Distributor or Companies shall not
constitute a course of conduct or a waiver in the future of that
same provision.
(c) INDEMNIFICATION
Broker-Dealer shall indemnify and hold Distributor and Companies
harmless from any liability, loss or expense sustained by Companies
or the Distributor (including reasonable attorney fees) on account
of any acts or omissions by Broker-Dealer or persons employed or
appointed by Broker-Dealer, except to the extent Companies' or
Distributor's acts or omissions caused such
5
<PAGE>
liability Indemnification by Broker-Dealer is subject to the
conditions that Distributor or Companies promptly notify Broker-
Dealer of any claim or suit made against Distributor or Companies,
and that Distributor or Companies allow Broker-Dealer to make such
investigation, settlement, or defense thereof as Broker-Dealer deems
prudent. Broker-Dealer expressly authorizes Companies to charge
against all compensation due or to become due to Broker-Dealer under
this Agreement any monies paid or liabilities incurred by Companies
under this Indemnification provision.
Distributor and Companies shall indemnify and hold Broker-Dealer
harmless from any liability, loss or expense sustained by the
Broker-Dealer (including reasonable attorney fees) on account of any
acts or omissions by Distributor or Companies, except to the extent
Broker-Dealer's acts or omissions caused such liability.
Indemnification by Distributor or Companies is subject to the
condition that Broker-Dealer promptly notify Distributor or
Companies of any claim or suit made against Broker-Dealer, and that
Broker-Dealer allow Distributor or Companies to make such
investigation, settlement, or defense thereof as Distributor or
Companies deems prudent.
(d) ASSIGNMENT
No assignment of this Agreement, or commissions payable hereunder,
shall be valid unless authorized in writing by Distributor. Every
assignment shall be subject to any indebtedness and obligation of
Broker-Dealer that may be due or become due to Companies and any
applicable state insurance regulations pertaining to such
assignments.
(e) OFFSET
Companies may at any time deduct, from any monies due under this
Agreement, every indebtedness or obligation of Broker-Dealer to
Companies or to any of its affiliates.
(f) CONFIDENTIALITY
Companies, Distributor and Broker-Dealer agree that all facts or
information received by any party related to a contract owner shall
remain confidential, unless such facts or information is required to
be disclosed by any regulatory authority or court of competent
jurisdiction.
(g) PRIOR AGREEMENTS
This Agreement terminates all previous agreements, if any, between
Companies, Distributor and Broker-Dealer. However, the execution of
this Agreement shall not affect any obligations which have already
accrued under any prior agreement.
(h) CHOICE OF LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut.
By executing this Broker-Dealer Sales and Supervision Agreement Specifications
Page, Broker-Dealer acknowledges that it has read this Agreement in its entirety
and is in agreement with the terms and conditions outlining the rights of
Distributor, Companies and Broker-Dealer and Affiliates under this Agreement.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement to be
effective as set forth above, upon the later of the execution date below or
approval of Distributor's registration by all appropriate state securities
commissions.
6
<PAGE>
BROKER-DEALER HARTFORD SECURITIES DISTRIBUTION
COMPANY INC.
By: By:
Title: Title:
Date: Date:
AFFILIATE (IF APPLICABLE) HARTFORD LIFE INSURANCE COMPANY
By: By:
Title: Title:
Date: Date:
ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
By:
Title:
Date:
7
<PAGE>
EXHIBIT B
In accordance with Section V.(c) of the Broker-Dealer-Dealer Sales and
Supervision Agreement, no compensation is payable unless Broker-Dealer and
Registered Representative have first complied with all applicable state
insurance laws, rules and regulations. Distributor must ensure that any Broker-
Dealer with whom Distributor intends to enter into an Agreement and any
Registered Representatives meet the licensing and registration requirements of
the state(s) Broker-Dealer operates in and the NASD.
Companies are required by the Insurance Department in all 50 states to pay
compensation only to individuals and entities that are properly insurance
licensed and appointed. For registered products, Distributor must also comply
with NASD regulations that require Distributor to pay compensation to an NASD
registered Broker-Dealer. Distributor must comply with both state and NASD
requirements.
Distributor requires confirmation that Broker-Dealer holds current state
insurance licenses or markets insurance products through a contractual affiliate
or wholly owned life agency, which is properly insurance licensed. If Broker-
Dealer is properly state licensed then compensation may be paid to Broker-Dealer
in compliance with both state and NASD requirements.
If Broker-Dealer is not state insurance licensed and relies on the licensing of
a contractual affiliate or wholly owned life agency, the SEC has issued a number
of letters indicating that, under specific limited circumstances, it will take
"no action" against insurers (Distributor) paying compensation on registered
products to Broker-Dealer's contractual affiliate or wholly owned life agency.
At the request of Broker-Dealer, Distributor will provide copies of several of
these letters as well as a summary of their requirements.
If Broker-Dealer intends to rely on one of these "no-action" letters, legal
counsel for Broker-Dealer must confirm to Distributor in writing that all of the
circumstances of any one of the SEC no-action letters are applicable. Broker-
Dealer's counsel must summarize each point upon which the no-action relief was
granted and represent that Broker-Dealer's method of operation is identical or
meets the same criteria. Broker-Dealer's counsel must also confirm that, to the
best of counsel's knowledge, the SEC has not rescinded or modified its no-action
position since the letter was released.
The Broker-Dealer Sales and Supervision Agreement will not be finalized and no
new applications for registered products will be accepted or no new compensation
will be payable unless the appropriate proof of state licensing or no-action
relief is confirmed. In addition to a letter from Broker-Dealer's counsel,
copies of the following documentation is required:
-- life insurance licenses for all states in which Broker-Dealer holds
these licenses and intends to operate and/or;
-- life insurance licenses for any contractual affiliate or wholly owned
life agency; and
-- the SEC No-Action Letter that will be relied upon.
If you have any questions regarding these matters, please contact your Life
Licensing and Contracting representative.
8
<PAGE>
CERTIFICATE AMENDING AND RESTATING
THE CERTIFICATE OF INCORPORATION BY
ACTION OF THE BOARD OF DIRECTORS AND SHAREHOLDERS
1. The name of the Corporation is ITT HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY.
2. The Certificate of Incorporation is amended and restated by the following
resolution of the Board of Directors and Shareholder of the Corporation.
RESOLVED, that the Certificate of Incorporation of the Corporation, as
supplemented and amended to date, is further amended and restated to read
as follows:
Section 1. The name of the Corporation is ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY.
Section 2. The address of the Registered Office of the Corporation is
Hartford Plaza, Hartford, Connecticut 06104-2999.
Section 3. The Corporation is a body politic and corporate and shall
have all the powers granted by the general statutes, as now
enacted or hereinafter amended, to corporations formed under
the Stock Corporation Act.
Section 4. The Corporation shall have the purposes and powers to write
any and all forms of insurance which any other corporation
now or hereafter chartered in Connecticut and empowered to
do an insurance business may now or hereafter lawfully do;
to accept and to cede reinsurance; to issue policies and
contracts for any kind or combination of kinds of insurance;
to issue policies or contracts either with or without
participation in profits; to acquire and hold any or all of
the shares or other securities of any insurance corporation
or any other kind of corporation; and to engage in any
lawful act or activity for which corporations may be formed
under the Stock Corporation Act. The corporation is
authorized to exercise the powers herein granted in any
state, territory or jurisdiction of the United States or in
any foreign country.
Section 5. The Corporation shall obtain a license from the insurance
commissioner prior to the commencement of business and shall
be subject to all general statutes applicable to insurance
companies.
Section 6. The aggregate number of shares which the corporation shall
have authority to issue is 3,000 shares consisting of one
class only, designated as Common Shares, of the par value of
$1,250.
Section 7. No shareholder shall, because of his ownership of shares,
have a preemptive or
<PAGE>
-2-
other right to purchase, subscribe for, or take any part of
any shares or any part of the notes, debentures, bonds, or
other securities convertible into or carrying options or
warrants to purchase shares of this corporation issued,
optioned, or sold by it after its incorporation.
Section 8. The minimum amount of stated capital with which the
corporation shall commence business is One Thousand Dollars
($1,000.00).
Section 9. So much of the charter of said corporation is amended, as is
inconsistent herewith is repealed, provided such repeal
shall not invalidate or otherwise affect any action taken
pursuant to the charter of the corporation, in accordance
with its terms, prior to the effective date of such repeal.
3. The above resolution was passed by the Board of Directors and the
Shareholder of the Corporation. The number of shares entitled to vote
thereon was 3,000 and the vote required for adoption was 2,000 shares. The
vote favoring adoption was 3,000 which was the greatest vote needed to pass
the resolution.
4. The term of existence of the corporation shall be perpetual.
Dated at Simsbury, Connecticut this 30 day of April, 1996.
--
We hereby declare, under the penalties of false statement, that the statements
made in the foregoing Certificate are true.
ITT HARTFORD LIFE AND
ANNUITY INSURANCE COMPANY
/s/ Lowndes A. Smith
-----------------------------
Lowndes A. Smith, President
/s/ Lynda Godkin
- ----------------------------------------
Lynda Godkin, Associate General Counsel
and Corporate Secretary
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
EFFECTIVE MAY 1, 1996
<PAGE>
-2-
ARTICLE I
Name - Home Office
SECTION 1. This company shall be named ITT Hartford and Annuity Life Insurance
Company.
SECTION 2. The Company may have such principal and other business offices,
either within or without the State of Connecticut, as the Board of Directors may
designate or as the business of the Company may require.
SECTION 3. The registered office of the Company is Hartford Plaza, Hartford,
Connecticut 06104-2999.
ARTICLE II
Stockholders' Meetings - Notice-Quorum-Right to Vote
SECTION 1. All meetings of the stockholders shall be held at the principal
business office of the Company unless the Board of Directors shall otherwise
provide and direct.
SECTION 2. The annual meeting of the stockholders shall be held on such day and
at such hour as the Board of Directors may decide. For cause the Board of
Directors may postpone or adjourn such annual meeting to any other time during
the year.
SECTION 3. Special meetings of the stockholders may be called by the Board of
Directors, the Executive Committee, the Chairman or Vice Chairman of the Board,
the President or any Vice President.
SECTION 4. Notice of stockholders' meetings shall be delivered to each
stockholder, either personally or by mail at his address as it appears on the
records of the Company, at least seven days prior to the meeting. The notice
shall state the place, date and time of the meeting and shall specify all
matters proposed to be acted upon at the meeting.
SECTION 5. At each annual meeting, the stockholders shall choose Directors as
hereinafter provided.
SECTION 6. Each stockholder shall be entitled to one vote at all meetings of
the Company for each share of stock held by such stockholder. Proxies may be
authorized by written power of attorney.
<PAGE>
-3-
SECTION 7. A majority of the total number of shares entitled to vote,
represented in person or by proxy, shall constitute a quorum.
SECTION 8. Each stockholder shall be entitled to a certificate of stock which
shall be signed by the President or a Vice President, and either the Treasurer
or an Assistant Treasurer of the Company, and shall bear the seal of the
Company, but such signatures and seal may be facsimile.
ARTICLE III
Directors-Meetings-Quorum
SECTION 1. The property, business and affairs of the Company shall be managed
by a board of not less than three nor more than twenty Directors, who shall be
chosen by the stockholders at each annual meeting. Vacancies occurring between
annual meetings may be filled by the affirmative vote of a majority of the
Directors then in office. Each Director shall hold office until the next annual
meeting of stockholders and until his successor is chosen and qualified.
SECTION 2. Meetings of the Board of Directors may be called by the direction of
the Chairman of the Board, the President, or any three Directors.
SECTION 3. Three days' notice of meetings of the Board of Directors shall be
given to each Director, either personally or by mail or telegraph, at his
residence or usual place of business, but notice may be waived, at any time, in
writing, and attendance of a Director at a meeting shall constitute a waiver of
notice of such meeting except where a Director attends a meeting and objects
thereat to the transaction of any business on grounds that the meeting was not
lawfully called or convened.
SECTION 4. A majority of the number of existing directorships, but not less than
two Directors, shall constitute a quorum.
ARTICLE IV
Election of Officer - Duties of Board of
Directors and Executive Committee
SECTION 1. The Board of Directors shall annually elect a President, a Secretary
and a Treasurer. It may elect a Chairman of the Board, a Vice Chairman of the
Board and such Vice Presidents, other Secretaries, Assistant Secretaries,
Assistant Treasurers and other officers as it may determine. All officer of the
Company shall hold office during the pleasure of the Board of Directors.
<PAGE>
-4-
SECTION 2. The Directors may fill any vacancy among the officers by election
for the unexpired term.
SECTION 3. The Board of Directors may appoint from its own number an
Executive Committee of not less than five Directors. The Executive Committee may
exercise all powers vested in and conferred upon the Board of Directors at any
time when the Board is not in session. A majority of the members of said
Committee shall constitute a quorum. Meetings of the Committee shall be called
whenever the Chairman of the Board, the President or a majority of its members
shall request.
SECTION 4. The Board of Directors may annually appoint from its own number a
Finance Committee of not less than three Directors, whose duties shall be as
hereinafter provided.
SECTION 5. The Board of Directors may, at any time, appoint such other
committees, not necessarily from its own number, as it may deem necessary for
the proper conduct of the business of the Company, which committees shall have
only such powers and duties as are specifically assigned to them by the Board of
Directors or the Executive Committee.
For all meetings, forty-eight hours' notice shall be given but notice may be
waived, at any time, in writing, and attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting except where a Director attends a
meeting and objects thereat to the transaction of any business on grounds that
the meeting was not lawfully called or convened.
SECTION 6. The Board of Directors may authorize corporate contributions, in such
amounts as it determines to be reasonable, for public welfare or for charitable,
scientific or educational purposes, subject to the limits and restrictions
imposed by law and to such rules and regulations consistent with law as it
makes.
ARTICLE V
Officers
Chairman of the Board
and
Vice Chairman of the Board
SECTION 1. The Chairman of the Board shall preside at the meetings of the
Board of Directors and the Executive Committee and, in the absence of the
Chairman of the Finance Committee, at the meetings of the Finance Committee.
In the absence or inability of the Chairman of the Board to so preside, the Vice
Chairman shall preside in his place if there be one, otherwise the President
shall preside.
<PAGE>
-5-
SECTION 2. The Vice Chairman of the Board shall, in the absence of the Chairman
of the Board, exercise the powers and perform the duties of the Chairman of the
Board. He shall perform such other duties and have such other powers as may be
assigned to him by the Board of Directors.
President
SECTION 3. The President, unless the Board of Directors shall otherwise order
pursuant to Section 7 below, shall be the chief executive officer of the Company
and, subject to the control of the Board of Directors, shall in general
supervise and control all the business and affairs of the Company. Unless the
Board of Directors shall provide otherwise, he shall, when present, preside at
all meetings of the shareholders and shall preside at all meetings of the Board
of Directors unless the Board shall have elected a Chairman of the Board of
Directors. He shall have authority, subject to such rules as may be prescribed
by the Board of Directors, to appoint such agents and employees of the Company
as he shall deem necessary, to prescribe their powers, duties and compensation,
and to delegate authority to them. Such agents and employees shall hold office
at the discretion of the President. Except as otherwise provided in these
Bylaws or by resolution of the Board of Directors, the President shall have
authority to sign, execute and acknowledge, on behalf of the Company all
contracts, reports and other documents or instruments necessary or proper to be
executed in the course of the Company's regular business, or which shall be
authorized by resolution of the Board of Directors; and except as otherwise
provided by law or the Board of Directors, he may authorize any Vice President
or other officer or agent of the Company to sign, execute and acknowledge such
documents or instruments in his place and stead. In general, he shall perform
all duties incident to the office of the chief executive officer and such other
duties as may be prescribed by the Board of Directors from time to time.
If the President is not the chief executive officer, he shall have such duties
and authority as prescribed by the Board of Directors or the chief executive
officer.
SECTION 4. In the absence or inability of the President to perform his duties,
the Board or the Chairman thereof may designate a Vice President to exercise the
powers and perform the duties of the President during such absence or inability.
Secretary
SECTION 5. The Secretary shall keep a record of all the meetings of the
Company, of the Board of Directors and of the Executive Committee, and he shall
discharge all other duties specifically required of the Secretary by law.
<PAGE>
-6-
The other Secretaries and the Assistant Secretaries shall perform such duties as
may be assigned to them by the Board of Directors or by their senior officers
and any Secretary or Assistant Secretary may affix the seal of the Company and
attest it and the signature of any officer to any and all instruments.
Treasurer
SECTION 6. The Treasurer shall keep, or cause to be kept, full and accurate
accounts of the Company. He shall see that the funds of the Company are
disbursed as may be ordered by the Board of Directors, the Finance Committee or
a duly authorized individual. He shall have charge of all moneys paid to the
Company and shall deposit such to the credit of the Company or in any other
properly authorized name, in such banks or depositories as may be designated in
a manner provided by these Bylaws. He shall also discharge all other duties
that may be required of him by law.
Other Officers
SECTION 7. The other officers shall perform such duties as may be assigned to
them by the President or the Board of Directors. The Board of Directors may
designate the Chairman of the Board or the Vice Chairman as the chief executive
officer of the Company. In such event that person shall assume all authority,
power, duties and responsibilities otherwise appointed to the President pursuant
to Section 3 above, and all references to the President in these Bylaws shall be
regarded as references to the Chairman of the Board or Vice Chairman, as the
case may be, as such chief executive officer, except where a contrary meaning is
clearly required, and provided that in no case shall that person be empowered in
place of the President to sign the certificates for shares of stock of the
Company.
ARTICLE VI
Finance Committee
SECTION 1. If a Finance Committee is established, it shall be the duty of that
committee to supervise the investment of the funds of the Company in securities
in which insurance companies are permitted by law to invest, and all other
matters connected with the management of investments. If no Finance Committee
is established, this duty shall be performed by the Board of Directors.
SECTION 2. All loans or purchases for the investment and reinvestment of the
funds of the Company shall be submitted for approval to the Finance Committee,
if not specifically approved by the Board of Directors.
<PAGE>
-7-
SECTION 3. Sale or transfer of any stocks or bonds shall be made upon
authorization of the Finance Committee unless specifically authorized by the
Board of Directors.
SECTION 4. Transfers of stock and registered bonds, deeds, leases, releases,
sales, mortgages chattel or real, assignments or partial releases of mortgages
chattel or real, and in general all instruments of defeasance of property and
all agreements or contracts affecting the same, except discharges of mortgages
and entries to foreclose the same as hereinafter provided, shall be authorized
by the Finance Committee or the Board of Directors, and be executed jointly for
the Company by two persons, to wit: the Chairman of the Board, the Vice
Chairman, the President or a Vice President, and a Secretary, the Treasurer or
an Assistant Treasurer, but may be acknowledged and delivered by either one of
those executing the instrument; provided, however, that either a Secretary, the
Treasurer, or an Assistant Treasurer alone, when authorized as aforesaid, or any
person specially authorized by the Finance Committee as attorney for the
Company, may make entry to foreclose any mortgage, and a Secretary, the
Treasurer or an Assistant Treasurer alone is authorized, without the necessity
of further authority, to discharge by deed or otherwise any mortgage on payment
to the Company of the principal, interest and all charges due.
SECTION 5. The Finance Committee may fix times and places for regular
meetings. No notice of regular meetings shall be necessary. Reasonable notice
shall be given of special meetings but the action of a majority of the Finance
Committee at any meeting shall be valid notwithstanding any defect in the notice
of such meeting.
SECTION 6. In the absence of specific authorization from the Board of
Directors or the Finance Committee, the Chairman of the Board, the President, a
Vice President or the Treasurer shall have the power to vote or execute proxies
for voting any shares held by the Company.
ARTICLE VII
Funds
SECTION 1. All monies belonging to the Company shall be deposited to the
credit of the Company, or in such other name as the Finance Committee, the
Chairman of the Finance Committee or such executive officers as are designated
by the Board of Directors shall direct, in such bank or banks as may be
designated from time to time by the Finance Committee, the Chairman of the
Finance Committee or by such executive officers as are designated by the Board
of Directors. Such monies shall be drawn only on checks or drafts signed by any
two executive officers of the Company, provided that the Board of Directors may
authorize the withdrawal of such monies by check or draft signed with the
facsimile signature of any one or more executive officers, and provided further,
that the Finance Committee may authorize such alternative methods of withdrawal
as it deems proper.
<PAGE>
-8-
The Board of Directors, the President, the Chairman of the Finance Committee, a
Vice President, or such executive officers as are designated by the Board of
Directors may authorize withdrawal of funds by checks or drafts drawn at offices
of the Company to be signed by Managers, General Agents, or employees of the
Company, provided that all such checks or drafts shall be signed by two such
authorized persons, except checks or drafts used for the payment of claims or
losses which need to be signed by only one such authorized person, and provided
further that the Board of Directors of the Company or executive officers
designated by the Board of Directors may impose such limitations or restrictions
upon the withdrawal of such funds as it deems proper.
ARTICLE VIII
Liability and Indemnity
SECTION 1. No person shall be liable to the Company for any loss or damage
suffered by it on account of any action taken or omitted to be taken by him as
director or officer of the Company, or of any other company, partnership, joint
venture, trust or other enterprise for which he serves as a director, officer
or employee at the request of the Company, in good faith, if such person (a)
exercised and used the same degree of care and skill as a prudent man would have
exercised or used under the circumstances in the conduct of his own affairs, or
(b) took or omitted to take such action in reliance upon advice of counsel for
the Company or upon statements made or information furnished by officers or
employees of the Company which he had reasonable grounds to believe to be true.
The foregoing shall not be exclusive of other rights and defenses to which he
may be entitled as a matter of law.
SECTION 2. The Company shall indemnify any person who was or is a party or
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, (other than one by or in the right of the Company) by reason
of the fact that he is or was a director, officer or employee of the Company, or
is or was serving at the request of the Company as a director, officer or
employee of another company, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding had reasonable
cause to believe that his conduct was unlawful.
SECTION 3. The Company shall indemnify any person who was or is a party or is
threatened to
<PAGE>
-9-
be made a party to any threatened, pending or completed action, suit or
proceeding, by or in the right of the Company to procure a judgment in its
favor by reason of the fact that he is or was a director, officer or
employee of the Company, or is or was serving at the request of the Company as a
director, officer or employee of another company, partnership, joint venture,
trust or other enterprise against expenses, including attorneys' fees, actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company, except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Company unless and only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability and in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as such court shall deem proper.
SECTION 4. Expenses, including attorneys' fees, incurred in defending a civil
or criminal action, suit or proceeding may be paid by the Company in advance of
the final disposition of such action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or employee to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Company as authorized hereby.
SECTION 5. The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any statute, bylaw, agreement, vote of shareholders or of disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer or employee and shall inure to
the benefit of the heirs, executors and administrators of such a person.
ARTICLE IX
Amendment of Bylaws
SECTION 1. The Directors shall have power to adopt, amend and repeal such
bylaws as may be deemed necessary or appropriate for the management of the
property and affairs of the Company.
SECTION 2. The stockholders at any annual or special meeting may amend or
repeal these bylaws or adopt new ones if the notice of such meeting contains a
statement of the proposed alteration, amendment, repeal or adoption of the
substance thereof. Bylaws amended or adopted by the stockholders may be amended
or repealed by the Directors.
<PAGE>
-10-
ARTICLE X
Term of Existence
SECTION 1. The term of existence of the corporation shall be perpetual.
This is to certify that the foregoing is a true copy of the Bylaws of ITT
Hartford Life and Annuity Insurance Company in full force and effect on this
first day of May, 1996.
Attest:
- ---------------------------------
Gregory A. Boyko
Vice President
<PAGE>
[Exhibit 9]
March 15, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: SEPARATE ACCOUNT THREE ("SEPARATE ACCOUNT")
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY ("COMPANY")
FILE NO. 33-80732
Dear Sir/Madam:
In my capacity as Associate General Counsel of the Company, I have supervised
the establishment of the Separate Account by the Board of Directors of the
Company as a separate account for assets applicable to Contracts offered by
the Company pursuant to Wisconsin law. I have participated in the
preparation of the registration statement for the Separate Account on Form
N-4 under the Securities Act of 1933 and the Investment Company Act of 1940
with respect to the Contracts.
I am of the following opinion:
1. The Separate Account is a separate account of the Company validly existing
pursuant to Wisconsin law and the regulations issued thereunder.
2. The assets held in the Separate Account are not chargeable with liabilities
arising out of any other business the Company may conduct.
3. The Contracts are legally issued and represent binding obligations of the
Company.
In arriving at the foregoing opinion, I have made such examination of the law
and examined such records and other documents as in my opinion as are necessary
or appropriate.
I hereby consent to the filing of this opinion as an exhibit to the registration
statement under the Securities Act of 1933.
Sincerely,
/s/ Lynda Godkin
Lynda Godkin
Associate General Counsel & Secretary
<PAGE>
Exhibit 10
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this Registration Statement File No. 33-80732 for ITT Hartford Life and Annuity
Insurance Company Separate Account Three on Form N-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 24, 1996
<PAGE>
EXHIBIT 26
PERSONS CONTROLLED BY OR UNDER COMMON
CONTROL WITH THE DEPOSITOR OR REGISTRANT
ITT Hartford Group, Inc..
(Delaware)
|
Hartford Fire Insurance Company
(Connecticut)
|
Hartford Accident and Indemnity Company
(Connecticut)
|
Hartford Life and Accident Insurance Company
(Connecticut)
|
|
|
|
|
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alpine Life Hartford Financial Hartford Life American Maturity
Insurance Company Services Life Insurance Company Life Insurance
(New Jersey) Insurance Co. (Connecticut) Company
(Connecticut) | (Connecticut)
|
|
|
|
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
ITT Hartford ITT Hartford The Hartford Hartford Hartford Securities
Life and Annuity International Life Investment Equity Sales Distribution
Insurance Company Reassurance Corp Management Co. Company, Inc. Company, Inc.
(Connecticut) (Connecticut) (Connecticut) (Connecticut) (Connecticut)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 13,548,628
<INVESTMENTS-AT-VALUE> 14,573,496
<RECEIVABLES> 11,174
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14,584,670
<PAYABLE-FOR-SECURITIES> 10,828
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 10,828
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 14,573,842
<DIVIDEND-INCOME> 146,964
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 70,423
<NET-INVESTMENT-INCOME> 76,541
<REALIZED-GAINS-CURRENT> 1,014
<APPREC-INCREASE-CURRENT> 1,024,868
<NET-CHANGE-FROM-OPS> 1,102,423
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 14,573,842
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.000
<PER-SHARE-NII> 0.000
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0.000
<EXPENSE-RATIO> 0.000
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
