<PAGE>
As filed with the Securities and Exchange Commission on April 12, 1999.
File No. 333-69491
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. ___ [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 11 [X]
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT THREE
(Exact Name of Registrant)
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Name of Depositor)
P. O. Box 2999
Hartford, CT 06104-2999
(Address of Depositor's Principal Offices)
(860) 843-4891
(Depositor's Telephone Number, Including Area Code)
Brian Lord
Hartford Life
P. O. Box 2999
Hartford, CT 06104-2999
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
___ on __________, 1999 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on __________, 1999 pursuant to paragraph (a)(1) of Rule 485
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
PURSUANT TO RULE 24F-2(a) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration shall become effective on such
date as the Commission, acting pursuant to Section 8(a), may determine.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(A)
<TABLE>
<CAPTION>
N-4 Item No. Prospectus Heading
- - --------------------------------------------------------------------
<S> <C>
1. Cover Page Hartford Life and Annuity Insurance Company -
Separate Account Three
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Yield Information
Information
5. General Description of Hartford Life Insurance Company, The Separate
Registrant Account, The Fixed Accounts, and The Funds
6. Deductions Contract Charges
7. General Description of The Contract, The Separate Account, The
Annuity Contracts Fixed Accounts, and Surrenders
8. Annuity Period Settlement Provisions
9. Death Benefit Death Benefits
10. Purchases and Contract Value The Contract, and Contract Value
11. Redemptions Surrenders
12. Taxes Federal Tax Considerations
13. Legal Proceedings Legal Matters and Experts
14. Table of Contents of the Table of Contents to
Statement of Additional Statement of Additional
Information Information
15. Cover Page Part B; Statement of Additional
Information
16. Table of Contents Table of Contents
17. General Information and History Summary
<PAGE>
18. Services None
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Data Calculation of Yield and Return
22. Annuity Payments Settlement Provisions
23. Financial Statements Financial Statements
24. Financial Statements and Financial Statements and
Exhibits Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Common Control with the Depositor
Depositor or Registrant or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Location of Accounts and Records
Records
31. Management Services Management Services
32. Undertakings Undertakings
</TABLE>
<PAGE>
PART A
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
DEAN WITTER SELECT DIMENSIONS VARIABLE ANNUITY
SEPARATE ACCOUNT THREE
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: 1-800-862-6668 (Contract Owners)
1-800-862-4397 (Account Executive)
- - --------------------------------------------------------------------------------
This Prospectus describes information you should know before you purchase Series
II of Dean Witter Select Dimensions variable annuity. Please read it carefully.
Dean Witter Select Dimensions variable annuity is a Contract between you and
Hartford Life and Annuity Insurance Company where you agree to make at least one
payment to us and we agree to make a series of annuity payments to you at a
later date. This annuity is a flexible premium, tax-deferred, variable annuity
offered to both individuals and groups. It is:
x Flexible, because you may add premium payments at any time.
x Tax-deferred, which means you don't pay taxes until you take money out or
until we start to make annuity payments to you.
x Variable, because the value of your annuity will fluctuate with the
performance of the underlying investment portfolio ("Portfolios").
At purchase, you allocate your premium payment, which is any purchase payment
less any Premium Taxes, to "Sub-Accounts". These are subdivisions of our
Separate Account, an account that keeps your annuity assets separate from our
company assets. The Sub-Accounts then purchase shares of mutual funds set up
exclusively for variable annuity or variable life insurance products. These
mutual funds are not the same mutual funds that you buy through your stockbroker
or through a retail mutual fund. They may have similar investment strategies and
the same portfolio managers as retail mutual funds. This annuity offers you
portfolios with investment strategies ranging from conservative to aggressive
and you may pick those portfolios that meet your investment goals and risk
tolerance. The Sub-Accounts and the portfolios are listed below:
- - - Money Market Sub-Account which purchases shares of Money Market Portfolio of
the Morgan Stanley Dean Witter Select Dimensions Investment Series;
- - - North American Government Securities Sub-Account which purchases shares of
North American Government Securities Portfolio of the Morgan Stanley Dean
Witter Select Dimensions Investment Series;
- - - Diversified Income Sub-Account which purchases shares of Diversified Income
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series;
- - - Balanced Growth Sub-Account which purchases shares of Balanced Growth
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series;
- - - Utilities Sub-Account which purchases shares of Utilities Portfolio of the
Morgan Stanley Dean Witter Select Dimensions Investment Series;
- - - Dividend Growth Sub-Account which purchases shares of Dividend Growth
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series;
- - - Value-Added Market Sub-Account which purchases shares of Value-Added Market
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series;
- - - Growth Sub-Account which purchases shares of Growth Portfolio of the Morgan
Stanley Dean Witter Select Dimensions Investment Series;
- - - American Value Sub-Account which purchases shares of American Value Portfolio
of the Morgan Stanley Dean Witter Select Dimensions Investment Series;
- - - Mid-Cap Growth Sub-Account which purchases shares of Mid-Cap Growth Portfolio
of the Morgan Stanley Dean Witter Select Dimensions Investment Series;
- - - Global Equity Sub-Account which purchases shares of Global Equity Portfolio of
the Morgan Stanley Dean Witter Select Dimensions Investment Series;
1 - PROSPECTUS
<PAGE>
- - - Developing Growth Sub-Account which purchases shares of Developing Growth
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series;
- - - Emerging Markets Sub-Account which purchases shares of Emerging Markets
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series;
- - - High Yield Sub-Account which purchases shares of High Yield Portfolio of the
Morgan Stanley Dean Witter Universal Funds, Inc.;
- - - Mid-Cap Value Sub-Account which purchases shares of Mid-Cap Value Portfolio of
the Morgan Stanley Dean Witter Universal Funds, Inc.;
- - - Emerging Markets Debt Sub-Account which purchases shares of Emerging Markets
Debt Portfolio of the Morgan Stanley Dean Witter Universal Funds, Inc.;
- - - Strategic Stock Sub-Account which purchases shares of Strategic Stock
Portfolio of the Van Kampen Life Investment Trust;
- - - Enterprise Sub-Account which purchases shares of Enterprise Portfolio of the
Van Kampen Life Investment Trust.
You may also allocate some or all of your premium payment to one of the "Fixed
Accounts", which pays an interest rate guaranteed for a certain time period from
the time the payment is made. Premium payments put in a Fixed Account are not
segregated from our company assets like the assets of the Separate Account.
If you decide to buy this annuity, you should keep this prospectus for your
records. You can also call us at 1-800-862-6668 to get a Statement of Additional
Information, free of charge. The Statement of Additional Information contains
more information about this annuity and, like this prospectus, is filed with the
Securities and Exchange Commission. We have included the Table of Contents for
the Statement of Additional Information at the end of this Prospectus.
Although we file the Prospectus and the Statement of Additional information with
the Securities and Exchange Commission, the Commission doesn't approve or
disapprove these securities or determine if the information is truthful or
complete. Anyone who represents that the Securities and Exchange Commission does
these things may be guilty of a criminal offense.
This Prospectus and the Statement of Additional Information can also be obtained
from the Securities and Exchange Commissions' website (HTTP://WWW.SEC.GOV).
This annuity IS NOT:
- - - A bank deposit or obligation
- - - Federally insured
- - - Endorsed by any bank or governmental agency
This annuity may not be available for sale in all states.
Prospectus Dated: May 3, 1999
Statement of Additional Information Dated: May 3, 1999
2 - PROSPECTUS
<PAGE>
TABLE OF CONTENTS
--------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----------------------------------------------------------------------------
<S> <C>
Glossary of Special Terms 4
----------------------------------------------------------------------------
Fee Table 6
----------------------------------------------------------------------------
Summary 10
----------------------------------------------------------------------------
Hartford Life and Annuity Insurance Company 12
----------------------------------------------------------------------------
The Separate Account 12
----------------------------------------------------------------------------
The Portfolios 12
----------------------------------------------------------------------------
The Investment Advisers 14
----------------------------------------------------------------------------
Performance Related Information 15
----------------------------------------------------------------------------
The Fixed Accounts 16
----------------------------------------------------------------------------
The Contract 17
----------------------------------------------------------------------------
Contract Value - Before the Annuity Commencement Date 18
----------------------------------------------------------------------------
Contract Value Transfers Before and After the Annuity Commencement
Date 18
----------------------------------------------------------------------------
Surrenders 19
----------------------------------------------------------------------------
Contract Charges 20
----------------------------------------------------------------------------
Death Benefits 22
----------------------------------------------------------------------------
Settlement Provisions 23
----------------------------------------------------------------------------
Annuity Payments 24
----------------------------------------------------------------------------
Other Information 26
----------------------------------------------------------------------------
<CAPTION>
PAGE
<S> <C>
----------------------------------------------------------------------------
Federal Tax Considerations 26
----------------------------------------------------------------------------
A. General 26
----------------------------------------------------------------------------
B.Taxation Of Hartford and The Separate Account 26
----------------------------------------------------------------------------
C.Taxation Of Annuities - General Provisions Affecting Purchasers
Other Than Qualified Retirement Plans 27
----------------------------------------------------------------------------
D. Federal Income Tax Withholding 29
----------------------------------------------------------------------------
E.General Provisions Affecting Qualified Retirement Plans 30
----------------------------------------------------------------------------
F.Annuity Purchases by Nonresident Aliens and Foreign Corporations 30
----------------------------------------------------------------------------
Miscellaneous 30
----------------------------------------------------------------------------
How Contracts Are Sold 30
----------------------------------------------------------------------------
Year 2000 30
----------------------------------------------------------------------------
Legal Matters 31
----------------------------------------------------------------------------
More Information 32
----------------------------------------------------------------------------
Appendix I - Information Regarding Tax-Qualified Plans 33
----------------------------------------------------------------------------
Appendix II - Optional Death Benefit- Examples 36
----------------------------------------------------------------------------
Table of Contents to Statement of Additional Information 37
----------------------------------------------------------------------------
</TABLE>
3 - PROSPECTUS
<PAGE>
GLOSSARY OF SPECIAL TERMS
--------------------------------------------------------------------
ACCOUNT: Any of the Sub-Accounts or Fixed Accounts.
ACCUMULATION UNIT: A unit of measure we use to calculate values before we begin
to make annuity payments to you.
ADMINISTRATIVE OFFICE: Located at 200 Hopmeadow Street, Simsbury, CT 06089. The
mailing address is Post Office Box 5085, Hartford, CT 06104-5085.
ANNIVERSARY VALUE: The value equal to the Contract Value as of a Contract
Anniversary, increased by the dollar amount of any premium payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary.
ANNUAL MAINTENANCE FEE: An annual $30 charge for annuities having a value of
less than $50,000 on the most recent Contract Anniversary or when the annuity is
Surrendered in full. The charge is deducted proportionately from the portfolios
in use at the time.
ANNUITANT: The person on whose life the Contract is based. The Annuitant may not
be changed.
ANNUITY: A Contract issued by us that provides, in exchange for premium
payments, a series of annuity payments.
ANNUITY CALCULATION DATE: The date we calculate your first annuity payment.
ANNUITY COMMENCEMENT DATE: The date we start to make annuity payments to you.
ANNUITY UNIT: A unit of measure we use to calculate the value of the annuity
payments we make to you.
ASSUMED INVESTMENT RETURN ("AIR"): The investment return, either 3%, 5% or 6%,
which we base your variable dollar amount payments on. You select the AIR before
we start to make annuity payments.
BENEFICIARY: The person or persons you designate to receive payment of the death
benefit upon the death of the Contract Owner.
CODE: The Internal Revenue Code of 1986, as amended.
CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before we begin making annuity payments.
CONTRACT: The contract is the individual Annuity contract and any endorsements
or riders. If you have a group annuity, you will receive a certificate rather
than a contract.
CONTRACT ANNIVERSARY: The annual anniversary of the date we issued your annuity.
If your contract anniversary falls on a day that is not a Valuation Day, then
the next Valuation Day will be your Contract Anniversary for that year.
CONTRACT OWNER(S) OR YOU: The owner(s) or holder(s) of this Annuity.
CONTRACT VALUE: The total value of your Annuity that we get by adding up the
value of each of your Sub-Accounts and Fixed Accounts on any Valuation Day.
CONTRACT YEAR: The 12 months following the date you purchased your annuity and
from any Contract Anniversary.
DOLLAR COST AVERAGING ("DCA"): Systematic transfers from one Account to another.
DCA PROGRAM FIXED ACCOUNTS: Fixed Accounts we establish to use for dollar cost
averaging programs. These are part of our General Account.
DEATH BENEFIT: The amount we pay when the Contract Owner or the Annuitant dies.
DUE PROOF OF DEATH: A certified copy of a death certificate, an order of a court
of competent jurisdiction, or any other proof acceptable to us.
FIXED ACCOUNT: This is an account that is part of our General Account. You may
allocate all or a portion of your premium payments or transfer of Contract Value
to this account.
FUNDS: Currently, the Morgan Stanley Dean Witter Select Dimensions Investment
Series, The Morgan Stanley Universal Funds, Inc. and the Van Kampen American
Capital Life Investment Trust.
GENERAL ACCOUNT: Our General Account that includes our company assets and your
annuity assets allocated to any of the Fixed Accounts or DCA Program Fixed
Accounts.
HARTFORD OR WE: Hartford Life and Annuity Insurance Company.
INTEREST ACCUMULATION VALUE: This is the amount which we use for the purpose of
calculating the optional interest accumulation death benefit.
MAXIMUM ANNIVERSARY VALUE: This is the highest Anniversary Value prior the
deceased's 81st birthday or the date of death, if earlier.
PAYEE: The person or party designated by you to receive annuity payments.
PREMIUM TAX: A tax charged by a state or municipality on premium payments.
SEPARATE ACCOUNT: An account that we establish to separate the assets for your
annuity Sub-Accounts from our company assets. Hartford Life and Annuity
Insurance Company Separate Account Three.
SUB-ACCOUNT: Divisions established within the Separate Account.
SURRENDER: A complete or partial withdrawal or distribution from your annuity.
4 - PROSPECTUS
<PAGE>
SURRENDER VALUE: What we pay you if you terminate your annuity before we begin
to make annuity payments.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined as of the close of the New York
Stock Exchange (generally 4:00 p.m. Eastern Time).
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
5 - PROSPECTUS
<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
- - ---------------------------------------------------------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE (as a percentage of amounts Surrendered)(1)
First Year (2) 7%
- - ---------------------------------------------------------------------------------------------------------------------------------
Second Year 6%
- - ---------------------------------------------------------------------------------------------------------------------------------
Third Year 6%
- - ---------------------------------------------------------------------------------------------------------------------------------
Fourth Year 5%
- - ---------------------------------------------------------------------------------------------------------------------------------
Fifth Year 4%
- - ---------------------------------------------------------------------------------------------------------------------------------
Sixth Year 3%
- - ---------------------------------------------------------------------------------------------------------------------------------
Seventh Year 2%
- - ---------------------------------------------------------------------------------------------------------------------------------
Eighth Year 0%
- - ---------------------------------------------------------------------------------------------------------------------------------
Annual Maintenance Fee (3) $30
- - ---------------------------------------------------------------------------------------------------------------------------------
ANNUAL EXPENSES - SEPARATE ACCOUNT (as a percentage of daily Sub-Account value)
Mortality and Expense Risk 1.250%
- - ---------------------------------------------------------------------------------------------------------------------------------
Administrative Fees 0.150%
- - ---------------------------------------------------------------------------------------------------------------------------------
Total 1.400%
- - ---------------------------------------------------------------------------------------------------------------------------------
Optional Charges
Optional Interest Accumulation Death Benefit (as a percentage of daily Sub-Account value) .15%
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Contingent Deferred Sales Charge is not assessed on partial Surrenders
which do not exceed 15% of premium payments each Contract year, on a
non-cumulative basis.
(2) Length of time from each premium payment.
(3) The Annual Maintenance Fee is a single $30 charge on a Contract deducted
each Contract Anniversary or upon Surrender. It is deducted proportionally
from the investment options in use at the time of the charge. The Annual
Maintenance Fee is deducted only when the Contract Value is less than
$50,000.
The purpose of this table is to assist you in understanding various costs and
expenses that your will bear directly or indirectly. The table reflects expenses
of the Separate Account and underlying Portfolios. We will deduct any Premium
Taxes that apply.
6 - PROSPECTUS
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OPERATING
FEES EXPENSES
INCLUDING OTHER INCLUDING
WAIVERS EXPENSES WAIVERS
<S> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES:
Money Market Portfolio 0.500% 0.050% 0.550%
- - ------------------------------------------------------------------------------------------------------------------------------
North American Government Securities Portfolio 0.650% 0.500% 1.150%
- - ------------------------------------------------------------------------------------------------------------------------------
Diversified Income Portfolio 0.400% 0.090% 0.490%
- - ------------------------------------------------------------------------------------------------------------------------------
Balanced Growth Portfolio 0.620% 0.090% 0.710%
- - ------------------------------------------------------------------------------------------------------------------------------
Utilities Portfolio 0.650% 0.060% 0.710%
- - ------------------------------------------------------------------------------------------------------------------------------
Dividend Growth Portfolio 0.600% 0.030% 0.630%
- - ------------------------------------------------------------------------------------------------------------------------------
Value-Added Market Portfolio 0.500% 0.050% 0.550%
- - ------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio 0.810% 0.250% 1.060%
- - ------------------------------------------------------------------------------------------------------------------------------
American Value Portfolio 0.620% 0.040% 0.660%
- - ------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio (1) 0.750% 0.230% 0.980%
- - ------------------------------------------------------------------------------------------------------------------------------
Global Equity Portfolio 1.000% 0.100% 1.100%
- - ------------------------------------------------------------------------------------------------------------------------------
Developing Growth Portfolio 0.500% 0.090% 0.590%
- - ------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Portfolio 1.250% 0.480% 1.730%
- - ------------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.:
High Yield Portfolio (2) 0.150% 0.650% 0.800%
- - ------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Portfolio (2) 0.230% 0.820% 1.050%
- - ------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt Portfolio (2) 0.270% 1.250% 1.520%
- - ------------------------------------------------------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST:
Strategic Stock Portfolio (3) 0.000% 0.650% 0.650%
- - ------------------------------------------------------------------------------------------------------------------------------
Enterprise Portfolio (3) 0.460% 0.140% 0.600%
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) With respect to the Mid-Cap Growth Portfolio, the expense information shown
in the table above has been restated to reflect the current fees. Prior to
April 30, 1999, the investment adviser, Morgan Stanley Dean Witter Advisors
Inc., assumed all expenses of the Portfolio and waived the compensation
provided for the Portfolio in its management agreement with the Fund.
(2) With respect to the High Yield, Mid-Cap Value and Emerging Markets Debt
Portfolios, the investment advisers have voluntarily agreed to waive their
investment advisory fees and to reimburse the Portfolios for certain other
expenses. Absent such reductions, it is estimated that "Management Fees",
"Other Expenses" and "Total Fund Operating Expenses" for the Portfolios
would have been as follows:
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
PORTFOLIO FEES EXPENSES EXPENSES
<S> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------------------
High Yield 0.500% 0.650% 1.150%
- - ------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value 0.750% 0.820% 1.570%
- - ------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt 0.800% 1.250% 2.050%
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(3) With respect to the Strategic Stock Portfolio and the Enterprise Portfolio,
the investment adviser, Van Kampen Asset Management Inc. has voluntarily
agreed to waive its investment advisory fees and to reimburse the
Portfolios if such fees would cause their respective "Total Fund Operating
Expenses" to exceed those set forth in the table above. Absent such
reductions, it is estimated that "Management Fees", "Other Expenses" and
"Total Fund Operating Expenses" for the Portfolios would have been as
follows:
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
PORTFOLIO FEES EXPENSES EXPENSES
<S> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------------------
Strategic Stock 0.500% 2.090% 2.590%
- - ------------------------------------------------------------------------------------------------------------------------------
Enterprise 0.500% 0.170% 0.670%
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7 - PROSPECTUS
<PAGE>
EXAMPLE
THE FOLLOWING TABLE ASSUMES THE OPTIONAL INTEREST ACCUMULATION DEATH BENEFIT WAS
ELECTED:
<TABLE>
<CAPTION>
IF YOU SURRENDER YOUR CONTRACT IF YOU ANNUITIZE YOUR CONTRACT
AT THE END OF THE APPLICABLE AT THE END OF THE APPLICABLE
TIME PERIOD YOU WOULD PAY THE TIME PERIOD YOU WOULD PAY THE
FOLLOWING EXPENSES ON A $1,000 FOLLOWING EXPENSES ON A $1,000
INVESTMENT, ASSUMING A 5% INVESTMENT, ASSUMING A 5%
ANNUAL RETURN ON ASSETS: ANNUAL RETURN ON ASSETS:
- - ------------------------------------------------------------------------------------------------
3 5 10 3 5 10
SUB-ACCOUNT 1 YEAR YEARS YEARS YEARS 1 YEAR YEARS YEARS YEARS
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market $85 $122 $153 $251 $22 $68 $116 $251
- - ------------------------------------------------------------------------------------------------
North American Government
Securities 91 141 184 312 28 86 147 311
- - ------------------------------------------------------------------------------------------------
Diversified Income 85 120 150 245 21 66 113 244
- - ------------------------------------------------------------------------------------------------
Balanced Growth 87 127 161 268 23 73 125 267
- - ------------------------------------------------------------------------------------------------
Utilities 87 127 161 268 23 73 125 267
- - ------------------------------------------------------------------------------------------------
Dividend Growth 86 125 157 260 22 70 120 259
- - ------------------------------------------------------------------------------------------------
Value-Added Market 85 122 153 251 22 68 116 251
- - ------------------------------------------------------------------------------------------------
Growth 90 138 179 303 27 83 143 303
- - ------------------------------------------------------------------------------------------------
American Value 86 126 159 263 23 71 122 262
- - ------------------------------------------------------------------------------------------------
Mid-Cap Growth 80 105 124 192 16 51 88 191
- - ------------------------------------------------------------------------------------------------
Global Equity 91 139 181 307 27 85 145 307
- - ------------------------------------------------------------------------------------------------
Developing Growth 86 124 155 255 22 69 118 255
- - ------------------------------------------------------------------------------------------------
Emerging Markets 97 158 213 368 34 104 176 367
- - ------------------------------------------------------------------------------------------------
High Yield 88 130 166 277 24 75 129 276
- - ------------------------------------------------------------------------------------------------
Mid-Cap Value 90 138 179 302 27 83 142 302
- - ------------------------------------------------------------------------------------------------
Emerging Markets Debt 95 152 202 348 31 97 166 347
- - ------------------------------------------------------------------------------------------------
Strategic Stock 86 125 158 262 23 71 122 261
- - ------------------------------------------------------------------------------------------------
Enterprise 86 124 156 257 22 69 119 256
- - ------------------------------------------------------------------------------------------------
<CAPTION>
IF YOU DO NOT SURRENDER YOUR
CONTRACT, YOU WOULD PAY THE
FOLLOWING EXPENSES ON A $1,000
INVESTMENT, ASSUMING A 5%
ANNUAL RETURN ON ASSETS:
- - ------------------------------
3 5 10
SUB-ACCOUNT 1 YEAR YEARS YEARS YEARS
- - ------------------------------
<S> <C> <C> <C> <C>
Money Market $22 $68 $117 $251
- - ------------------------------
North American Government
Securities 28 87 148 312
- - ------------------------------
Diversified Income 22 66 114 245
- - ------------------------------
Balanced Growth 24 73 125 268
- - ------------------------------
Utilities 24 73 125 268
- - ------------------------------
Dividend Growth 23 71 121 260
- - ------------------------------
Value-Added Market 22 68 117 251
- - ------------------------------
Growth 27 84 143 303
- - ------------------------------
American Value 23 72 123 263
- - ------------------------------
Mid-Cap Growth 17 51 88 192
- - ------------------------------
Global Equity 28 85 145 307
- - ------------------------------
Developing Growth 23 70 119 255
- - ------------------------------
Emerging Markets 34 104 177 368
- - ------------------------------
High Yield 25 76 130 277
- - ------------------------------
Mid-Cap Value 27 84 143 302
- - ------------------------------
Emerging Markets Debt 32 98 166 348
- - ------------------------------
Strategic Stock 23 71 122 262
- - ------------------------------
Enterprise 23 70 120 257
- - ------------------------------
</TABLE>
In the Example, the Annual Maintenance Fee is approximately a 0.08% annual asset
charge based on the experience of the Contracts. This Example should not be
considered a representation of past or future expenses and actual expenses may
be greater or less than those shown.
Pursuant to requirements of the Investment Company Act of 1940, the Annual
Maintenance Fee has been reflected in the Examples by a method intended to show
the "average" impact of the Annual Maintenance Fee on an investment in the
Separate Account.
8 - PROSPECTUS
<PAGE>
THE FOLLOWING TABLE ASSUMES THE OPTIONAL INTEREST ACCUMULATION DEATH BENEFIT WAS
NOT ELECTED:
If you Surrender your Contract at the end of the applicable time period you
would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets:
If you annuitize your Contract at the end of the applicable time period you
would pay the following expenses on a $1,000 investment, assuming a 5% annual
return on assets:
If you do not Surrender your Contract, you would pay the following expenses on a
$1,000 investment, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market............................ $ 84 $ 118 $ 145 $ 236 $ 20 $ 63 $ 109
North American Government Securities.... 90 136 176 297 26 81 139
Diversified Income...................... 83 116 142 229 19 61 105
Balanced Growth......................... 85 123 154 252 22 68 117
Utilities............................... 85 123 154 252 22 68 117
Dividend Growth......................... 84 120 149 244 21 65 113
Value-Added Market...................... 84 118 145 236 20 63 109
Growth.................................. 89 133 172 288 25 79 135
American Value.......................... 85 121 151 247 21 66 114
Mid-Cap Growth.......................... 78 100 116 176 14 46 80
Global Equity........................... 89 135 174 292 26 80 137
Developing Growth....................... 84 119 147 240 20 64 111
Emerging Markets........................ 96 154 205 354 32 99 169
High Yield.............................. 86 125 158 262 23 71 122
Mid-Cap Value........................... 89 133 171 287 25 78 134
Emerging Markets Debt................... 94 147 195 334 30 93 158
Strategic Stock......................... 85 121 150 246 21 66 114
Enterprise.............................. 84 119 148 241 21 65 111
<CAPTION>
10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Money Market............................ $ 235 $ 21 $ 64 $ 109 $ 236
North American Government Securities.... 297 27 82 140 297
Diversified Income...................... 228 20 62 106 229
Balanced Growth......................... 252 22 69 118 252
Utilities............................... 252 22 69 118 252
Dividend Growth......................... 243 21 66 113 244
Value-Added Market...................... 235 21 64 109 236
Growth.................................. 288 26 79 136 288
American Value.......................... 246 22 67 115 247
Mid-Cap Growth.......................... 175 15 46 80 176
Global Equity........................... 292 26 81 138 292
Developing Growth....................... 239 21 65 111 240
Emerging Markets........................ 353 33 100 169 354
High Yield.............................. 261 23 71 122 262
Mid-Cap Value........................... 287 26 79 135 287
Emerging Markets Debt................... 333 31 93 159 334
Strategic Stock......................... 245 22 67 114 246
Enterprise.............................. 240 21 65 112 241
</TABLE>
In the Example, the Annual Maintenance Fee is approximately a 0.08% annual asset
charge based on the experience of the Contracts. This Example should not be
considered a representation of past or future expenses and actual expenses may
be greater or less than those shown.
Pursuant to requirements of the Investment Company Act of 1940, the Annual
Maintenance Fee has been reflected in the Examples by a method intended to show
the "average" impact of the Annual Maintenance Fee on an investment in the
Separate Account.
9 - PROSPECTUS
<PAGE>
SUMMARY
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HOW DO I PURCHASE THIS ANNUITY?
You must complete our application or order request and submit it to us for
approval with your first premium payment. Your first premium payment must be at
least $1,000 and subsequent premium payments must be at least $500. The minimum
premium payment requirements may differ if you are participating in our
automatic investing ("InvestEase-Registered Trademark-") program.
- - - For a limited time, usually within ten days after you receive your annuity,
you may cancel your annuity without paying a Contingent Deferred Sales Charge.
You bear the investment risk for your premium payment prior to our receipt of
your request for cancellation.
WHAT TYPE OF SALES CHARGE WILL I PAY?
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
The CDSC covers expenses relating to the sale and distribution of the Contracts,
including commissions paid to distributing organizations and the cost of
preparing sales literature and other promotional activities.
We assess a CDSC when you request a full or partial Surrender. The percentage of
the CDSC is based on how long each premium payment has been in the Contract.
Each premium payment has its own CDSC schedule. Premium payments are Surrendered
in the order that they were received. The longer you leave your premium payment
in the Contract, the lower the CDSC will be when you Surrender.
The CDSC is a percentage of the amount Surrendered (not to exceed the total
amount of the premium payments made) and equals:
<TABLE>
<CAPTION>
LENGTH OF TIME
FROM PREMIUM
PAYMENT CDSC CHARGE
- - ----------------- -------------------
<S> <C>
1 year 7%
2 years 6%
3 years 6%
4 years 5%
5 years 4%
6 years 3%
7 years 2%
8 years or more 0%
</TABLE>
IS THERE AN ANNUAL MAINTENANCE FEE?
Yes. We deduct this $30 fee each year on your Contract Anniversary or when you
completely Surrender your annuity, if, on either of those dates, the value of
your annuity is less than $50,000.
WHAT CHARGES WILL I PAY ON AN ANNUAL BASIS?
In addition to the Annual Maintenance Fee, you pay three different types of
charges each year. The first type of charge is the fee you pay for insurance.
This charge is:
A mortality and expense risk charge that is subtracted daily and is equal to an
annual charge of 1.25% of your Contract Value invested in the Portfolios.
The second type of charge is the fee you pay for the Separate Account. This
charge is:
An administrative fee is .15% per year of the Contract Values held in the
Separate Account.
The third type of charge is the fee you pay for the Portfolios.
Currently, portfolio charges range from 0.490% to 1.730% of the average daily
value of the amount you have invested in the portfolio. See the Annual Operation
Expense Table for more complete information and the portfolios' prospectuses
attached to this Prospectus.
If an Optional Death Benefit is elected an additional charge is deducted daily
from your Contract Value and is equal to 0.15% per year of your Contract Value
invested in the Funds.
CAN I TAKE OUT ANY OF MY MONEY?
You can partially or fully Surrender your Contract subject to a Contingent
Deferred Sales Charge (CDSC). You can partially Surrender your Contract without
any CDSC applied to the Surrender under the following conditions:
- - - Surrenders which don't exceed 15% of premium payments per Contract Year
(Annual Withdrawal Amount);
- - - Surrenders made from premium payments invested more than seven years;
- - - 100% Surrender of earnings after the seventh Contract Year;
- - - Surrenders under the nursing home waiver (described as Eligible Confinement in
the Contract); or
- - - Surrenders eligible for disability waiver under a group qualified plan.
WILL HARTFORD PAY A DEATH BENEFIT?
Your Contract has a Death Benefit and we offer an Optional Interest Accumulation
Death Benefit ("Optional Death Benefit") that you can elect for an additional
fee. There is a Death Benefit if the Contract Owner, joint owner or Annuitant,
die before we begin to make annuity payments. The Death Benefit will remain
invested in the Sub-Accounts according to your last
10 - PROSPECTUS
<PAGE>
instructions (unless otherwise mutually specified by your Beneficiaries) and
will be subject to market fluctuations.
IF YOU DO NOT ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
1) 100% of the total premium payments you have made to us reduced by any
subsequent Surrenders;
2) The Contract Value of your annuity, or
3) Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries, of Contract Values, premium payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death. The Anniversary Value is equal to the
Contract Value as of a Contract Anniversary, increased by the dollar amount of
any premium payments made since that anniversary and reduced by the dollar
amount of any partial Surrenders since that anniversary. The Maximum Anniversary
Value is equal to the greatest Anniversary Value attained from this series of
calculations.
IF YOU ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
1) 100% of the total premium payments you have made to us reduced by any
subsequent Surrenders;
2) The Contract Value of your annuity;
3) Your Maximum Anniversary Value, which is the highest Anniversary Value
before the deceased's 81st birthday or date of death; or
4) Your Interest Accumulation Value.
THE INTEREST ACCUMULATION VALUE is calculated by accumulating interest on your
premium payments at a rate of 5% per year up to the deceased's 81st birthday or
date of death, assuming you have not taken any Surrenders. If you have taken any
Surrenders, the 5% will be accumulated on your premium payments, but there will
be an adjustment for any of the Surrenders. This adjustment will reduce the
Optional Death Benefit proportionally for the Surrenders. The Optional Death
Benefit is limited to a maximum of 200% of premium payments, less proportional
adjustments for any Surrenders. For examples on how the Optional Death Benefit
is calculated see "Appendix II". If you elect the Optional Death Benefit, we
will deduct an additional charge daily from your Contract Value equal to .15% of
the Sub-Account value.
SPOUSAL CONTRACT CONTINUATION -- IF THE BENEFICIARY IS THE CONTRACT OWNER'S
SPOUSE, THE CONTRACT WILL CONTINUE WITH THE SPOUSE AS CONTRACT OWNER, UNLESS THE
SPOUSE ELECTS TO RECEIVE THE DEATH BENEFIT AS A LUMP SUM PAYMENT. IF THE
CONTRACT CONTINUES WITH THE SPOUSE AS CONTRACT OWNER, WE WILL ADJUST THE
CONTRACT VALUE TO THE AMOUNT THAT WE WOULD HAVE PAID AS THE DEATH BENEFIT
PAYMENT, HAD THE SPOUSE ELECTED TO RECEIVE THE DEATH BENEFIT AS A LUMP SUM
PAYMENT OR AS AN ANNUITY PAYMENT OPTION. THIS PROVISION WILL ONLY APPLY ONE TIME
FOR EACH CONTRACT.
WHAT ANNUITY PAYMENT OPTIONS ARE AVAILABLE?
When you purchase your annuity, you may choose one of the following annuity
payment options, or receive a lump sum payment:
LIFE ANNUITY where we make scheduled payments for the Annuitant's life.
- - - Payments under this option stop upon the death of the Annuitant, even if the
Annuitant dies after one payment.
LIFE ANNUITY WITH CASH REFUND where we make payments during the life of the
Annuitant and when the Annuitant dies, we pay the remaining value to the
Beneficiary. The remaining value is calculated at the time we receive Due Proof
of Death by subtracting the annuity payments already made from the Contract
Value, less any applicable Premium Taxes, applied to this annuity payment
option.
- - - This option is only available if you select a variable dollar amount payment
with the 5% AIR or fixed dollar amount annuity payments.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN where we make payments for the
life of the Annuitant but you are at least guaranteed payments for a time period
you select which is a minimum of 5 years and a maximum of 100 years minus your
annuitant's age.
- - - If the Annuitant dies prior to the end of the period selected, we will pay
the value of the remaining payments to your Beneficiary, either in a lump sum
or we will continue payments until the end of the period selected.
JOINT AND LAST SURVIVOR ANNUITY where we make payments during the lifetimes of
the Annuitant and another designated individual called the Joint Annuitant. At
the time of electing this annuity payment option, the Contract Owner may elect
reduced payments over the remaining lifetime of the survivor.
- - - Payments under this option stop upon the death of the Annuitant and Joint
Annuitant, even if the Annuitant and Joint Annuitant die after one payment.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN where we
make payments during the lifetime of the Annuitant and a Joint Annuitant, and we
guarantee that those payments for a time period you select which is a minimum of
5 years and a maximum 100 years minus the younger Annuitant's age. At the time
of electing this Annuity Option, the
11 - PROSPECTUS
<PAGE>
Contract Owner may elect reduced payments over the remaining lifetime of the
survivor.
- - - If the Annuitant and the Joint Annuitant die prior to the end of the period
selected, we will pay the value of the remaining payments to your
Beneficiary, either in a lump sum or we will continue payments until the end
of the period selected.
PAYMENTS FOR A PERIOD CERTAIN where we agree to make payments for a specified
time. The minimum period that you can select is 10 years during the first two
Contract Years and 5 years after the second Contract Anniversary. The maximum
period that you can select is 100 years minus your Annuitant's age.
- - - If you select this option under a variable dollar amount payment, YOU MAY
SURRENDER YOUR ANNUITY after annuity payments have started and we will give
you the present value of the remaining payments less any applicable
Contingent Deferred Sales Charge.
- - - If the Annuitant dies prior to the end of the period selected, we will pay
the value of the remaining payments to your Beneficiary, either in a lump sum
or we will continue payments until the end of the period selected.
You must begin to take payments before the Annuitant's 90th birthday or the end
of the 10th Contract Year, which ever comes later, unless you elect a later date
to begin receiving payments subject to the laws and regulations then in effect
and our approval. If you do not tell us what annuity payment option you want
before that time, we will pay you under the Life Annuity with a 10 year period
certain. You and Hartford can agree to start payments at a later date if the
laws in effect allow us to defer payment and we agree to allow you to defer. The
Annuity Commencement Date in New York may be different. Please consult your
Registered Representative or call us.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut. Our offices are
located in Simsbury, Connecticut; however, our mailing address is P.O. Box 2999,
Hartford, CT 06104-2999. We are ultimately controlled by The Hartford Financial
Services Group, Inc., one of the largest financial service providers in the
United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
EFFECTIVE DATE
RATING AGENCY OF RATING RATING BASIS OF RATING
- - -------------------- -------------- --------- ---------------------
<S> <C> <C> <C>
A.M. Best and
Company, Inc....... 1/1/99 A+ Financial performance
Insurer financial
Standard & Poor's... 6/1/98 AA strength
Duff & Phelps....... 12/21/98 AA+ Claims paying ability
</TABLE>
THE SEPARATE ACCOUNT
--------------------------------------------------------------------
The Separate Account is where we set aside and invest the assets of some of our
annuity contracts, including this Contract. The Separate Account was established
on June 13, 1994 and is registered as a unit investment trust under the
Investment Company Act of 1940. This registration does not involve supervision
by the Commission of the management or the investment practices of the Separate
Account or Hartford. The Separate Account meets the definition of "Separate
Account" under federal securities law. This Separate Account holds only assets
for variable annuity contracts. The Separate Account:
- - - Holds assets for the benefit of you and other Contract Owners, and the persons
entitled to the payments described in the Contract.
- - - Is not subject to the liabilities arising out of any other business Hartford
may conduct.
- - - Is not affected by the rate of return of Hartford's General Account or by the
investment performance of any of Hartford's other Separate Accounts.
- - - May be subject to liabilities from a Sub-Account of the Separate Account which
holds assets of other variable annuity contracts offered by the Separate
Account which are not described in this Prospectus.
- - - Is credited with income and gains, and takes losses, whether or not realized,
from the assets it holds.
We do not guarantee the investment results of the Separate Account. There is no
assurance that the value of your Annuity will equal the total of the payments
you make to us.
THE PORTFOLIOS
The underlying investment for the Policies are shares of the Portfolios of
Morgan Stanley Dean Witter Select Dimensions Investment Series, Morgan Stanley
Dean Witter Universal Portfolios, Inc., and Van Kampen Life Investment Trust,
all open-ended management investment companies. The underlying Portfolios
corresponding to each Sub-Account and their investment
12 - PROSPECTUS
<PAGE>
objectives are described below. 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.
We do not guarantee the investment results of any of the underlying Portfolios.
Since each underlying Portfolio has different investment objectives, each is
subject to different risks. These risks and the Portfolio's expenses are more
fully described in the accompanying Funds' prospectuses and the Statements of
Additional Information. The Funds' prospectuses should be read in conjunction
with this Prospectus before investing.
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES:
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's prospectus.
BALANCED GROWTH PORTFOLIO
Seeks to provide capital growth with reasonable current income by investing,
under normal market conditions, at least 60% of its total assets in a
diversified portfolio of common stocks of companies which have a record of
paying dividends and, in the opinion of the Investment Manager, have the
potential for increasing dividends and in securities convertible into common
stock, and at least 20% of its total assets in investment grade fixed-income
(fixed-rate and adjustable-rate) securities such as corporate notes and bonds
and obligations issued or guaranteed by the U.S. Government, its agencies and
its instrumentalities.
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.
GROWTH 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 attractively valued given their
above average relative earnings growth potential at that time.
MID-CAP GROWTH PORTFOLIO
Seeks long-term capital growth by investing primarily in equity securities of
"mid-cap" companies (that is, companies whose equity market capitalization falls
within the range of $250 million to $5 billion).
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, 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.
13 - PROSPECTUS
<PAGE>
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's prospectus.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.:
HIGH YIELD PORTFOLIO
Seeks above-average total return over a market cycle of three to five years by
investing primarily in a diversified portfolio of high yield securities,
including corporate bonds and other fixed income securities and derivatives.
High yield securities are rated below investment grade and are commonly referred
to as "junk bonds". The Portfolio's average weighted maturity will ordinarily
exceed five years. See the special considerations for investments in high yield
securities disclosed in the Fund prospectus.
MID CAP VALUE PORTFOLIO
Seeks above-average total return over a market cycle of three to five years by
investing in common stocks and other equity securities of issuers with equity
capitalizations in the range of the companies represented in the S&P MidCap 400
Index.
EMERGING MARKETS DEBT PORTFOLIO
Seeks high total return by investing primarily in fixed income securities of
government and government related issuers and, to a lesser extent, of corporate
issuers located in emerging market countries.
VAN KAMPEN LIFE INVESTMENT TRUST:
STRATEGIC STOCK PORTFOLIO
Seeks to provide investors with an above average total return through a
combination of potential capital appreciation and dividend income, consistent
with the preservation of invested capital by investing primarily in a portfolio
of dividend paying equity securities included in the Dow Jones Industrial
Average or in the Morgan Stanley Capital International USA Index.
ENTERPRISE PORTFOLIO
Seeks capital appreciation through investments in securities believed by the
investment advisor to have above average potential for capital appreciation.
THE INVESTMENT ADVISERS
Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"), a Delaware
Corporation, whose address is Two World Trade Center, New York, New York 10048,
is the Investment Manager for the Money Market Portfolio, the North American
Government Securities Portfolio, the Diversified Income Portfolio, the Balanced
Growth Portfolio, the Utilities Portfolio, the Dividend Growth Portfolio, the
Value-Added Market Portfolio, the Growth Portfolio, the American Value
Portfolio, the Mid-Cap Growth Portfolio, the Global Equity Portfolio, the
Developing Growth Portfolio, and the Emerging Markets Portfolio of the Morgan
Stanley Dean Witter Select Dimensions Investment Series (the "Morgan Stanley
Dean Witter Portfolios"). MSDW Advisors was incorporated in July, 1992 and is a
wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. ("MSDW")
MSDW Advisors provides administrative services, manages the Dean Witter
Portfolios' business affairs and manages the investment of the Morgan Stanley
Dean Witter Portfolios' assets, including the placing of orders for the purchase
and sales of portfolio securities. MSDW Advisors has retained Morgan Stanley
Dean Witter Services Company Inc., its wholly-owned subsidiary, to perform the
aforementioned administrative services for the Morgan Stanley Dean Witter
Portfolios. For its services, the Morgan Stanley Dean Witter Portfolios pay MSDW
Advisors a monthly fee. See the accompanying Fund prospectus for a more complete
description of MSDW Advisors and the respective fees of the Morgan Stanley Dean
Witter Portfolios.
With regard to the North American Government Securities Portfolio and the
Emerging Markets Portfolio, TCW Funds Management ("TCW"), under a Sub-Advisory
Agreement with MSDW Advisors, provides these Portfolios with investment advice
and portfolio management, in each case subject to the overall supervision of the
MSDW Advisors. TCW's address is 865 South Figueroa Street, Suite 1800, Los
Angeles, California 90017.
With regard to the Growth Portfolio, Morgan Stanley Dean Witter Investment
Management Inc. ("MSDW Investment Management"), under a Sub-Advisory Agreement
with MSDW Advisers, provides the Growth Portfolio with investment advice and
portfolio management, subject to the overall supervision of MSDW Advisors. MSDW
Investment Management, like MSDW Advisors, is a wholly-owned subsidiary of MSDW.
MSDW Investment Management's address is 1221 Avenue of the Americas, New York,
New York 10020.
In addition to acting as the Sub-Adviser for the Growth Portfolio, MSDW
Investment Management, pursuant to an Investment Advisory Agreement with the
Morgan Stanley Dean Witter Universal Funds, Inc., is the investment adviser for
the Emerging Markets Debt Portfolio. As the investment adviser, MSDW Investment
Management, provides investment advice and portfolio management services for the
Emerging Markets Debt Portfolio, subject to the supervision of the Morgan
Stanley Dean Witter Universal Fund's Board of Directors.
The Investment Adviser for the High Yield Portfolio and the Mid Cap Value
Portfolio is Miller Anderson & Sherrerd, LLP ("MAS"). MAS is a Pennsylvania
limited liability partnership founded in 1969 with its principal offices at One
Tower Bridge,
14 - PROSPECTUS
<PAGE>
West Conshohocken, Pennsylvania 19428. MAS provides investment advisory services
to employee benefit plans, endowment portfolios, foundations and other
institutional investors and has served as an investment adviser to several
open-end investment companies. MAS is an indirect wholly-owned subsidiary of
MSDW.
The Investment Adviser with respect to the Strategic Stock Portfolio and the
Enterprise Portfolio is Van Kampen Asset Management Inc., a wholly-owned
subsidiary of Van Kampen Investments Inc. Van Kampen Investments Inc. is an
indirect wholly-owned subsidiary of MSDW. Van Kampen Investment Inc.'s address
is 1 Parkview Plaza, Oakbrook Terrace, IL 60181. Van Kampen Investments Inc. is
a diversified asset management company with more than two million retail
investor accounts, extensive capabilities for managing institutional portfolios,
and more than $75 billion under management or supervision. Van Kampen
Investments Inc.'s more than 50 open-end and 39 closed end portfolios and more
than 2,500 unit investment trusts are professionally distributed by leading
financial advisers nationwide.
MIXED AND SHARED FUNDING -- Shares of the Portfolios are sold to our other
Separate Accounts and our insurance company affiliates or other unaffiliated
insurance companies to serve as the underlying investment for both variable
annuity contracts and variable life insurance contracts, a practice known as
"mixed and shared funding." As a result, there is a possibility that a material
conflict may arise between the interests of Contract Owners, and of owners of
other contracts whose contract values are allocated to one or more of these
other Separate Accounts investing in any one of the Portfolios. In the event of
any such material conflicts, we will consider what action may be appropriate,
including removing the Portfolio from the Separate Account or replacing the
Portfolio with another Portfolio. There are certain risks associated with mixed
and shared funding, as disclosed in the portfolios' prospectus.
VOTING RIGHTS -- We are the legal owners of all Portfolio shares held in the
Separate Account and we have the right to vote at the Portfolio's shareholder
meetings. To the extent required by federal securities laws or regulations, we
will:
- - - Notify you of any Portfolio shareholders' meeting if the shares held for your
Contract may be voted.
- - - Send proxy materials and a form of instructions that you can use to tell us
how to vote the Portfolio shares held for your Contract.
- - - Arrange for the handling and tallying of proxies received from Contract
Owners.
- - - Vote all Portfolio shares attributable to your Contract according to
instructions received from you, and
- - - Vote all Portfolio shares for which no voting instructions are received in the
same proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present interpretation,
change to permit us to vote Portfolio shares on our own, we may decide to do so.
You may attend any Shareholder Meeting at which shares held for your Contract
may be voted. After we begin to make Annuity Payments to you, the number of
votes you have will decrease.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF PORTFOLIOS -- We reserve the right,
subject to any applicable law, to make certain changes to the Portfolios offered
under your Contract. We may, in our sole discretion, establish new Portfolios.
New Portfolios will be will be made available to existing Contract Owners as we
determined appropriate. We may also close one or more Portfolios to additional
payments or transfers from existing Sub-Accounts.
We reserve the right to eliminate the shares of any of the Portfolios for any
reason and to substitute shares of another registered investment company for the
shares of any Portfolio already purchased or to be purchased in the future by
the Separate Account. To the extent required by the 1940 Act, substitutions of
shares attributable to your interest in a Portfolio will not be made until we
have the approval of the Commission and we have notified you of the change.
In the event of any substitution or change, We may, by appropriate endorsement,
make such changes in the Contract as may be necessary or appropriate to reflect
such substitution or change. If we decide that it is in the best interest of the
Contract Owners, the Separate Account may be operated as a management company
under the 1940 Act or any other form permitted by law, may be de-registered
under the 1940 Act in the event such registration is no longer required, or may
be combined with one or more other Separate Accounts.
PERFORMANCE RELATED INFORMATION
--------------------------------------------------------------------
The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
When a Sub-Account advertises its STANDARDIZED TOTAL RETURN, it will usually be
calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period and assumes that the Optional Death Benefit
has not been elected.
15 - PROSPECTUS
<PAGE>
The Separate Account may also advertise NON-STANDARD TOTAL RETURNS THAT PRE-DATE
THE INCEPTION DATE OF THE SEPARATE ACCOUNT. These non-standardized total returns
are calculated by assuming that the Sub-Accounts have been in existence for the
same periods as the underlying Portfolios and by taking deductions for charges
equal to those currently assessed against the Sub-Accounts. These
non-standardized returns must be accompanied by standardized total returns.
If applicable, the Sub-Accounts may advertise YIELD IN ADDITION TO TOTAL RETURN.
The yield will be computed in the following manner: The net investment income
per unit earned during a recent one month period, divided by the unit value on
the last day of the period. This figure reflects the recurring charges at the
Separate Account level including the Annual Maintenance Fee.
The 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 and effective yield reflect the recurring charges at the Separate Account
level including the Annual Maintenance Fee.
The Separate Account may also disclose yield for periods prior to the date the
Separate Account commenced operations. For periods prior to the date the
Separate Account commenced operations, performance information for the
Sub-Accounts will be calculated based on the performance of the underlying
Portfolios and the assumption that the Sub-Accounts were in existence for the
same periods as those of the underlying Portfolios, with a level of charges
equal to those currently assessed against the Sub-Accounts. No yield disclosure
for periods prior to the date of the Separate Account will be used without the
yield disclosure for periods as of the date of the inception of the Separate
Account.
We may provide information on various topics to Contract Owners and prospective
Contract Owners in advertising, sales literature or other materials. These
topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, dollar cost averaging and
asset allocation), the advantages and disadvantages of investing in tax-deferred
and taxable instruments, customer profiles and hypothetical purchase scenarios,
financial management and tax and retirement planning, and other investment
alternatives, including comparisons between the Contracts and the
characteristics of and market for such alternatives.
THE FIXED ACCOUNTS
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IMPORTANT INFORMATION YOU SHOULD KNOW: THIS PORTION OF THE CONTRACT RELATING TO
THE FIXED ACCOUNTS IS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 ("1933
ACT") AND THE FIXED ACCOUNTS ARE NOT REGISTERED AS INVESTMENT COMPANIES UNDER
THE INVESTMENT COMPANY ACT OF 1940 ("1940 ACT"). NONE OF THE FIXED ACCOUNTS OR
ANY OF THEIR INTERESTS ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933
ACT OR THE 1940 ACT, AND THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS
NOT REVIEWED THE DISCLOSURE REGARDING THE FIXED ACCOUNTS. THE FOLLOWING
DISCLOSURE ABOUT THE FIXED ACCOUNTS MAY BE SUBJECT TO CERTAIN GENERALLY
APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND
COMPLETENESS OF DISCLOSURE.
Payments and Contract Values allocated to a Fixed Account become a part of our
general assets. We invest the assets of the General Account in accordance with
applicable law governing the investments of insurance company General Accounts.
We have more than one Fixed Account. The standard Fixed Account (the "Fixed
Account") and then a number of DCA Program Fixed Accounts, which we collectively
refer to as the "Fixed Accounts".
Currently, we guarantee that we will credit interest at a rate of not less than
3% per year, compounded annually, to amounts you allocate to the Fixed Account.
We reserve the right, in our sole discretion, to credit interest at a rate in
excess of 3% per year. You assume the risk that interest credited to the Fixed
Account may not exceed the minimum guarantee of 3% for any given year.
We will periodically publish the Fixed Account interest rates currently in
effect. There is no specific formula for the determination of interest rates.
Some of the factors that we may consider in determining whether to credit excess
interest are: general economic trends, rates of return currently available and
anticipated on our investments, regulatory and tax requirements and competitive
factors. We will account for any deductions, Surrenders or transfers from the
Fixed Account on a "first-in", "first-out" basis. For Contracts issued in the
state of New York, Fixed Account interest rates may vary from other states.
From time to time, we may credit increased interest rates to Contract Owners
under certain programs established at our sole discretion.
16 - PROSPECTUS
<PAGE>
DOLLAR COST AVERAGING PLUS ("DCA PLUS") PROGRAMS: These programs will use
designated DCA Program Fixed Accounts. Currently, Contract Owners may enroll in
a special pre-authorized transfer program known as our Dollar Cost Averaging
Plus Program (the "Program"). Under this Program, Contract Owners who enroll may
allocate a minimum of $5,000 of their payment into the appropriate DCA Program
Fixed Account (we may allow a lower minimum premium payment for qualified plan
transfers or rollovers, including IRAs) and pre-authorize transfers to any of
the Sub-Accounts under either the 6 Month Transfer Program or 12 Month Transfer
Program. The 6-Month Transfer Program and the 12-Month Transfer Program will
generally have different credited interest rates. Under the 6 Month Transfer
Program, the interest rate can accrue up to 6 months and all payments and
accrued interest must be transferred from the DCA Program Fixed Account in use
to the selected Sub-Accounts in 3 to 6 months. Under the 12-Month Transfer
Program, the interest rate can accrue up to 12 months and all payments and
accrued interest must be transferred to the selected Sub-Accounts in 7 to 12
months. This will be accomplished by monthly transfers for the period selected
and a final transfer of the entire amount remaining in the Program, which will
generally be less than the prior monthly transfer amounts. Contract Owners who
purchase their Contracts in New York have a different DCA Plus Program, which
includes different credited interest rates. Currently, only one DCA Plus Program
transfer period is available in New York, but that period allows transfers to
selected Sub-Accounts in 3 to 12 months.
The pre-authorized transfers will begin within 15 days after we receive the
initial Program payment and complete enrollment instructions. If We do not
receive complete Program enrollment instructions within 15 days of receipt of
the initial Program payment, the Program will be voided and the entire balance
in the Program will be transferred to the Accounts designated by you. If you do
not designate an Account, we will transfer any remaining amounts to the Fixed
Account and you will receive the Fixed Account's current effective interest
rate. Any subsequent payments we receive within the Program period selected will
be allocated to the Sub-Accounts over the remainder of that Program transfer
period, unless otherwise directed by You.
You may only have one dollar cost averaging program in place at one time, this
means one standard dollar cost averaging plan or one Dollar Cost Averaging Plus
Program.
You may elect to terminate the pre-authorized transfers by calling or writing us
of your intent to cancel enrollment in the Program. Upon cancellation of
enrollment in the Program, you will no longer receive the increased interest
rate and unless we receive instructions to the contrary, the amounts remaining
in the DCA Program Fixed Account may be transferred to the Fixed Account and
accrue the interest rate currently in effect.
Transfers made under a Dollar Cost Averaging Program do not count towards the
twelve transfers each Contract Year that we allow without charge and are not
subject to our rule that prohibits any two transfers from occurring on
Consecutive Valuation Days.
We reserve the right to discontinue, modify or amend the Program or any other
interest rate program established by Hartford. Any change to the Program will
not affect Contract Owners currently enrolled in the Program. This Program may
not be available in all states; please contact us to determine if it is
available in your state.
THE CONTRACT
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THE CONTRACT OFFERED -- The Contracts are individual or group tax-deferred
variable annuity contracts. They are designed for retirement planning purposes
and may be purchased by any individual, group or trust, including; (a) any
trustee or custodian for a retirement plan qualified under Sections 401(a), or
403(a) of the Internal Revenue Code (which includes Section 401(k)); (b) annuity
purchase plans adopted by public school systems and certain tax-exempt
organizations according to Section 403(b) of the Code; (c) Individual Retirement
Annuities adopted according to Section 408 of the Code; (d) employee pension
plans established for employees by a state, a political subdivision of a state,
or an agency or instrumentality of either a state or a political subdivision of
a state, and (e) certain eligible deferred compensation plans as defined in
Section 457 of the Code ("Qualified Contracts").
PURCHASING A CONTRACT -- A prospective Contract Owner may purchase a Contract by
completing and submitting an application or an order request along with an
initial premium payment to the Administrative Office of the Company. The maximum
age for Annuitant, Owner and Joint Owner on the Contract Issue Date is 85.
Generally, the minimum premium payment is $1,000. The minimum subsequent premium
payment is $500. Certain plans may be allowed to make smaller periodic premium
payments. Unless we give our prior approval, we will not accept a premium
payment in excess of $1,000,000. Each premium payment, which is your premium
payment after the deduction of any applicable Premium Taxes, may be split among
the various Accounts subject to minimum amounts then in effect. We will send you
a confirmation notice upon receipt and acceptance of your premium payment.
RIGHT TO EXAMINE THE CONTRACT -- If you are not satisfied with your purchase,
you may cancel the Contract by returning it within 10 days (or longer in some
states) after you receive it. You must send a written request for cancellation
along with the Contract. We will, without deduction for any CDSC normally
assessed, pay you an amount equal to the Contract Value. YOU BEAR THE INVESTMENT
RISK DURING THE PERIOD PRIOR TO OUR RECEIPT OF YOUR REQUEST FOR CANCELLATION.We
will refund the
17 - PROSPECTUS
<PAGE>
premium paid only for Individual Retirement Annuities, if returned within seven
days of receipt, and in those states where required by law.
CREDITING AND VALUATION -- Your premium payment, which is the balance remaining
after the deduction of any Premium Tax, is credited to your Contract within two
business days of receipt by us at our Administrative Office of a properly
completed application or an order to purchase a Contract and the premium
payment. The payment will be credited to the Accounts according to the
instructions we receive from you.
If your application or other information is incomplete when received, your
payment will be credited to the Accounts within five business days of receipt of
complete information. If the payment is not credited within five business days,
it will be immediately returned to you unless you have been informed of the
delay and tell us not to return it.
Subsequent premium payments are priced on the Valuation Day we receive the
payment in our Administrative Office, provided it is received before the New
York Stock Exchange closes. Unless otherwise specified, We will allocate any
subsequent payments to Accounts according to your most recent instructions.
CONTRACT VALUE - BEFORE THE ANNUITY COMMENCEMENT DATE
Your Contract Value reflects interest rate credited any amounts allocated to the
Fixed Accounts and the investment performance of the Sub-Accounts where you have
payments allocated.
SUB-ACCOUNT VALUES -- Your Sub-Account Values on the date we issue your Contract
is the amount of your premium payment allocated to any Sub-Account. After that,
we determine your Sub-Account value by determining the Accumulation Unit value
for each Sub-Account, and then multiplying that value by the number of those
units. Sub-Account Value reflects any variation of the interest income,
dividends, net capital gains or losses, realized or unrealized, and any amounts
transferred into or out of that Sub-Account.
ACCUMULATION UNITS -- When Premium Payments are credited to your Sub-Accounts,
they are converted into accumulation Units by dividing the amount of your
Premium Payments, minus any Premium Taxes, by the Accumulation Unit Value for
that day. The more Premium Payments you put into your Contract, the more
Accumulation Units you will own. You decrease the number of Accumulation Units
you have by requesting Surrenders, transferring money out of an Account,
settling a Death Benefit claim or by annuitizing your Contract.
ACCUMULATION UNIT VALUE -- The Accumulation Unit value for each Sub-Account was
arbitrarily set initially at $1 when the Sub-Account began operations. After
that, the Accumulation Unit value for each Sub-Account will equal (a) the
Accumulation Unit value at the end of the preceding Valuation Day multiplied by
(b) the Net Investment Factor (see the definition below) for the Valuation Day
for which the Accumulation Unit value is being calculated.
You will be advised, at least semiannually, of the number of Accumulation Units
credited to each Sub-Account, the current Accumulation Unit values, and the
total value of your Contract.
THE NET INVESTMENT FACTOR (BEFORE AND AFTER THE ANNUITY COMMENCEMENT DATE) --
The Net Investment Factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. For each
Sub-Account, the Net Investment Factor reflects the investment performance of
the Portfolio in which that Sub-Account invests and the charges assessed against
that Sub-Account for a Valuation Period. The Net Investment Factor is calculated
by dividing (a) by (b) and subtracting (c) from the result, where:
(a) Is the Net Asset Value of the Portfolio held in that Sub-Account, determined
at the end of the current Valuation Period (plus the per share amount of any
dividends or capital gains distributions made by that Portfolio);
(b) Is the Net Asset Value of the Portfolio held in the Sub-Account, determined
at the beginning of the Valuation Period;
(c) Is a daily factor representing the mortality and expense risk charge and any
optional charges deducted from the Sub-Account, adjusted for the number of
days in the Valuation Period.
CONTRACT VALUE TRANSFERS BEFORE AND AFTER THE ANNUITY COMMENCEMENT DATE
You may transfer your Contract Values from one or more Accounts to another
Account free of charge. WE RESERVE THE RIGHT TO LIMIT THE NUMBER OF TRANSFERS TO
12 PER CONTRACT YEAR, WITH NO 2 TRANSFERS OCCURRING ON CONSECUTIVE VALUATION
DAYS. Transfers by telephone may be made by you or by your attorney-in-fact
pursuant to a power of attorney by calling us at 1-800-862-6668 or by the agent
of record by calling 1-800-862-4397. Telephone transfers may not be permitted by
some states. There may be limitations on transfers to and from the Fixed
Accounts that are described in your Contract. Some states may allow us to limit
the dollar amount transferred.
We, or our agents and affiliates will not be responsible for losses resulting
from acting upon telephone requests reasonably believed to be genuine. We will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. The procedure we follow for transactions initiated by
telephone include requirements that callers provide certain information for
identification purposes. All transfer instructions by telephone are
tape-recorded.
We may permit you to pre-authorize transfers under certain circumstances.
Transfers between the Accounts may be made
18 - PROSPECTUS
<PAGE>
both before and after the Annuity Commencement Date. Generally, the minimum
allocation to any Sub-Account may not be less than $500. All percentage (%)
allocations must be in whole numbers (e.g., 1%). No minimum balance is presently
required in any Account.
IT IS YOUR RESPONSIBILITY TO VERIFY THE ACCURACY OF ALL CONFIRMATIONS OF
TRANSFERS AND TO PROMPTLY ADVISE US IN OUR ADMINISTRATIVE OFFICES OF ANY
INACCURACIES WITHIN 30 DAYS OF THE DATE YOU RECEIVE YOUR CONFIRMATION.
The right to reallocate Contract Values is subject to modification if we
determine, in our sole opinion, that the exercise of that right by one or more
Contract Owners is, or would be, to the disadvantage of other Contract Owners.
Any modification could be applied to transfers to or from some or all of the
Accounts and could include, but not be limited to, the requirement of a minimum
time period between each transfer, not accepting transfer requests of an agent
acting under a power of attorney on behalf of more than one Contract Owner, or
limiting the dollar amount that may be transferred between the Sub-Accounts by
you at any one time. SUCH RESTRICTIONS MAY BE APPLIED IN ANY MANNER REASONABLY
DESIGNED TO PREVENT ANY USE OF THE TRANSFER RIGHT WHICH WE CONSIDER TO BE TO THE
DISADVANTAGE OF OTHER CONTRACT OWNERS.
For Contracts issued in THE STATE OF FLORIDA, MARYLAND OR OREGON, the
reservation of rights set forth in the preceding paragraph is limited to: (i)
requiring up to a maximum of 10 Valuation Days between each transfer; (ii)
limiting the amount to be transferred on any one Valuation Day to no more than
$2 million; and (iii) upon 30 days prior written notice, to only accepting
transfer instructions from you and not from your representative, agent or person
acting under a power of attorney for you.
Currently, we will not accept instructions from agents acting under a power of
attorney of multiple Contract Owners whose Accounts aggregate more than $2
million, unless the agent has entered into a third party transfer services
agreement with us.
Transfers made under a Dollar Cost Averaging Program do not count towards the
twelve transfers each Contract Year that we allow without charge and are not
subject to our rule that prohibits any two transfers from occurring on
Consecutive Valuation Days.
SURRENDERS
Contract Owners should consult their tax adviser regarding the tax consequences
of a Surrender.
A Surrender made before age 59 1/2 may result in adverse tax consequences,
including a penalty tax of 10% of the taxable portion of the Surrender Value.
(See "Federal Tax Considerations")
PAYMENT OF SURRENDER AMOUNTS -- Payment of any request for a full or partial
Surrender from the Accounts will be made as soon as possible and in any event no
later than seven days after we receive the request at our Administrative Office.
There may be postponement in the payment of Surrender Amounts whenever (a) the
New York Stock Exchange is closed; (b) trading on the New York Stock Exchange is
restricted as determined by the Commission; (c) the Commission permits
postponement and so orders; or (d) the Commission determines that an emergency
exists making valuation of the amounts or disposal of securities not reasonably
practicable.
FULL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE -- At any time prior to
the Annuity Commencement Date, you have the right to fully Surrender the
Contract. In such event, the Surrender Value of the Contract may be taken in the
form of a lump sum cash payment.
The Surrender Value of the Contract is equal to the Contract Value less any
Premium Taxes, the Annual Maintenance Fee and any Contingent Deferred Sales
Charge, if applicable. The Surrender Value may be more or less than the amount
of the payments made to your Contract.
PARTIAL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE -- You may make a
partial Surrender of your Contract Value at any time prior to the Annuity
Commencement Date so long as the amount Surrendered is at least equal to our
minimum amount rules then in effect. Additionally, if the remaining Contract
Value following a Surrender is less than $500, we may terminate the Contract and
pay the Surrender Value. For Contracts issued in TEXAS, the Contract will not be
terminated when the remaining Contract Value after a Surrender is less than $500
unless there were no payments made during the previous 2 Contract Years.
WHEN REQUESTING A PARTIAL SURRENDER, YOU SHOULD SPECIFY THE ACCOUNT(S) FROM
WHICH THE PARTIAL SURRENDER WILL BE TAKEN; OTHERWISE, THE SURRENDER WILL BE
TAKEN ON A PRO RATA BASIS ACCORDING TO THE VALUE IN EACH ACTIVE ACCOUNT.
We may permit you to pre-authorize partial Surrenders subject to certain
limitations then in effect. We permit partial Surrenders by telephone subject to
dollar amount limitations in effect at the time you request the Surrender. To
request partial Surrenders by telephone, you must have completed and returned to
us a Telephone Redemption Program Enrollment Form authorizing telephone
Surrenders. If there are joint Contract Owners, both must authorize us to accept
telephone instructions and agree that We may accept telephone instructions for
partial Surrenders from either Contract Owner. Partial Surrender requests will
not be honored until we receive all required documents in proper form.
Telephone authorization will remain valid until (a) we receive written notice of
revocation by you, or, in the case of joint Contract Owners, written notice from
either Contract Owner; (b) we discontinue the privilege; or (c) we have reason
to believe that you have entered into a market timing agreement with an
investment adviser and/or broker/dealer.
19 - PROSPECTUS
<PAGE>
We may record any telephone calls to verify data concerning transactions and may
adopt other procedures to confirm that telephone instructions are genuine. We
will not be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine.
In order to obtain that day's unit values on Surrender, We must receive
telephone Surrender instructions prior to the close of trading on the New York
Stock Exchange (generally 4:00 p.m.).
We may modify, suspend, or terminate telephone transaction privileges at any
time.
SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- You may fully Surrender your
Contract on or after the Annuity Commencement Date if you elect the Payment For
a Period Certain Settlement Option. We pay you the commuted value that is equal
to the present value of the remaining payments we are scheduled to make less any
applicable Contingent Deferred Sales Charge. The commuted value is determined as
of the date we receive your written request for Surrender at our Administrative
Office.
Partial Surrenders are permitted after the Annuity Commencement Date if you
elect the Payments for a Period Certain Settlement Option, but check with your
tax adviser because there may be adverse tax consequences.
IMPORTANT TAX INFORMATION: THERE ARE CERTAIN RESTRICTIONS ON SECTION 403(B)
TAX-SHELTERED ANNUITIES. AS OF DECEMBER 31, 1988, ALL SECTION 403(B) ANNUITIES
HAVE LIMITS ON FULL AND PARTIAL SURRENDERS. CONTRIBUTIONS TO THE CONTRACT MADE
AFTER DECEMBER 31, 1988 AND ANY INCREASES IN CASH VALUE AFTER DECEMBER 31, 1988
MAY NOT BE DISTRIBUTED UNLESS THE CONTRACT OWNER/EMPLOYEE HAS A) ATTAINED AGE
59 1/2, B) SEPARATED FROM SERVICE, C) DIED, D) BECOME DISABLED OR E) EXPERIENCED
FINANCIAL HARDSHIP (CASH VALUE INCREASES MAY NOT BE DISTRIBUTED FOR HARDSHIPS
PRIOR TO AGE 59 1/2). DISTRIBUTIONS PRIOR TO AGE 59 1/2 DUE TO FINANCIAL
HARDSHIP OR SEPARATION FROM SERVICE MAY STILL BE SUBJECT TO A PENALTY TAX OF
10%. WE WILL NOT ASSUME ANY RESPONSIBILITY FOR DETERMINING WHETHER A SURRENDER
IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR SITUATION; OR IN
MONITORING SURRENDER REQUESTS REGARDING PRE OR POST JANUARY 1, 1989 CONTRACT
VALUES. ANY FULL OR PARTIAL SURRENDER DESCRIBED ABOVE MAY AFFECT THE CONTINUING
TAX-QUALIFIED STATUS OF SOME CONTRACTS OR PLANS AND MAY RESULT IN ADVERSE TAX
CONSEQUENCES TO THE CONTRACT OWNER. THE CONTRACT OWNER, THEREFORE, SHOULD
CONSULT WITH A TAX ADVISER BEFORE UNDERTAKING ANY SUCH SURRENDER. (SEE "FEDERAL
TAX CONSIDERATIONS")
CONTRACT CHARGES
CONTINGENT DEFERRED SALES CHARGE ("CDSC") The CDSC covers expenses relating to
the sale and distribution of the Contracts, including commissions paid to
distributing organizations and the cost of preparing sales literature and other
promotional activities.
We assess a CDSC when you request a full or partial Surrender. The percentage of
the CDSC is based on how long each premium payment has been in the Contract.
Each premium payment has its own CDSC schedule. Premium payments are Surrendered
in the order that they were received. The longer you leave your premium payment
in the Contract, the lower the CDSC will be when you Surrender.
The CDSC is a percentage of the amount Surrendered (not to exceed the total
amount of the premium payments made) and equals:
<TABLE>
<CAPTION>
LENGTH OF TIME
FROM PREMIUM
PAYMENT CDSC CHARGE
- - ----------------- -------------------
<S> <C>
1 year 7%
2 years 6%
3 years 6%
4 years 5%
5 years 4%
6 years 3%
7 years 2%
8 years or more 0%
</TABLE>
PAYMENTS NOT SUBJECT TO CDSC
ANNUAL WITHDRAWAL AMOUNT -- During the first seven Contract years, you may make
a partial Surrender of Contract Values of up to 15% of the premium payments each
Contract Year on a non-cumulative basis, as determined on the date of the
requested Surrender, without the application of the CDSC. After the seventh
Contract Year, you may make a partial Surrender each Contract Year of 15% of
premium payments made during the seven years prior to the Surrender and 100% of
the Contract Value less the premium payments made during the seven years prior
to the Surrender. These amounts are different for group unallocated Contracts
and Contracts issued to a Charitable Remainder Trust.
EXTENDED SURRENDER PRIVILEGE -- This privilege allows Annuitants who attain age
70 1/2 with a Contract held under an Individual Retirement Account or 403(b)
plan to Surrender an amount equal to the required minimum distribution for the
stated Contract without incurring any CDSC.
WAIVERS OF CDSC
CONFINEMENT IN A NURSING HOME, HOSPITAL OR LONG TERM CARE FACILITY (described as
Eligible Confinement in the Contract) - We will waive any CDSC applicable to a
partial or full Surrender if the Annuitant, Contract Owner or joint owner is
confined, at the recommendation of a physician for medically necessary reasons,
for at least 180 calendar days to: a hospital recognized as a general hospital
by the proper authority of the
20 - PROSPECTUS
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state in which it is located; or a hospital recognized as a general hospital by
the Joint Commission on the Accreditation of Hospitals; or a facility certified
as a hospital or long-term care facility; or a nursing home licensed by the
state in which it is located and offers the services of a registered nurse 24
hours a day.
The Annuitant, Contract Owner, or joint owner cannot be confined at the time the
Contract is purchased in order to receive this waiver and the Contract Owner(s)
must have been the Contract Owner(s) continuously since the Contract issue date.
You must provide written proof of confinement satisfactory to Hartford and you
must request the partial or full Surrender within 91 calendar days of the last
day of confinement.
This waiver may not be available in all states. Please contact your registered
representative or contact Us to determine availability.
DEATH OF THE ANNUITANT OR CONTRACT OWNER OR PAYMENTS UNDER AN ANNUITY OPTION --
No CDSC otherwise applicable will be assessed in the event of death of the
Annuitant, death of the Contract Owner or if payments are made under an Annuity
option (other than a Surrender of variable payments for a Period Certain Annuity
option) provided for under the Contract.
OTHER PLANS OR PROGRAMS -- Certain plans or programs established by us from time
to time may have different Surrender privileges.
MORTALITY AND EXPENSE RISK CHARGE -- For assuming risks under the Contract, We
deduct a daily charge at the rate of 1.25% per year against all Contract Values
held in the Accounts during the life of the Contract. Although variable annuity
payments made under the Contracts will vary in accordance with the investment
performance of the underlying Portfolio shares held in the Sub-Account(s), the
payments will not be affected by (a) our actual mortality experience among
Annuitants before or after the Annuity Commencement Date or (b) our actual
expenses, if greater than the deductions provided for in the Contracts because
of the expense and mortality undertakings by us.
There are two types of mortality risks: those made during the accumulation or
deferral phase and those made during the annuity payout phase. The mortality
risk we take in the accumulation phase is that we may experience a loss
resulting from the assumption of the mortality risk relative to the death
benefit in event of the death of an Annuitant or Contract Owner before
commencement of Annuity payments, in periods of declining value. The mortality
risk we take during the annuity payout phase is to make monthly Annuity payments
(determined in accordance with the 1983a Individual Annuity Mortality Table and
other provisions contained in the Contract) to Annuitants regardless of how long
an Annuitant may live, and regardless of how long all Annuitants as a group may
live. These mortality undertakings are based on our determination of expected
mortality rates among all Annuitants. If actual experience among Annuitants
during the Annuity payment period deviates from our actuarial determination of
expected mortality rates among Annuitants because, as a group, their longevity
is longer than anticipated, we must provide amounts from our general funds to
fulfill our contractual obligations. We will bear the loss in such a situation.
During the accumulation phase, we also provide an expense undertaking. We assume
the risk that the Annual Maintenance Fee for maintaining the Contracts prior to
the Annuity Commencement Date may be insufficient to cover the actual cost of
providing such items.
ANNUAL MAINTENANCE FEE -- Each year, on each Contract Anniversary on or before
the Annuity Commencement Date, we will deduct an Annual Maintenance Fee, if
applicable, from Contract Values to reimburse us for expenses relating to the
maintenance of the Contract and Accounts. If during a Contract Year the Contract
is Surrendered for its full value, we will deduct the Annual Maintenance Fee at
the time of such Surrender. The fee is a flat fee that will be due in the full
amount regardless of the time of the Contract Year that Contract Values are
Surrendered. The Annual Maintenance Fee is $30 per Contract Year for Contracts
with less than $50,000 Contract Value on the Contract Anniversary. Fees will be
deducted on a pro rata basis according to the value in each Account under a
Contract.
WAIVERS OF THE ANNUAL MAINTENANCE FEE -- Annual Maintenance Fees are waived for
Contracts with Contract Value equal to or greater than $50,000. In addition, we
will waive one Annual Maintenance Fee for Contract Owners who own one or more
Contracts with a combined Contract Value of $50,000 up to $100,000. If you have
multiple Contracts with a combined Contract Value of $100,000 or greater, we
will waive the Annual Maintenance Fee on all Contracts. However, we reserve the
right to limit the number of Annual Maintenance Fee waivers to a total of six
Contracts. We reserve the right to waive the Annual Maintenance Fee under other
conditions.
ADMINISTRATIVE CHARGE -- For administration, we apply a daily charge at the rate
of .15% per year 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.
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You should refer to the Trust prospectus for a description of deductions and
expenses paid out of the assets of the Trust's portfolios.
PREMIUM TAXES -- Charges are also deducted for Premium Tax, if applicable,
imposed by state or other governmental entity. Certain states impose a Premium
Tax, currently ranging up to 3.5%. Some states assess the tax at the time
purchase payments are made; others assess the tax at the time of annuitization.
We will pay Premium Taxes at the time imposed under applicable law. At our sole
discretion, we may deduct Premium Taxes at the time we pay such taxes to the
applicable taxing authorities, at the time the Contract is Surrendered, at the
time a death benefit is paid, or at the time the Contract annuitizes.
OPTIONAL DEATH BENEFIT FEE -- If you elect the Optional Death Benefit, we will
deduct daily from your Contract Value an additional charge which equals .15% per
year of the Sub-Account value.
EXCEPTIONS TO CHARGES UNDER THE CONTRACT -- We may offer, at our discretion,
reduced fees and charges including, but not limited to, CDSC, the mortality and
expense risk charge, administration charges, optional charges and the Annual
Maintenance Fee for certain sales (including employer sponsored savings plans)
under circumstances which may result in savings of certain costs and expenses.
Reductions in these fees and charges will not be unfairly discriminatory against
any Contract Owner.
DEATH BENEFITS
DEATH BEFORE THE ANNUITY COMMENCEMENT DATE
DETERMINATION OF THE BENEFICIARY -- If the Contract Owner or the Annuitant dies
before the Annuity Commencement Date, we will pay a Death Benefit to the
Beneficiary.
- - - IF THE CONTRACT OWNER DIES before the Annuity Commencement Date, any surviving
joint Contract Owner becomes the Beneficiary. If there is no surviving joint
Contract Owner, the designated Beneficiary will be the Beneficiary. If the
Contract Owner's spouse is the sole Beneficiary, the spouse may elect, in lieu
of receiving the Contract Value, to be treated as the Contract Owner. If the
Annuitant is not living and there is no Contingent Annuitant, the spouse will
be presumed to be the Contingent Annuitant. If no Beneficiary designation is
in effect or if the Beneficiary has predeceased the Contract Owner, the
Contract Owner's estate will be the Beneficiary.
- - - IF THE ANNUITANT DIES before the Annuity Commencement Date, the Contingent
Annuitant will become the Annuitant. If either (a) there is no Contingent
Annuitant, (b) the Contingent Annuitant predeceases the Annuitant, or (c) if
any sole Contract Owner dies before the Annuity Commencement Date, the
Beneficiary, as determined under the Contract control provisions, will receive
the Death Benefit. However, if the Annuitant dies prior to the Annuity
Commencement Date and the Contract Owner is living, the Contract Owner shall
be the Beneficiary. In that case, the rights of any designated Beneficiary
shall be void.
DETERMINATION OF THE DEATH BENEFIT
IF YOU DID NOT ELECT THE OPTIONAL DEATH BENEFIT, Your Death Benefit, which we
will calculate as of the date we receive Due Proof of Death, will be calculated
as follows:
If the deceased HAD NOT REACHED THEIR 81ST BIRTHDAY, the Death Benefit is the
greater of:
1) 100% of the total premium payments made to the Contract, reduced by any
subsequent Surrenders, or
2) The Contract Value of your annuity, or
3) Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, premium payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death. The Anniversary Value is equal to the
Contract Value as of a Contract Anniversary, increased by the dollar amount of
any premium payments made since that anniversary and reduced by the dollar
amount of any partial Surrenders since that anniversary. The Maximum Anniversary
Value is equal to the greatest Anniversary Value attained from this series of
calculations.
IF THE DECEASED REACHED THEIR 81ST BIRTHDAY, then the Death Benefit is the
greater of:
1) 100% OF THE TOTAL PREMIUM PAYMENTS MADE TO US, REDUCED BY ANY SUBSEQUENT
SURRENDERS, OR
2) THE CONTRACT VALUE OF YOUR ANNUITY, OR
3) THE MAXIMUM ANNIVERSARY VALUE.
IF YOU DID ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
1) 100% of the total premium payments made to us, reduced by any subsequent
Surrenders;
2) The Contract Value of your annuity;
3) The Maximum Anniversary Value; or
4) The Interest Accumulation Value, which is described below.
The Interest Accumulation Value is calculated by accumulating interest on your
premium payments at a rate of 5% per year up to the deceased's 81st birthday or
date of death, assuming you
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have not taken any Surrenders. If you have taken any Surrenders, the 5% will be
accumulated on your premium payments, but there will be an adjustment for any of
the Surrenders. This adjustment will reduce the Optional Death Benefit
proportionally for the Surrenders. We stop compounding interest on the
deceased's 81st birthday or date of death. After that date, the Interest
Accumulation Value will be adjusted by adding any subsequent payments and
subtracting proportional adjustments for any partial Surrenders. The Optional
Death Benefit is limited to a maximum of 200% of premium payments, less
proportional adjustments for any Surrenders. For examples on how the Optional
Death Benefit is calculated see "Appendix II".
SPOUSAL CONTRACT CONTINUATION -- If the Death Benefit beneficiary is the
Contract Owner's spouse, the Contract will continue with the spouse as Contract
Owner, unless the spouse elects to receive the Death Benefit as a lump sum
payment or as an annuity payment option. If the Contract continues with the
spouse as Contract Owner, we will adjust the Contract Value to the amount that
we would have paid as the Death Benefit payment, had the spouse elected to
receive the Death Benefit as a lump sum payment. This provision will only apply
one time for each Contract.
CALCULATION OF THE DEATH BENEFIT -- If the Contract Owner or Annuitant dies
before the Annuity Commencement Date and a Death Benefit is payable to the
Beneficiary, the Death Benefit will be calculated as of the date we receive
written notification of Due Proof of Death. THE DEATH BENEFIT REMAINS INVESTED
IN THE SEPARATE ACCOUNT ACCORDING TO YOUR LAST INSTRUCTIONS UNTIL THE PROCEEDS
ARE PAID OR WE RECEIVE NEW SETTLEMENT INSTRUCTIONS FROM THE BENEFICIARY. DURING
THE TIME PERIOD BETWEEN OUR RECEIPT OF WRITTEN NOTIFICATION OF DUE PROOF OF
DEATH AND OUR RECEIPT OF THE COMPLETE SETTLEMENT INSTRUCTIONS, THE CALCULATED
DEATH BENEFIT WILL BE SUBJECT TO MARKET FLUCTUATIONS. UPON RECEIPT OF COMPLETE
SETTLEMENT INSTRUCTIONS, WE WILL CALCULATE THE PAYABLE AMOUNT.
Any Annuity payments made on or after the date of death, but before receipt of
written notification of Due Proof of Death will be recovered by us from the
Payee.
DEATH ON OR AFTER THE ANNUITY COMMENCEMENT DATE
If, on or after the Annuity Commencement Date, the Contract Owner dies and the
Annuitant is living, the Beneficiary becomes the Contract Owner. If the
Annuitant dies and the Contract Owner is living, the Contract Owner becomes the
Beneficiary.
If the Annuitant dies on or after the Annuity Commencement Date, a Death Benefit
may be paid or payments may continue under the following annuity payment
options:
x Life Annuity with Cash Refund
x Life Annuity with payments for a Period Certain
x Joint and Last Survivor Life Annuity with payments for a Period Certain and
x payments for a Period Certain.
Proceeds from the Death Benefit may be left with us for at least 5 years from
the date of the Contract Owner's death if the death occurs prior to the Annuity
Commencement Date. These proceeds will remain in the Account(s) to which they
were allocated at the time of death unless the Beneficiary elects to reallocate
them. Full or partial Surrenders may be made at any time. In the event of a
complete Surrender, the remaining value will equal the Contract Value of the
proceeds left with us, minus any partial Surrenders. This option may not be
available under certain Contracts issued in connection with Qualified Plans.
SETTLEMENT PROVISIONS
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You select an Annuity Commencement Date which will not be deferred beyond the
Valuation Day immediately following the later of the Annuitant's 90th birthday
or the end of the tenth Contract Year. You may elect a later Annuity
Commencement Date if we allow and subject to the laws and regulations then in
effect. If the Contract is sold as part of a Charitable Remainder Trust, the
Annuity Commencement Date may be deferred to the Annuitant's 100th birthday. The
Annuity Commencement Date may be changed from time to time, but ANY CHANGE MUST
BE WITHIN 30 DAYS PRIOR TO THE DATE ON WHICH ANNUITY PAYMENTS ARE SCHEDULED TO
BEGIN.
You also elect in writing an annuity payment option, which may be any of the
options described below or any annuity payment option then being offered by us.
The annuity payment option may not be changed on or after the Annuity
Commencement Date. The Contract contains the six annuity payment options
described below and the Annuity Proceeds Settlement Option.
For Qualified Contracts, the following annuity payment options are only
available if the guaranteed payment period is less than the life expectancy of
the Annuitant at the time the option becomes effective. The Annuity Proceeds
Settlement option is available for Qualified Contracts only if the guaranteed
payment period is less than the life expectancy of the Beneficiary at the time
the option becomes effective. Such life expectancies are computed on the basis
of the mortality table prescribed by the IRS, or if none is prescribed, the
mortality table in use by us. If you do not elect otherwise, fixed dollar amount
annuity payments will begin automatically on the Annuity Commencement Date,
under the Life Annuity Payment Option.
For Non-Qualified Contracts, if you do not elect otherwise, fixed dollar amount
annuity payments will automatically begin on the Annuity Commencement Date under
the annuity payment option Life Annuity with payments for a Period Certain of 10
years. For Qualified Contracts and Contracts issued in Texas, if you do not
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elect otherwise, fixed dollar amount annuity payments will begin automatically
on the Annuity Commencement Date, under the Life Annuity Payment Option.
With the exception of the option Payments for a Period Certain, if the variable
dollar amount payment is selected, no Surrenders are permitted after annuity
payments begin.
ANNUITY PAYMENT OPTIONS
OPTION 1 -- LIFE ANNUITY where we make Annuity payments for as long as the
Annuitant lives.
- - - Payments under this option STOP UPON THE DEATH OF THE ANNUITANT, even if the
Annuitant dies after one payment.
OPTION 2 -- LIFE ANNUITY WITH CASH REFUND where we make payments during the life
of the Annuitant and when the Annuitant dies, we pay the remaining value to the
Beneficiary. The remaining value is calculated at the time we receive Due Proof
of Death by subtracting the annuity payments already made from the Contract
Value less any applicable Premium Taxes applied to this annuity payment option.
- - - This option is only available if you select payments using a VARIABLE DOLLAR
AMOUNT PAYMENT OPTION WITH THE 5% AIR OR FIXED DOLLAR AMOUNT ANNUITY
PAYMENTS.
OPTION 3 -- LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN where we make
payments to you for the life of the Annuitant but you are at least guaranteed
payments for a time period you select which is a minimum of 5 years and a
maximum of 100 years minus your Annuitant's age.
- - - If the Annuitant dies prior to the end of the period selected, we will pay
your Beneficiary the present value of the remaining payments, either in a
lump sum payment or we will continue payments until the end of the period
selected.
OPTION 4 -- JOINT AND LAST SURVIVOR ANNUITY where we make payments during the
lifetimes of the Annuitant and another designated individual called the Joint
Annuitant At the time of electing this Annuity Option, the Contract Owner may
elect reduced payments over the remaining lifetime of the survivor.
- - - Payments under this option STOP UPON THE DEATH OF THE ANNUITANT AND JOINT
ANNUITANT, even if the Annuitant and Joint Annuitant die after one payment.
OPTION 5 -- JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD
CERTAIN where we make payments during the lifetime of the Annuitant and a Joint
Annuitant, and we guarantee that those payments for a time period you select
which is not less than 5 years and no more than 100 years minus the younger
Annuitant's age. At the time of electing this Annuity Option, the Contract Owner
may elect reduced payments over the remaining lifetime of the survivor.
- - - If the Annuitant and Joint Annuity die prior to the end of the period
selected, we will pay your Beneficiary the present value of the remaining
payments, either in a lump sum payment or We will continue payments until the
end of the period selected.
OPTION 6 -- PAYMENTS FOR A PERIOD CERTAIN where we agree to make payments for a
specified time. The minimum period that you can select is 10 years during the
first two Contract years and 5 years after the second Contract Anniversary. The
maximum period that you can select is 100 years minus your Annuitant's age.
- - - If you select this option under a variable dollar amount payment, you may
Surrender your Annuity after annuity payments have started and we will give
you the present value of the remaining payments less any applicable
Contingent Deferred Sales Charge.
- - - If the Annuitant dies prior to the end of the period selected, we will pay
your Beneficiary the present value of the remaining payments, either in a
lump sum payment or we will continue payments until the end of the period
selected.
WE MAY OFFER OTHER ANNUITY PAYMENT OPTIONS FROM TIME TO TIME.
ANNUITY PAYMENTS
When your decide to begin to take payments, we calculate your Contract Value
minus any Premium Tax which we must pay and, unless you instruct us otherwise,
we apply that amount to a variable annuity with the same Sub-Account values. You
may however, choose to have your Contract Value applied to a fixed annuity
instead.
IMPORTANT: YOU SHOULD CONSIDER THE QUESTION OF ALLOCATION OF CONTRACT VALUES
(LESS APPLICABLE PREMIUM TAXES) AMONG ACCOUNTS TO MAKE CERTAIN THAT ANNUITY
PAYMENTS ARE BASED ON THE INVESTMENT ALTERNATIVE BEST SUITED TO YOUR NEEDS FOR
RETIREMENT.
ANNUITY PAYMENTS -- The minimum Annuity payment is $50. No election may be made
which results in a first payment of less than $50. If at any time Annuity
payments are or become less than $50, we have the right to change the frequency
of payment to intervals so that payments will at least be $50. For Contracts
issued in the State of New York, the minimum monthly Annuity payment is $20. If
any amount due is less than the minimum amount per year, we make such other
settlement as may be equitable to the Payee.
All Annuity payments under any option will occur the same day of the month as
the Annuity Commencement Date, based on the payment frequency selected by you.
Available payment frequencies include monthly, quarterly, semi-annual and
annual. The payment frequency may be changed within 30 days prior to the
anniversary of your Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE -- You select the Annuity Commencement Date in your
application or order request. The
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Annuity Calculation Date will be no more than five Valuation Days before the
Annuity Commencement Date.
ANNUITY CALCULATION DATE -- On the Annuity Calculation Date, your Contract Value
less any applicable Premium Tax is applied to purchase Annuity Units of the
Sub-Accounts selected by you. The first Annuity payment is computed using the
value of these Annuity Units as of the Annuity Calculation Date.
INCOME PAYMENT DATES -- All Annuity payments after the first Annuity payment are
computed and payable as of the Income Payment Dates. These dates are the same
day of the month as the Annuity Commencement Date, based on the Annuity payment
frequency selected by you. They are also shown on the specification page of your
Contract. You may choose from monthly, quarterly, semi-annual and annual
payments. The Annuity payment frequency may not be changed once selected by you.
IN THE EVENT THAT YOU DO NOT SELECT A PAYMENT FREQUENCY, ANNUITY PAYMENTS WILL
BE MADE MONTHLY.
VARIABLE ANNUITY PAYMENTS
THE FIRST VARIABLE ANNUITY PAYMENT. Variable Annuity payments are periodic
payments we pay to your designated Payee, the amount of which varies from one
Income Payment Date to the next as a function of the net investment performance
of the Sub-Accounts selected by you. The dollar amount of the first Variable
Annuity payment depends on the annuity payment option chosen, the age of the
Annuitant, the gender of the Annuitant (if applicable), the amount of Contract
Value less applicable Premium Tax applied to purchase the Annuity payments, and
the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table using projection scale G projected to the year 2000 and an AIR
of not less than 3.0%.
The dollar amount of the first Variable Annuity payment attributable to each
Sub-Account is determined by dividing the dollar amount of the Contract Value
less applicable Premium Tax applied to that Sub-Account on the Annuity
Calculation Date by $1,000 and multiplying the result by the payment factor in
the Contract for the selected annuity payment option. The dollar value of the
first Variable Annuity payment is the sum of the first Variable Annuity payments
attributable to each Sub-Account.
ANNUITY UNITS. The number of Annuity Units attributable to a Sub-Account is
derived by dividing the first Variable Annuity payment attributable to that
Sub-Account by the Annuity Unit value for that Sub-Account for the Valuation
Period ending on the Annuity Calculation Date or during which the Annuity
Calculation Date falls if the Valuation Period does not end on such date. The
number of Annuity Units attributable to each Sub-Account under a Contract
remains fixed unless there is a transfer of Annuity Units between Sub-Accounts.
SUBSEQUENT VARIABLE ANNUITY PAYMENTS. The dollar amount of each subsequent
Variable Annuity payment attributable to each Sub-Account is calculated on the
Income Payment Date. It is determined by multiplying (a) by (b), where:
(a) is the number of Annuity Units of each Sub-Account credited under the
Contract and
(b) is the Annuity Unit value (described below) for that Sub-Account.
The total subsequent Variable Annuity payments equal the sum of the amounts
attributable to each Sub-Account.
When an Income Payment Date falls on a day that is not a Valuation Day, the
Income Payment is computed as of the prior Valuation Day. If the date of the
month elected does not occur in a given month, i.e., the 29th, 30th, or 31st of
a month, the payment will be computed as of the last Valuation Day of the month.
The Annuity Unit value of each Sub-Account for any Valuation Period is equal to
(a) multiplied by (b) multiplied by (c) where:
(a) is the Net Investment Factor for the Valuation Period for which the Annuity
Unit value is being calculated;
(b) is the Annuity Unit value for the preceding Valuation Period; and
(c) is the Annuity Unit Factor
The Annuity Unit Factor neutralizes the AIR percentage (3%, 5%, or 6%). The
daily Annuity Unit Factor corresponding to the AIR percentages of 3%, 5%, and 6%
are 0.999919, 0.999866, and 0.999840, respectively
THE ASSUMED INVESTMENT RETURN (AIR). The Annuity Unit value will increase or
decrease from one Income Payment Date to the next in direct proportion to the
net investment return of the Sub-Account(s) supporting the Variable Annuity
payments, less an adjustment to neutralize the selected AIR. Dividing what would
otherwise be the Annuity Unit value by the AIR factor is necessary in order to
adjust the change in the Annuity Unit value (resulting from the Net Investment
Factor) so that the Annuity Unit value only changes to the extent that the Net
Investment Factor represents a rate of return greater than or less than the AIR
selected by you. Without this adjustment, the Net Investment Factor would
decrease the Annuity Unit value to the extent that such value represented an
annualized rate of return of less than 0.0% and increase the Annuity Unit value
to the extent that such value represented an annualized rate of return of
greater than 0.0%.
The Contract permits Contract Owners to select one of three AIRs: 3%, 5% or 6%.
A higher AIR will result in a higher initial payment, a more slowly rising
series of subsequent payments when actual investment performance (minus any
deductions and expenses) exceeds the AIR, and a more rapid drop in subsequent
payments when actual investment performance (minus
25 - PROSPECTUS
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any deductions and expenses) is less than the AIR. The following examples may
help clarify the impact of selecting one AIR over another:
- - - If you select a 3% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 3% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 3% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 3%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
- - - If you select a 5% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 5% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 5% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 5%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
- - - If you select a 6% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 6% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 6% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 6%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
LEVEL VARIABLE ANNUITY PAYMENTS WOULD BE PRODUCED IF THE INVESTMENT RATE RETURNS
REMAINED CONSTANT AND EQUAL TO THE AIR. IN FACT, PAYMENTS WILL VARY UP OR DOWN
AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE AIR.
EXCHANGE (TRANSFER) OF ANNUITY UNITS. After the Annuity Calculation Date, you
may exchange (i.e., transfer) the dollar value of a designated number of Annuity
Units of a particular Sub-Account for an equivalent dollar amount of Annuity
Units of another Sub-Account. On the date of the transfer, the dollar amount of
a Variable Annuity payment generated from the Annuity Units of either
Sub-Account would be the same. Transfers are executed as of the day Hartford
receives a written request for a transfer. For guidelines refer to Sub-Account
Value Transfers Before and After the Annuity Commencement Date.
FIXED DOLLAR ANNUITY. Fixed Annuity payments are determined at annuitization by
multiplying the Contract Value (less applicable Premium Taxes) by a rate to be
determined by Hartford which is no less than the rate specified in the Fixed
Annuity option tables in the Contract. The Annuity payment will remain level for
the duration of the Annuity. Any Fixed Annuity allocation may not be changed.
OTHER INFORMATION
ASSIGNMENT -- Ownership of this Contract is generally assignable. However, if
the Contracts are issued pursuant to some form of Qualified Plan, it is possible
that the ownership of the Contracts may not be transferred or assigned depending
on the type of tax-qualified retirement plan involved. An assignment of a
Non-Qualified Contract may subject the Contract Values or assignment proceeds to
income taxes and certain penalty taxes.
CONTRACT MODIFICATION -- The Annuitant may not be changed; however, the
Contingent Annuitant may be changed at any time prior to the Annuity
Commencement Date by sending us written notice. We may modify the Contract, but
no modification will effect the amount or term of any Contract unless a
modification is required to conform the Contract to applicable Federal or State
law. No modification will effect the method by which Contract Values are
determined.
FEDERAL TAX CONSIDERATIONS
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What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
Since federal tax law is complex, the tax consequences of purchasing this
contract will vary depending on your situation. You may need tax or legal advice
to help you determine whether purchasing this contract is right for you.
Our general discussion of the tax treatment of this contract is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed description of all federal income tax consequences regarding the
purchase of this contract cannot be made in the prospectus. We also do not
discuss state, municipal or other tax laws that may apply to this contract. For
detailed information, you should consult with a qualified tax adviser familiar
with your situation.
B. TAXATION OF HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly,
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the Separate Account will not be taxed as a "regulated investment company" under
subchapter M of Chapter 1 of the Code. Investment income and any realized
capital gains on the assets of the Separate Account are reinvested and are taken
into account in determining the value of the Accumulation and Annuity Units (See
"Value of Accumulation Units"). As a result, such investment income and realized
capital gains are automatically applied to increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER THAN
QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC. Code Section 72 contains provisions
for contract owners which are not natural persons. Non-natural persons include
corporations, trusts, limited liability companies, partnerships and other types
of legal entities. The tax rules for contracts owned by non-natural persons are
different from the rules for contracts owned by individuals. For example, the
annual net increase in the value of the contract is currently includible in the
gross income of a non-natural person, unless the non-natural person holds the
contract as an agent for a natural person. There are additional exceptions from
current inclusion for:
- - - certain annuities held by structured settlement companies,
- - - certain annuities held by an employer with respect to a terminated qualified
retirement plan and
- - - certain immediate annuities.
A non-natural person which is a tax-exempt entity for federal tax purposes will
not be subject to income tax as a result of this provision.
If the contract owner is a non-natural person, the primary annuitant is treated
as the contract owner in applying mandatory distribution rules. These rules
require that certain distributions be made upon the death of the contract owner.
A change in the primary annuitant is also treated as the death of the contract
owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS). A Contract Owner is not taxed on
increases in the value of the Contract until an amount is received or deemed
received, e.g., in the form of a lump sum payment (full or partial value of a
Contract) or as Annuity payments under the settlement option elected.
The provisions of Section 72 of the Code concerning distributions are summarized
briefly below. Also summarized are special rules affecting distributions from
Contracts obtained in a tax-free exchange for other annuity contracts or life
insurance contracts which were purchased prior to August 14, 1982.
A. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
I. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of the
Code.
II. To the extent that the value of the Contract (ignoring any surrender charges
except on a full surrender) exceeds the "investment in the contract," such
excess constitutes the "income on the contract."
III. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a partial surrender) is deemed to come first from any such
"income on the contract" and then from "investment in the contract," and for
these purposes such "income on the contract" shall be computed by reference to
any aggregation rule in subparagraph 2.c. below. As a result, any such amount
received or deemed received (1) shall be includable in gross income to the
extent that such amount does not exceed any such "income on the contract," and
(2) shall not be includable in gross income to the extent that such amount does
exceed any such "income on the contract." If at the time that any amount is
received or deemed received there is no "income on the contract" (e.g., because
the gross value of the Contract does not exceed the "investment in the contract"
and no aggregation rule applies), then such amount received or deemed received
will not be includable in gross income, and will simply reduce the "investment
in the contract."
IV. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an amount
received for purposes of this subparagraph a. and the next subparagraph b.
V. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not apply,
however, to certain transfers of property between spouses or incident to
divorce.
B. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
I. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the Annuity
Commencement Date, any additional payments (including surrenders) will be
entirely includable in gross income.
II. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity
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payments excluded from gross income by the exclusion ratio does not exceed the
investment in the contract as of the Annuity Commencement Date, then the
remaining portion of unrecovered investment shall be allowed as a deduction for
the last taxable year of the Annuitant.
III. Generally, nonperiodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and shall be
fully includable in gross income. However, upon a full surrender after such
date, only the excess of the amount received (after any surrender charge) over
the remaining "investment in the contract" shall be includable in gross income
(except to the extent that the aggregation rule referred to in the next
subparagraph c. may apply).
C. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same Contract Owner within the same calendar year (other than
certain contracts held in connection with a tax-qualified retirement
arrangement) will be treated as one annuity Contract for the purpose of
determining the taxation of distributions prior to the Annuity Commencement
Date. An annuity contract received in a tax-free exchange for another annuity
contract or life insurance contract may be treated as a new Contract for this
purpose. Hartford believes that for any annuity subject to such aggregation, the
values under the Contracts and the investment in the contracts will be added
together to determine the taxation under subparagraph 2.a., above, of amounts
received or deemed received prior to the Annuity Commencement Date. Withdrawals
will first be treated as withdrawals of income until all of the income from all
such Contracts is withdrawn. As of the date of this Prospectus, there are no
regulations interpreting this provision.
D. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY PAYMENTS.
I. If any amount is received or deemed received on the Contract (before or after
the Annuity Commencement Date), the Code applies a penalty tax equal to ten
percent of the portion of the amount includable in gross income, unless an
exception applies.
II. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has attained the age of
59 1/2.
2. Distributions made on or after the death of the holder or where the holder is
not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of substantially equal
periodic payments (not less frequently than annually) for the life (or life
expectancy) of the recipient (or the joint lives or life expectancies of the
recipient and the recipient's designated Beneficiary).
5. Distributions of amounts which are allocable to the "investment in the
contract" prior to August 14, 1982 (see next subparagraph e.).
E. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE EXCHANGE
OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED PRIOR TO AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life insurance or
annuity Contract purchased prior to August 14, 1982, then any amount received or
deemed received prior to the Annuity Commencement Date shall be deemed to come
(1) first from the amount of the "investment in the contract" prior to August
14, 1982 ("pre-8/14/82 investment") carried over from the prior Contract, (2)
then from the portion of the "income on the contract" (carried over to, as well
as accumulating in, the successor Contract) that is attributable to such
pre-8/14/82 investment, (3) then from the remaining "income on the contract" and
(4) last from the remaining "investment in the contract." As a result, to the
extent that such amount received or deemed received does not exceed such
pre-8/14/82 investment, such amount is not includable in gross income., In
addition, to the extent that such amount received or deemed received does not
exceed the sum of (a) such pre-8/14/82 investment and (b) the "income on the
contract" attributable thereto, such amount is not subject to the 10% penalty
tax. In all other respects, amounts received or deemed received from such post-
exchange Contracts are generally subject to the rules described in this
subparagraph 3.
F. REQUIRED DISTRIBUTIONS
I. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary provisions in ii or
iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Contract has been distributed, the remaining
portion of such interest shall be distributed at least as rapidly as under the
method of distribution being used as of the date of such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the entire
interest in the Contract will be distributed within 5 years after such death;
and
3. If the Contract Owner is not an individual, then for purposes of 1. or 2.
above, the primary annuitant under the Contract shall be treated as the Contract
Owner, and any change in the primary annuitant shall be treated as the death of
the Contract Owner. The primary annuitant is the individual, the events in the
life of whom are of primary importance in affecting the timing or amount of the
payout under the Contract.
II. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in i. above is
payable to or for the benefit of a designated beneficiary, such beneficiary may
elect to have the portion distributed over a
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period that does not extend beyond the life or life expectancy of the
beneficiary. The election must be made and payments must begin within a year of
the death.
III. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for the
benefit of his or her spouse, and the Annuitant or Contingent Annuitant is
living, such spouse shall be treated as the Contract Owner of such portion for
purposes of section i. above. This spousal continuation shall apply only once
for this contract.
3. DIVERSIFICATION REQUIREMENTS. The Code requires that investments supporting
your contract be adequately diversified. Code Section 817 provides that a
variable annuity contract will not be treated as an annuity contract for any
period during which the investments made by the separate account or underlying
fund are not adequately diversified. If a contract is not treated as an annuity
contract, the contract owner will be subject to income tax on annual increases
in cash value.
The Treasury Department's diversification regulations require, among other
things, that:
- - - no more than 55% of the value of the total assets of the segregated asset
account underlying a variable contract is represented by any one investment,
- - - no more than 70% is represented by any two investments,
- - - no more than 80% is represented by any three investments and
- - - no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all securities of
the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In the
case of government securities, each government agency or instrumentality is
treated as a separate issuer.
A separate account must be in compliance with the diversification standards on
the last day of each calendar quarter or within 30 days after the quarter ends.
If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the taxation of contract income on an ongoing basis. However, either the company
or the contract owner must agree to pay the tax due for the period during which
the diversification requirements were not met.
We monitor the diversification of investments in the separate accounts and test
for diversification as required by the Code. We intend to administer all
contracts subject to the diversification requirements in a manner that will
maintain adequate diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT. In order for a variable
annuity contract to qualify for tax deferral, assets in the separate accounts
supporting the contract must be considered to be owned by the insurance company
and not by the contract owner. It is unclear under what circumstances an
investor is considered to have enough control over the assets in the separate
account to be considered the owner of the assets for tax purposes.
The IRS has issued several rulings discussing investor control. These rulings
say that certain incidents of ownership by the contract owner, such as the
ability to select and control investments in a separate account, will cause the
contract owner to be treated as the owner of the assets for tax purposes.
In its explanation of the diversification regulations, the Treasury Department
recognized that the temporary regulations "do not provide guidance concerning
the circumstances in which investor control of the investments of a segregated
asset account may cause the investor, rather than the insurance company, to be
treated as the owner of the assets in the account." The explanation further
indicates that "the temporary regulations provide that in appropriate cases a
segregated asset account may include multiple sub-accounts, but do not specify
the extent to which policyholders may direct their investments to particular
sub-accounts without being treated as the owners of the underlying assets.
Guidance on this and other issues will be provided in regulations or revenue
rulings under Section 817(d), relating to the definition of variable contract."
The final regulations issued under Section 817 did not provide guidance
regarding investor control, and as of the date of this prospectus, guidance has
yet to be issued. We do not know if additional guidance will be issued. If
guidance is issued, we do not know if it will have a retroactive effect.
Due to the lack of specific guidance on investor control, there is some
uncertainty about when a contract owner is considered the owner of the assets
for tax purposes. We reserve the right to modify the contract, as necessary, to
prevent you from being considered the owner of assets in the separate account.
D. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will be
subject to federal income tax withholding, pursuant to Section 3405 of the Code.
The application of this provision is summarized below:
1. NON-PERIODIC DISTRIBUTIONS.
The portion of a non-periodic distribution which constitutes taxable income will
be subject to federal income tax withholding unless the recipient elects not to
have taxes withheld. If there is no election to waive withholding, 10% of the
taxable distribution will be withheld as federal income tax. Election forms will
be provided at the time distributions are requested. If the necessary election
forms are not submitted to Hartford, Hartford will automatically withhold 10% of
the taxable distribution.
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2. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN ONE
YEAR).
The portion of a periodic distribution which constitutes taxable income will be
subject to federal income tax withholding as if the recipient were married
claiming three exemptions. A recipient may elect not to have income taxes
withheld or have income taxes withheld at a different rate by providing a
completed election form. Election forms will be provided at the time
distributions are requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I for information relative to the types of plans
for which it may be used and the general explanation of the tax features of such
plans.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to annuity purchasers that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal income tax and withholding on annuity distributions at a 30% rate,
unless a lower treaty rate applies. In addition, purchasers may be subject to
state premium tax, other state and/or municipal taxes, and taxes that may be
imposed by the purchaser's country of citizenship or residence. Prospective
purchasers are advised to consult with a qualified tax adviser regarding U.S.,
state, and foreign taxation with respect to an annuity purchase.
MISCELLANEOUS
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HOW CONTRACTS ARE SOLD
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is an affiliate of Hartford. Both HSD and Hartford are ultimately controlled by
The Hartford Financial Services Group, Inc. The principal business address of
HSD is the same as that of Hartford.
The securities will be sold by insurance and variable annuity agents of Hartford
who are registered representatives of Dean Witter Reynolds 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.
HSD is registered with the Commission under the Securities Exchange Act of 1934
as a Broker-Dealer and is a member of the National Association of Securities
Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 6% of premium
payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on premium payments made by
policyholders or contract owners. This compensation is usually paid from the
sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or Surrender variable insurance products.
YEAR 2000
IN GENERAL The Year 2000 issue relates to the ability or inability of computer
hardware, software and other information technology (IT) systems, as well as
non-IT systems, such as equipment and machinery with imbedded chips and
microprocessors, to properly process information and data containing or related
to dates beginning with the year 2000 and beyond. The Year 2000 issue exists
because, historically, many IT and non-IT systems that are in use today were
developed years ago when a year was identified using a two-digit date field
rather than a four-digit date field. As information and data containing or
related to the century date are introduced to date sensitive systems, these
systems may recognize the year 2000 as "1900", or not at all, which may result
in systems processing information incorrectly. This, in turn, may significantly
and adversely affect the integrity and reliability of information databases of
IT systems, may cause the malfunctioning of certain non-IT systems, and may
result in a wide variety of adverse consequences to a company. In addition, Year
2000 problems that occur with third parties with which a company does business,
such as suppliers, computer vendors, distributors and others, may also adversely
affect any given company.
The integrity and reliability of Hartford's IT systems, as well as the
reliability of its non-IT systems, are integral aspects of Hartford's business.
Hartford issues insurance policies, annuities, mutual funds and other financial
products to individual and
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business customers, nearly all of which contain date sensitive data, such as
policy expiration dates, birth dates and premium payment dates. In addition,
various IT systems support communications and other systems that integrate
Hartford's various business segments and field offices. Hartford also has
business relationships with numerous third parties that affect virtually all
aspects of Hartford's business, including, without limitation, suppliers,
computer hardware and software vendors, insurance agents and brokers, securities
broker-dealers and other distributors of financial products, many of which
provide date sensitive data to Hartford, and whose operations are important to
Hartford's business.
INTERNAL YEAR 2000 EFFORTS AND TIMETABLE Beginning in 1990, Hartford began
working on making its IT systems Year 2000 ready, either through installing new
programs or replacing systems. Since January 1998, Hartford's Year 2000 efforts
have focused on the remaining Year 2000 issues related to IT and non-IT systems
in all of Hartford's business segments. These Year 2000 efforts include the
following five main initiatives: (1) identifying and assessing Year 2000 issues;
(2) taking actions to remediate IT and non-IT systems so that they are Year 2000
ready; (3) testing IT and non-IT systems for Year 2000 readiness; (4) deploying
such remediated and tested systems back into their respective production
environments; and (5) conducting internal and external integrated testing of
such systems. As of December 31, 1998, Hartford substantially completed
initiatives (1) through (4) of its internal Year 2000 efforts. Hartford has
begun initiative (5) and management currently anticipates that such activity
will continue into the fourth quarter of 1999.
THIRD PARTY YEAR 2000 EFFORTS AND TIMETABLE Hartford's Year 2000 efforts include
assessing the potential impact on Hartford of third parties' Year 2000
readiness. Hartford's third party Year 2000 efforts include the following three
main initiatives: (1) identifying third parties which have significant business
relationships with Hartford, including, without limitation, insurance agents,
brokers, third party administrators, banks and other distributors and servicers
of financial products, and inquiring of such third parties regarding their Year
2000 readiness; (2) evaluating such third parties' responses to Hartford's
inquiries; and (3) based on the evaluation of third party responses (or a third
party's failure to respond) and the significance of the business relationship,
conducting additional activities with respect to third parties as determined to
be necessary in each case. These activities may include conducting additional
inquiries, more in-depth evaluations of Year 2000 readiness and plans, and
integrated IT systems testing. Hartford has completed the first third party
initiative and, as of early 1999, had substantially completed evaluating third
party responses received. Hartford has begun conducting the additional
activities described in initiative (3) and management currently anticipates that
it will continue to do so through the end of 1999. However, notwithstanding
these third party Year 2000 efforts, Hartford does not have control over these
third parties and, as a result, Hartford cannot currently determine to what
extent future operating results may be adversely affected by the failure of
these third parties to adequately address their Year 2000 issues.
YEAR 2000 COSTS The costs of Hartford's Year 2000 program that were incurred
through the year ended December 31, 1997 were not material to Hartford's
financial condition or results of operations. The after-tax costs of Hartford's
Year 2000 efforts for the year ended December 31, 1998 were approximately $3
million. Management currently estimates that after-tax costs related to the Year
2000 program to be incurred in 1999 will be less than $10 million. These costs
are being expensed as incurred.
RISKS AND CONTINGENCY PLANS If significant Year 2000 problems arise, including
problems arising with third parties, failures of IT and non-IT systems could
occur, which in turn could result in substantial interruptions in Hartford's
business. In addition, Hartford's investing activities are an important aspect
of its business and Hartford may be exposed to the risk that issuers of
investments held by it will be adversely impacted by Year 2000 issues. Given the
uncertain nature of Year 2000 problems that may arise, especially those related
to the readiness of third parties discussed above, management cannot determine
at this time whether the consequences of Year 2000 related problems that could
arise will have a material impact on Hartford's financial condition or results
of operations.
Hartford is in the process of developing certain contingency plans so that if,
despite its Year 2000 efforts, Year 2000 problems ultimately arise, the impact
of such problems may be avoided or minimized. These contingency plans are being
developed based on, among other things, known or reasonably anticipated
circumstances and potential vulnerabilities. The contingency planning also
includes assessing the dependency of Hartford's business on third parties and
their Year 2000 readiness. Hartford currently anticipates that internal and
external contingency plans will be substantially complete by the end of the
second quarter of 1999. However, in many contexts, Year 2000 issues are dynamic,
and ongoing assessments of business functions, vulnerabilities and risks must be
made. As such, new contingency plans may be needed in the future and/or existing
plans may need to be modified as circumstances warrant.
LEGAL MATTERS
There are no material legal proceedings pending to which the Separate Account is
a party.
Counsel with respect to federal laws and regulations applicable to the issue and
sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
Senior Vice President, General Counsel and Corporate Secretary, Hartford Life
and Annuity Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.
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The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
MORE INFORMATION
You may call your Representative if you have any questions or write or call us
at the address below:
Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: 1-800-862-6668 (Contract Owners)
1-800-862-4397 (Account Executive)
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APPENDIX I - INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS
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This summary does not attempt to provide more than general information about the
federal income tax rules associated with use of a Contract by a tax-qualified
retirement plan. Because of the complexity of the federal tax rules, owners,
participants and beneficiaries are encouraged to consult their own tax advisors
as to specific tax consequences.
The federal tax rules applicable to owners of Contracts under tax-qualified
retirement plans vary according to the type of plan as well as the terms and
conditions of the plan itself. Contract owners, plan participants and
beneficiaries are cautioned that the rights and benefits of any person may be
controlled by the terms and conditions of the tax-qualified retirement plan
itself, regardless of the terms and conditions of a Contract. We are not bound
by the terms and conditions of such plans to the extent such terms conflict with
a Contract, unless we specifically consent to be bound.
Some tax-qualified retirement plans are subject to distribution and other
requirements that are not incorporated into our administrative procedures.
Contract owners, participants and beneficiaries are responsible for determining
that contributions, distributions and other transactions comply with applicable
law. Tax penalties may apply to transactions with respect to tax-qualified
retirement plans if applicable federal income tax rules and restrictions are not
carefully observed.
We do not currently offer the Contracts in connection with all of the types of
tax-qualified retirement plans discussed below and may not offer the Contracts
for all types of tax-qualified retirement plans in the future.
1. Tax-Qualified Pension or Profit-Sharing Plans Eligible employers can
establish certain tax-qualified pension and profit-sharing plans under section
401 of the Code. Rules under section 401(k) of the Code govern certain "cash or
deferred arrangements" under such plans. Rules under section 408(k) govern
"simplified employee pensions". Tax-qualified pension and profit-sharing plans
are subject to limitations on the amount that may be contributed, the persons
who may be eligible to participate and the time when distributions must
commence. Employers intending to use the Contracts in connection with tax-
qualified pension or profit-sharing plans should seek competent tax and other
legal advice.
2. Tax Sheltered Annuities Under Section 403(b) Public schools and certain
types of charitable, educational and scientific organizations, as specified in
section 501(c)(3) of the Code, can purchase tax-sheltered annuity contracts for
their employees. Tax-deferred contributions can be made to tax-sheltered annuity
contracts under section 403(b) of the Code, subject to certain limitations.
Generally, such contributions may not exceed the lesser of $10,000 (indexed) or
20% of the employee's "includable compensation" for such employee's most recent
full year of employment, subject to other adjustments. Special provisions under
the Code may allow some employees to elect a different overall limitation.
Tax-sheltered annuity programs under section 403(b) are subject to a PROHIBITION
AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO CONTRIBUTIONS MADE
PURSUANT TO A SALARY REDUCTION AGREEMENT, unless such distribution is made:
- - - after the participating employee attains age 59 1/2;
- - - upon separation from service;
- - - upon death or disability; or
- - - in the case of hardship (and in the case of hardship, any income attributable
to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions attributable to
cash values or other amounts held under a section 403(b) contract as of December
31, 1988.
3. Deferred Compensation Plans Under Section 457 A governmental employer
or a tax-exempt employer other than a governmental unit can establish a Deferred
Compensation Plan under section 457 of the Code. For these purposes, a
"governmental employer" is a State, a political subdivision of a State, or an
agency or an instrumentality of a State or political subdivision of a State.
Employees and independent contractors performing services for a governmental or
tax-exempt employer can elect to have contributions made to a Deferred
Compensation Plan of their employer in accordance with the employer's plan and
section 457 of the Code.
Deferred Compensation Plans that meet the requirements of section 457(b) of the
Code are called "eligible" Deferred Compensation Plans. Section 457(b) limits
the amount of contributions that can be made to an eligible Deferred
Compensation Plan on behalf of a participant. Generally, the limitation on
contributions is 33 1/3% of a participant's includable compensation (typically
25% of gross compensation) or, for 1999, $8,000 (indexed), whichever is less.
The plan may provide for additional "catch-up" contributions during the three
taxable years ending before the year in which the participant attains normal
retirement age.
All of the assets and income of an eligible Deferred Compensation Plan
established by a governmental employer after August 20, 1996, must be held in
trust for the exclusive benefit of participants and their beneficiaries. For
this purpose, custodial accounts and certain annuity contracts are treated as
trusts. Eligible Deferred Compensation Plans that were in existence on
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August 20, 1996 may be amended to satisfy the trust and exclusive benefit
requirements any time prior to January 1, 1999, and must be amended not later
than that date to continue to receive favorable tax treatment. The requirement
of a trust does not apply to amounts under a Deferred Compensation Plan of a
tax-exempt (non-governmental) employer. In addition, the requirement of a trust
does not apply to amounts under a Deferred Compensation Plan of a governmental
employer if the Deferred Compensation Plan is not an eligible plan within the
meaning of section 457(b) of the Code. In the absence of such a trust, amounts
under the plan will be subject to the claims of the employer's general
creditors.
In general, distributions from an eligible Deferred Compensation Plan are
prohibited under section 457 of the Code unless made after the participating
employee:
- - - attains age 70 1/2,
- - - separates from service,
- - - dies, or
- - - suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Deferred Compensation
Plan under section 457 of the Code cannot be transferred or rolled over on a
tax-deferred basis except for certain transfers to other Deferred Compensation
Plans under section 457 in limited cases.
4. Individual Retirement Annuities ("IRAs") Under Section 408
Traditional IRAs. Eligible individuals can establish individual retirement
programs under section 408 of the Code through the purchase of an IRA. Section
408 imposes limits with respect to IRAs, including limits on the amount that may
be contributed to an IRA, the amount of such contributions that may be deducted
from taxable income, the persons who may be eligible to contribute to an IRA,
and the time when distributions commence from an IRA. Distributions from certain
tax-qualified retirement plans may be "rolled-over" to an IRA on a tax-deferred
basis.
SIMPLE IRAs. Eligible employees may establish SIMPLE IRAs in connection with a
SIMPLE IRA plan of an employer under section 408(p) of the Code. Special
rollover rules apply to SIMPLE IRAs. Amounts can be rolled over from one SIMPLE
IRA to another SIMPLE IRA. However, amounts can be rolled over from a SIMPLE IRA
to a Traditional IRA only after two years have expired since the employee first
commenced participation in the employer's SIMPLE IRA plan. Amounts cannot be
rolled over to a SIMPLE IRA from a qualified plan or a Traditional IRA. Hartford
is a non-designated financial institution for purposes of the SIMPLE IRA rules.
Roth IRAs. Eligible individuals may establish Roth IRAs under section 408A of
the Code. Contributions to a Roth IRA are not deductible. Subject to special
limitations, a Traditional IRA may be converted into a Roth IRA or a
distribution from a Traditional IRA may be rolled over to a Roth IRA. However, a
conversion or a rollover from a Traditional IRA to a Roth IRA is not excludable
from gross income. If certain conditions are met, qualified distributions from a
Roth IRA are tax-free.
5. Federal Tax Penalties and Withholding Distributions from tax-qualified
retirement plans are generally taxed as ordinary income under section 72 of the
Code. Under these rules, a portion of each distribution may be excludable from
income. The excludable amount is the portion of the distribution that bears the
same ratio as the after-tax contributions bear to the expected return.
(a) Penalty Tax on Early Distributions Section 72(t) of the Code imposes an
additional penalty tax equal to 10% of the taxable portion of a distribution
from certain tax-qualified retirement plans. However, the 10% penalty tax
does not apply to a distributions that is:
- - - Made on or after the date on which the employee reaches age 59 1/2;
- - - Made to a beneficiary (or to the estate of the employee) on or after the death
of the employee;
- - - Attributable to the employee's becoming disabled (as defined in the Code);
- - - Part of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the employee or the
joint lives (or joint life expectancies) of the employee and his or her
designated beneficiary;
- - - Except in the case of an IRA, made to an employee after separation from
service after reaching age 55; or
- - - Not greater than the amount allowable as a deduction to the employee for
eligible medical expenses during the taxable year.
IN ADDITION, THE 10% PENALTY TAX DOES NOT APPLY TO A DISTRIBUTION FROM AN IRA
THAT IS:
- - - Made after separation from employment to an unemployed IRA owner for health
insurance premiums, if certain conditions are met;
- - - Not in excess of the amount of certain qualifying higher education expenses,
as defined by section 72(t)(7) of the Code; or
- - - A qualified first-time homebuyer distribution meeting the requirements
specified at section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that the 10%
penalty tax is increased to 25% with respect to non-exempt early distributions
made from your SIMPLE IRA during the first two years following the date you
first commenced participation in any SIMPLE IRA plan of your employer.
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(b) Minimum Distribution Penalty Tax If the amount distributed is less than the
minimum required distribution for the year, the Participant is subject to a
50% penalty tax on the amount that was not properly distributed.
An individual's interest in a tax-qualified retirement plan generally must be
distributed, or begin to be distributed, not later than the Required Beginning
Date. Generally, the Required Beginning Date is April 1 of the calendar year
following the later of:
- - - the calendar year in which the individual attains age 70 1/2; or
- - - the calendar year in which the individual retires from service with the
employer sponsoring the plan.
The Required Beginning Date for an individual who is a five (5) percent owner
(as defined in the Code), or who is the owner of an IRA, is April 1 of the
calendar year following the calendar year in which the individual attains age
70 1/2.
The entire interest of the Participant must be distributed beginning no later
than the Required Beginning Date over:
- - - the life of the Participant or the lives of the Participant and the
Participant's designated beneficiary, or
- - - over a period not extending beyond the life expectancy of the Participant or
the joint life expectancy of the Participant and the Participant's designated
beneficiary.
Each annual distribution must equal or exceed a "minimum distribution amount"
which is determined by dividing the account balance by the applicable life
expectancy. This account balance is generally based upon the account value as of
the close of business on the last day of the previous calendar year. In
addition, minimum distribution incidental benefit rules may require a larger
annual distribution.
If an individual dies before reaching his or her Required Beginning Date, the
individual's entire interest must generally be distributed within five years of
the individual's death. However, this rule will be deemed satisfied, if
distributions begin before the close of the calendar year following the
individual's death to a designated beneficiary and distribution is over the life
of such designated beneficiary (or over a period not extending beyond the life
expectancy of the beneficiary). If the beneficiary is the individual's surviving
spouse, distributions may be delayed until the individual would have attained
age 70 1/2.
If an individual dies after reaching his or her Required Beginning Date or after
distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect at
the time of the individual's death.
(c) Withholding In general, regular wage withholding rules apply to
distributions from IRAs and plans described in section 457 of the Code.
Periodic distributions from other tax-qualified retirement plans that are
made for a specified period of 10 or more years or for the life or life
expectancy of the participant (or the joint lives or life expectancies of
the participant and beneficiary) are generally subject to federal income tax
withholding as if the recipient were married claiming three exemptions. The
recipient of periodic distributions may generally elect not to have
withholding apply or to have income taxes withheld at a different rate by
providing a completed election form.
Mandatory federal income tax withholding at a flat rate of 20% will generally
apply to other distributions from such other tax-qualified retirement plans
unless such distributions are:
- - - the non-taxable portion of the distribution;
- - - required minimum distributions; or
- - - direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
Certain states require withholding of state taxes when federal income tax is
withheld.
35 - PROSPECTUS
<PAGE>
APPENDIX II - OPTIONAL DEATH BENEFIT - EXAMPLES
--------------------------------------------------------------------
EXAMPLE 1
Assume that you deposited a premium payment of $100,000 on January 1, 1998. If
you made no Surrenders during the year, your Interest Accumulation Value on
January 1, 1999 would be $105,000, calculated as follows:
<TABLE>
<C> <S>
$100,000 Premium deposited on January 1, 1998
5,000 Interest accumulated at 5% per year on premiums
- - --------
105,000 Interest Accumulation Value on January 1, 1999.
</TABLE>
If you elected the Optional Death Benefit, you would be guaranteed a Death
Benefit payment equal to at least $105,000.
EXAMPLE 2
Assume that you deposited a premium payment of $100,000 on January 1, 1998. If
you Surrendered $10,000 on January 1, 1999 and your Contract Value immediately
prior to the partial Surrender was $100,000, your Interest Accumulation Value on
January 1, 1999 would be $94,500, calculated as follows:
<TABLE>
<C> <S>
$100,000 Premium deposited on January 1, 1998
5,000 Interest accumulated at 5% per year on premiums
($10,500) Adjustment for partial Surrender*
- - ---------
$94,500 Interest Accumulation Value on January 1, 1999.
</TABLE>
- - --------------------------------------------------------------------------------
* The Adjustment for the partial Surrender reduces the Interest Accumulation
Value by an amount equal to the proportion of the partial Surrender to the
Contract Value prior to the partial Surrender. Therefore, in this example, the
$10,500 reduction to the Interest Accumulation Value is calculated by dividing
the amount of the Surrender, $10,000, by the Contract Value paid prior to the
Surrender, $100,000. This ratio (Surrender DIVIDED BY Contract Value prior to
Surrender) is multiplied by the Interest Accumulation Value prior to
Surrenders and results in the adjustment for the partial Surrender.
<TABLE>
<S> <C>
Interest Accumulation Value prior to Surrenders........ $105,000
Multiplied by ratio of Surrenders DIVIDED BY Contract
Value prior to Surrenders ($10,000 DIVIDED BY
100,000).............................................. X .10
--------
Adjustment for the partial Surrender................... $ 10,500
</TABLE>
The Surrender reduced the Interest Accumulation Value by $10,500 ($105,000 -
94,500).
- - --------------------------------------------------------------------------------
36 - PROSPECTUS
<PAGE>
TABLE OF CONTENTS TO
STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------------------------------
<TABLE>
<CAPTION>
SECTION PAGE
- - -----------------------------------------------------------
<S> <C>
Description of Hartford and Annuity Life
Insurance Company
- - -----------------------------------------------------------
Safekeeping of Assets
- - -----------------------------------------------------------
Independent Public Accountants
- - -----------------------------------------------------------
Distribution of Contracts
- - -----------------------------------------------------------
Calculation of Yield and Return
- - -----------------------------------------------------------
Performance Comparisons
- - -----------------------------------------------------------
Financial Statements
- - -----------------------------------------------------------
</TABLE>
37 - PROSPECTUS
<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, 1988 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:
a. attained age 59 1/2,
b. separated from service,
c. died, or
d. become disabled.
Distributions of post December 31, 1988 contributions (excluding any income
thereon) may also be made if you have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made prior to age 59 1/2
because of financial hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Dean Witter Select Dimensions Variable Annuity.
Please refer to your Plan.
Please complete the following and return to:
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: ___________________________________________________
Contract No: ____________________________________________
Signature: ______________________________________________
- - --------------------------------------------------------------------------------
To obtain a Statement of Additional Information, please complete the form below
and mail to:
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 Series II of Dean Witter
Select Dimensions Variable Annuity to me at the following address:
- - -------------------------------------------------------
Name
- - -------------------------------------------------------
Address
- - -------------------------------------------------------
City/State Zip Code
<PAGE>
Part B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT THREE
SERIES II OF DEAN WITTER SELECT DIMENSIONS
This Statement of Additional Information is not a prospectus. The information
contained herein should be read in conjunction with the prospectus.
To obtain a prospectus, send a written request to Hartford Life and Annuity
Insurance Company, Attn: Annuity Marketing Services, P.O. Box 5085, Hartford,
CT 06102-5085.
Date of Prospectus: May 3, 1999
Date of Statement of Additional Information: May 3, 1999
333-69491
<PAGE>
2
TABLE OF CONTENTS
SECTION PAGE
- - ------- ----
DESCRIPTION OF HARTFORD LIFE AND
ANNUITY INSURANCE COMPANY............................... 3
SAFEKEEPING OF ASSETS...................................... 3
INDEPENDENT PUBLIC ACCOUNTANTS............................. 3
DISTRIBUTION OF CONTRACTS.................................. 3
CALCULATION OF YIELD AND RETURN............................ 4
PERFORMANCE COMPARISONS.................................... 12
FINANCIAL STATEMENTS.......................................
<PAGE>
3
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both
individual and group, in all states of the United States, the District of
Columbia and Puerto Rico, except New York. On January 1, 1998, Hartford's
name changed from ITT Hartford Life and Annuity Insurance Company to Hartford
Life and Annuity Insurance Company. We were originally incorporated under
the laws of Wisconsin on January 9, 1956, and subsequently redomiciled to
Connecticut. Our offices are located in Simsbury, Connecticut; however, our
mailing address is P.O. Box 2999, Hartford, CT 06104-2999. We are ultimately
controlled by The Hartford Financial Services Group, Inc., one of the largest
financial service providers in the United States.
HARTFORD'S RATINGS
- - -------------------------------------------------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
- - -------------------------------------------------------------------------------
A.M. Best and Company, Inc. 1/1/99 A+ Financial performance
- - -------------------------------------------------------------------------------
Standard & Poor's 6/1/98 AA Insurer financial strength
- - -------------------------------------------------------------------------------
Duff & Phelps 12/21/98 AA+ Claims paying ability
- - -------------------------------------------------------------------------------
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. The assets
are kept physically segregated and are held separate and apart from
Hartford's general corporate assets. Records are maintained of all purchases
and redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory
financial statements are presented in accordance with statutory accounting
practices prescribed or permitted by the National Association of Insurance
Commissioners and the State of Connecticut Insurance Department and are not
presented in accordance with generally accepted accounting principles. The
principal business address of Arthur Andersen LLP is One Financial Plaza,
Hartford, Connecticut 06103.
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account.
HSD is an affiliate of Hartford. Both HSD and Hartford are ultimately
controlled by The Hartford Financial Services Group, Inc. The principal
business address of HSD is the same as that of Hartford.
<PAGE>
4
The securities will be sold by insurance and variable annuity agents of
Hartford who are registered representatives of Dean Witter Reynolds 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.
HSD is registered with the Commission under the Securities Exchange Act of
1934 as a Broker-Dealer and is a member of the National Association of
Securities Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 6% of premium
payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a
schedule set forth by HSD and any applicable rules or regulations for
variable insurance compensation. Compensation is generally based on premium
payments made by policyholders or contract owners. This compensation is
usually paid from the sales charges described in the prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance
products. These payments, which may be different for different broker-dealers
or financial institutions, will be made by HSD, its affiliates or Hartford
out of their own assets and will not effect the amounts paid by the
policyholders or contract owners to purchase, hold or Surrender variable
insurance products.
Hartford currently pays HSD underwriting commissions for its role as
Principal Underwriter of all variable annuities associated with this Separate
Account. For the past three years, the aggregate dollar amount of
underwriting commissions paid to HSD in its role as Principal
Underwriter has been: 1998: $11,655,729, 1997: $17,944,107 and 1996:
$23,145,753. HSD has retained none of these commissions.
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
<PAGE>
5
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. THE CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES
ON THE SEPARATE ACCOUNT LEVEL, INCLUDING THE MAXIMUM ANNUAL MAINTENANCE FEE.
- - -----------------------------------------------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
- - -----------------------------------------------------------------------------
The Money Market Portfolio* 3.30% 3.36%
- - -----------------------------------------------------------------------------
* Yield and effective yield for the seven day period ending December 31, 1998.
YIELDS OF NORTH AMERICAN GOVERNMENT SECURITIES PORTFOLIO AND DIVERSIFIED
INCOME PORTFOLIO SUB-ACCOUNTS. As summarized in the prospectus under the
heading "Performance Related Information," yields of the above Sub-Accounts
will be computed by annualizing a recent month's net investment income,
divided by a Fund share's net asset value on the last trading day of that
month. Net changes in the value of a hypothetical account will assume the
change in the underlying mutual fund's "net asset value per share" for the
same period in addition to the daily expense charge assessed, at the
sub-account level for the respective period. The Sub-Accounts' yields will
vary from time to time depending upon market conditions and, the composition
of the underlying funds' portfolios. Yield should also be considered relative
to changes in the value of the Sub-Accounts' shares and to the relative risks
associated with the investment objectives and policies of the underlying Fund.
<PAGE>
6
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL, INCLUDING
THE ANNUAL MAINTENANCE FEE.
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges assessed
against a Contract Owner's account over the base period. Yield quotations based
on a 30 day period were computed by dividing the dividends and interest earned
during the period by the maximum offering price per unit on the last day of the
period, according to the following formula:
Example:
6
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1) - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the period
that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the period.
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.
- - -----------------------------------------------------------------------------
SUB-ACCOUNT YIELD
- - -----------------------------------------------------------------------------
The North American Government Securities Portfolio** 3.49%
- - -----------------------------------------------------------------------------
The Diversified Income Portfolio** 6.77%
- - -----------------------------------------------------------------------------
High Yield Portfolio** 8.26%
- - -----------------------------------------------------------------------------
** Yield quotation based on a 30 day period ended December 31, 1998.
CALCULATION OF TOTAL RETURN. As summarized in the prospectus under the
heading "Performance Related Information", total return is a measure of the
change in value of an investment in a Sub-Account over the period covered and
assumes that the Optional Death Benefit has not been elected. The formula
for total return used herein includes three steps: (1) calculating the value
of the hypothetical initial investment of $1,000 as of the end of the period
by multiplying the total number of units owned at the end of the period by
the unit value per unit on the last trading day of the period; (2) assuming
redemption at the end of the period and deducting any applicable contingent
deferred sales charge and (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.
<PAGE>
7
For the fiscal year ended December 31, 1998, standardized average annual
total return quotations for the Sub-Accounts listed were as follows.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------
S/A SINCE
SUB-ACCOUNT INCEPTION DATE 1 YEAR 5 YEAR 10 YEAR INCEPTION
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Value 11/8/94 18.96% N/A N/A 22.44%
- - ------------------------------------------------------------------------------------
Balanced Growth 11/8/94 2.82% N/A N/A 11.38%
- - ------------------------------------------------------------------------------------
Developing Growth 11/8/94 -2.48% N/A N/A 15.46%
- - ------------------------------------------------------------------------------------
Dividend Growth 11/8/94 8.06% N/A N/A 21.50%
- - ------------------------------------------------------------------------------------
Diversified Income 11/8/94 -7.23% N/A N/A 1.34%
- - ------------------------------------------------------------------------------------
Emerging Markets 11/8/94 -37.92% N/A N/A -10.14%
- - ------------------------------------------------------------------------------------
Global Equity 11/8/94 3.52% N/A N/A 6.03%
- - ------------------------------------------------------------------------------------
Growth 11/8/94 1.65% N/A N/A 12.36%
- - ------------------------------------------------------------------------------------
Midcap Growth 1/2/97 -5.80% N/A N/A 3.50%
- - ------------------------------------------------------------------------------------
Money Market 11/8/94 -6.30% N/A N/A -0.60%
- - ------------------------------------------------------------------------------------
North American Government 11/8/94 -7.17% N/A N/A -0.80%
- - ------------------------------------------------------------------------------------
Utilities 11/8/94 10.53% N/A N/A 15.20%
- - ------------------------------------------------------------------------------------
Value-Added Market 11/8/94 0.63% N/A N/A 14.50%
- - -------------------------------------------------------------------------------------
VK Enterprise 4/1/98 N/A N/A N/A -3.48%
- - -------------------------------------------------------------------------------------
VK Strategic Stock 4/1/98 N/A N/A N/A -7.16%
- - -------------------------------------------------------------------------------------
MS Emerging Markets Debt 4/1/98 N/A N/A N/A -40.21%
- - -------------------------------------------------------------------------------------
MS High Yield 4/1/98 N/A N/A N/A -10.06%
- - -------------------------------------------------------------------------------------
MS Midcap Value 4/1/98 N/A N/A N/A -8.88%
- - -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
8
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1998
WITH 15 BPS DEATH OPTION
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------
S/A SINCE
SUB-ACCOUNT INCEPTION DATE 1 YEAR 5 YEAR 10 YEAR INCEPTION
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Value 11/8/94 18.77% N/A N/A 22.25%
- - -------------------------------------------------------------------------------------
Balanced Growth 11/8/94 2.65% N/A N/A 11.20%
- - -------------------------------------------------------------------------------------
Developing Growth 11/8/94 -2.64% N/A N/A 15.27%
- - -------------------------------------------------------------------------------------
Dividend Growth 11/8/94 7.89% N/A N/A 21.30%
- - -------------------------------------------------------------------------------------
Diversified Income 11/8/94 -7.38% N/A N/A 1.17%
- - -------------------------------------------------------------------------------------
Emerging Markets 11/8/94 -38.02% N/A N/A -10.29%
- - -------------------------------------------------------------------------------------
Global Equity 11/8/94 3.35% N/A N/A 5.85%
- - -------------------------------------------------------------------------------------
Growth 11/8/94 1.48% N/A N/A 12.18%
- - -------------------------------------------------------------------------------------
Midcap Growth 1/2/97 -5.95% N/A N/A 3.33%
- - -------------------------------------------------------------------------------------
Money Market 11/8/94 -6.45% N/A N/A -0.78%
- - -------------------------------------------------------------------------------------
North American Government 11/8/94 -7.33% N/A N/A -0.97%
- - -------------------------------------------------------------------------------------
Utilities 11/8/94 10.35% N/A N/A 15.01%
- - -------------------------------------------------------------------------------------
Value-Added Market 11/8/94 0.47% N/A N/A 14.32%
- - -------------------------------------------------------------------------------------
VK Enterprise 4/1/98 N/A N/A N/A -3.60%
- - -------------------------------------------------------------------------------------
VK Strategic Stock 4/1/98 N/A N/A N/A -7.28%
- - -------------------------------------------------------------------------------------
MS Emerging Markets Debt 4/1/98 N/A N/A N/A -40.28%
- - -------------------------------------------------------------------------------------
MS High Yield 4/1/98 N/A N/A N/A -10.17%
- - -------------------------------------------------------------------------------------
MS Midcap Value 4/1/98 N/A N/A N/A -8.99%
- - -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
9
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1998
WITH 15 BPS DEATH OPTION
<TABLE><CAPTION>
- - -------------------------------------------------------------------------------------
S/A
SINCE SUB-ACCOUNT INCEPTION DATE 1 YEAR 5 YEAR 10 YEAR
INCEPTION
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Value 11/8/94 18.77% N/A N/A
22.25%
- - -------------------------------------------------------------------------------------
Balanced Growth 11/8/94 2.65% N/A N/A
11.20%
- - -------------------------------------------------------------------------------------
Developing Growth 11/8/94 -2.64% N/A N/A
15.27%
- - -------------------------------------------------------------------------------------
Dividend Growth 11/8/94 7.89% N/A N/A
21.30%
- - -------------------------------------------------------------------------------------
Diversified Income 11/8/94 -7.38% N/A N/A
1.17%
- - -------------------------------------------------------------------------------------
Emerging Markets 11/8/94 -38.02% N/A N/A
- - -10.29%
- - -------------------------------------------------------------------------------------
Global Equity 11/8/94 3.35% N/A N/A
5.85%
- - -------------------------------------------------------------------------------------
Growth 11/8/94 1.48% N/A N/A
12.18%
- - -------------------------------------------------------------------------------------
Midcap Growth 1/2/97 -5.95% N/A N/A
3.33%
- - -------------------------------------------------------------------------------------
Money Market 11/8/94 -6.45% N/A N/A
- - -0.78%
- - -------------------------------------------------------------------------------------
North American Government 11/8/94 -7.33% N/A N/A
- - -0.97%
- - -------------------------------------------------------------------------------------
Utilities 11/8/94 10.35% N/A N/A
15.01%
- - -------------------------------------------------------------------------------------
Value-Added Market 11/8/94 0.47% N/A N/A
14.32%
- - -------------------------------------------------------------------------------------
VK Enterprise 4/1/98 N/A N/A N/A
- - -3.60%
- - -------------------------------------------------------------------------------------
VK Strategic Stock 4/1/98 N/A N/A N/A
- - -7.28%
- - -------------------------------------------------------------------------------------
MS Emerging Markets Debt 4/1/98 N/A N/A N/A
- - -40.28%
- - -------------------------------------------------------------------------------------
MS High Yield 4/1/98 N/A N/A N/A
- - -10.17%
- - -------------------------------------------------------------------------------------
MS Midcap Value 4/1/98 N/A N/A N/A
- - -8.99%
- - -------------------------------------------------------------------------------------
</TABLE>
In addition to the standardized total return, the Sub-Account may
advertise a non-standardized total return. This figure will usually be
calculated for one year, five years, and ten years or other periods.
Non-standardized total return is measured in the same manner as the
standardized total return described above, except that the contingent
deferred sales charge and the Annual Maintenance Fee are not deducted and the
time periods used to calculate return are based on the inception date of the
underlying Funds. Therefore, non-standardized total return for a Sub-Account
is higher than standardized total return for a Sub-Account.
<PAGE>
10
The following are the non-standardized annualized total return quotations for
the Sub-Accounts for the fiscal year ended December 31, 1998.
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE INCEPTION DATE OF THE
SEPARATE ACCOUNT FOR YEAR ENDED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------
S/A SINCE
SUB-ACCOUNT INCEPTION DATE 1 YEAR 5 YEAR 10 YEAR INCEPTION
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Value 11/8/94 28.96% N/A N/A 25.59%
- - -------------------------------------------------------------------------------------
Balanced Growth 11/8/94 12.82% N/A N/A 15.01%
- - -------------------------------------------------------------------------------------
Developing Growth 11/8/94 7.52% N/A N/A 18.64%
- - -------------------------------------------------------------------------------------
Dividend Growth 11/8/94 18.06% N/A N/A 24.54%
- - -------------------------------------------------------------------------------------
Diversified Income 11/8/94 2.77% N/A N/A 5.68%
- - -------------------------------------------------------------------------------------
Emerging Markets 11/8/94 -30.02% N/A N/A -5.29%
- - -------------------------------------------------------------------------------------
Global Equity 11/8/94 13.52% N/A N/A 10.12%
- - -------------------------------------------------------------------------------------
Growth 11/8/94 11.65% N/A N/A 16.03%
- - -------------------------------------------------------------------------------------
Midcap Growth 1/2/97 4.20% N/A N/A 9.43%
- - -------------------------------------------------------------------------------------
Money Market 11/8/94 3.70% N/A N/A 3.92%
- - -------------------------------------------------------------------------------------
North American Government 11/8/94 2.83% N/A N/A 3.73%
- - -------------------------------------------------------------------------------------
Utilities 11/8/94 20.53% N/A N/A 18.74%
- - -------------------------------------------------------------------------------------
Value-Added Market 11/8/94 10.63% N/A N/A 17.96%
- - -------------------------------------------------------------------------------------
VK Enterprise 4/1/98 N/A N/A N/A 6.52%
- - -------------------------------------------------------------------------------------
VK Strategic Stock 4/1/98 N/A N/A N/A 2.84%
- - -------------------------------------------------------------------------------------
MS Emerging Markets Debt 4/1/98 N/A N/A N/A -32.48%
- - -------------------------------------------------------------------------------------
MS High Yield 4/1/98 N/A N/A N/A -0.07%
- - -------------------------------------------------------------------------------------
MS Midcap Value 4/1/98 N/A N/A N/A 1.12%
- - -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
11
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE INCEPTION DATE
OF THE SEPARATE ACCOUNT FOR YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------
S/A SINCE
SUB-ACCOUNT INCEPTION DATE 1 YEAR 5 YEAR 10 YEAR INCEPTION
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Value 11/8/94 28.77% N/A N/A 25.40%
- - -------------------------------------------------------------------------------------
Balanced Growth 11/8/94 12.65% N/A N/A 14.83%
- - -------------------------------------------------------------------------------------
Developing Growth 11/8/94 7.36% N/A N/A 18.46%
- - -------------------------------------------------------------------------------------
Dividend Growth 11/8/94 17.89% N/A N/A 24.35%
- - -------------------------------------------------------------------------------------
Diversified Income 11/8/94 2.62% N/A N/A 5.52%
- - -------------------------------------------------------------------------------------
Emerging Markets 11/8/94 -30.13% N/A N/A -5.43%
- - -------------------------------------------------------------------------------------
Global Equity 11/8/94 13.35% N/A N/A 9.96%
- - -------------------------------------------------------------------------------------
Growth 11/8/94 11.48% N/A N/A 15.86%
- - -------------------------------------------------------------------------------------
Midcap Growth 1/2/97 4.05% N/A N/A 9.27%
- - -------------------------------------------------------------------------------------
Money Market 11/8/94 3.55% N/A N/A 3.76%
- - -------------------------------------------------------------------------------------
North American Government 11/8/94 2.67% N/A N/A 3.58%
- - -------------------------------------------------------------------------------------
Utilities 11/8/94 20.35% N/A N/A 18.56%
- - -------------------------------------------------------------------------------------
Value-Added Market 11/8/94 10.47% N/A N/A 17.79%
- - -------------------------------------------------------------------------------------
VK Enterprise 4/1/98 N/A N/A N/A 6.40%
- - -------------------------------------------------------------------------------------
VK Strategic Stock 4/1/98 N/A N/A N/A 2.72%
- - -------------------------------------------------------------------------------------
MS Emerging Markets Debt 4/1/98 N/A N/A N/A -32.56%
- - -------------------------------------------------------------------------------------
MS High Yield 4/1/98 N/A N/A N/A -0.18%
- - -------------------------------------------------------------------------------------
MS Midcap Value 4/1/98 N/A N/A N/A 1.01%
- - -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
12
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 a Fund
customarily invests. The index does not include bonds in certain of the lower
rating classifications in which a Fund may invest. The performance figures
of the index reflect changes in market prices and reinvestment of all
interest payments.
The Lehman Brothers Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury;
all publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
The Lehman Brothers Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of
approximately 5,300 bonds with a face value currently in excess of $1.3
trillion. To be included in the SL Government/Corporate Index, an issue must
have amounts outstanding in excess of $1 million, have at least one year to
maturity and be rated "Baa" or higher ("investment grade") by a nationally
recognized rating agency. The index does not include bonds in certain of the
lower-rating classifications in which a Fund may invest. Its performance
figures reflect changes in market prices and reinvestment of all interest
payments.
<PAGE>
13
Morgan Stanley Capital International World Index is an unmanaged list of
approximately 1,450 equity securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand and the Far East, with
all values expressed in U.S. dollars. Performance figures reflect changes in
market prices and reinvestment of distributions net of withholding taxes.
The securities in the index change over time to maintain representativeness.
The NASDAQ-OTC Industrial Average (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate
market value of approximately 3,500 stocks relative to the base measure of
100.00 on February 5, 1971. The NASDAQ Index is composed entirely of common
stocks of companies traded over-the-counter and often through the National
Association of Securities Dealers Automated Quotations ("NASDAQ") system.
Only those over-the-counter stocks having only one market maker or traded on
exchanges are excluded. Its performance figures reflect changes of market
prices but do not reflect reinvestment of cash dividends.
Salomon Brothers Long-Term High-Grade Corporate Bond Index is an unmanaged
list of publicly traded corporate bonds having a rating of at least AA by
Standard & Poor's or Aa by Moody's and is frequently used as general measure
of the performance of fixed-income securities. The average quality of bonds
included in the index may be higher than the average quality of those bonds
in which a Fund may customarily invest. The index does not include bonds in
certain of the lower rating classifications in which a Fund may invest.
Performance figures for the index reflect changes of market prices and
reinvestment of all distributions.
The Salomon Brothers 7-10 Year Government Bond Index is an unmanaged list of
U.S. Government and government agency securities with maturities of 7 to 10
years. Performance figures for the index reflect changes of market prices
and reinvestment of all interest payments.
The Standard & Poor's Composite Index of 500 stocks (the "S&P 500") is a
market value-weighted and unmanaged index showing changes in the aggregate
market value of 500 stocks relative to the base period 1941-43. The S&P 500
is composed almost entirely of common stocks of companies listed on the New
York Stock Exchange, although the common stocks of a few companies listed on
the American Stock Exchange or traded over-the-counter are included. The 500
companies represented include 400 industrial, 60 transportation and 40
financial services concerns. The S&P 500 represents about 80% of the market
value of all issues traded on the New York Stock Exchange. Its performance
figures reflect changes of market prices and reinvestment of all regular cash
dividends.
The Standard & Poor's 40 Utilities Index is unmanaged list of 40 utility
stocks. The Index assumes reinvestment of all distributions and reflects
changes in market prices but does not take into account brokerage commissions
or other fees.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-1
- - --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- - --------------------------------------------------------------------------------
TO HARTFORD LIFE & ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT THREE AND TO THE OWNERS OF UNITS OF INTEREST THEREIN:
We have audited the accompanying statements of assets and liabilities of
Hartford Life & Annuity Insurance Company Separate Account Three (Money Market
Portfolio, North American Government Securities Portfolio, Balanced Portfolio,
Utilities Portfolio, Dividend Growth Portfolio, Value-Added Market Portfolio,
Growth Portfolio, American Value Portfolio, Global Equity Portfolio, Developing
Growth Portfolio, Emerging Markets Portfolio, Diversified Income Portfolio,
Mid-Cap Growth Portfolio, High Yield Portfolio, Mid-Cap Portfolio, Emerging
Markets Debt Portfolio, Strategic Stock Portfolio, and Enterprise Portfolio),
(collectively, the Account) as of December 31, 1998, and the related statements
of operations and the statements of changes in net assets for the periods
presented. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1998, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 15, 1999 ARTHUR ANDERSEN LLP
<PAGE>
SA-2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- - --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
- - --------------------------------------------------------------------------------
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NORTH AMERICAN
GOVERNMENT
MONEY SECURITIES
MARKET PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
----------------- ---------------
<S> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Funds:
Money Market
Portfolio
Shares 108,750,992
Cost $108,750,992
Market Value....... $108,750,992 --
North American
Government
Securities Portfolio
Shares 743,033
Cost $7,512,350
Market Value....... -- $7,541,786
Balanced Growth
Portfolio
Shares 5,797,361
Cost $78,208,232
Market Value....... -- --
Utilities Portfolio
Shares 4,243,893
Cost $57,437,318
Market Value....... -- --
Dividend Growth
Portfolio
Shares 29,122,513
Cost $486,982,477
Market Value....... -- --
Value-Added Market
Portfolio
Shares 7,678,132
Cost $108,750,636
Market Value....... -- --
Growth Portfolio
Shares 2,622,153
Cost $36,924,259
Market Value....... -- --
American Value
Portfolio
Shares 14,276,821
Cost $233,572,499
Market Value....... -- --
Global Equity
Portfolio
Shares 7,429,316
Cost $89,457,600
Market Value....... -- --
Due from Hartford Life
and Annuity Insurance
Company............... -- --
Receivable from fund
shares sold........... 991,904 290
----------------- ---------------
Total Assets........... 109,742,896 7,542,076
----------------- ---------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... 991,553 301
Payable for fund shares
purchased............. -- --
----------------- ---------------
Total Liabilities...... 991,553 301
----------------- ---------------
Net Assets (variable
annuity contract
liabilities).......... $108,751,343 $7,541,775
----------------- ---------------
----------------- ---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-3
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE-ADDED AMERICAN
BALANCED UTILITIES DIVIDEND GROWTH MARKET GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
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 Funds:
Money Market
Portfolio
Shares 108,750,992
Cost $108,750,992
Market Value....... -- -- -- -- -- --
North American
Government
Securities Portfolio
Shares 743,033
Cost $7,512,350
Market Value....... -- -- -- -- -- --
Balanced Growth
Portfolio
Shares 5,797,361
Cost $78,208,232
Market Value....... $94,960,769 -- -- -- -- --
Utilities Portfolio
Shares 4,243,893
Cost $57,437,318
Market Value....... -- $79,403,235 -- -- -- --
Dividend Growth
Portfolio
Shares 29,122,513
Cost $486,982,477
Market Value....... -- -- $642,151,413 -- -- --
Value-Added Market
Portfolio
Shares 7,678,132
Cost $108,750,636
Market Value....... -- -- -- $ 147,343,353 -- --
Growth Portfolio
Shares 2,622,153
Cost $36,924,259
Market Value....... -- -- -- -- $47,801,852 --
American Value
Portfolio
Shares 14,276,821
Cost $233,572,499
Market Value....... -- -- -- -- -- $ 332,792,691
Global Equity
Portfolio
Shares 7,429,316
Cost $89,457,600
Market Value....... -- -- -- -- -- --
Due from Hartford Life
and Annuity Insurance
Company............... 48,060 229,885 166,667 -- 794 433,972
Receivable from fund
shares sold........... 18 13 44 27,473 4 35
------------- ------------- ---------------- -------------- ------------- --------------
Total Assets........... 95,008,847 79,633,133 642,318,124 147,370,826 47,802,650 333,226,698
------------- ------------- ---------------- -------------- ------------- --------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... 18 13 44 27,478 4 35
Payable for fund shares
purchased............. 46,744 230,264 166,305 -- 795 434,244
------------- ------------- ---------------- -------------- ------------- --------------
Total Liabilities...... 46,762 230,277 166,349 27,478 799 434,279
------------- ------------- ---------------- -------------- ------------- --------------
Net Assets (variable
annuity contract
liabilities).......... $94,962,085 $79,402,856 $642,151,775 $ 147,343,348 $47,801,851 $ 332,792,419
------------- ------------- ---------------- -------------- ------------- --------------
------------- ------------- ---------------- -------------- ------------- --------------
<CAPTION>
GLOBAL
EQUITY
PORTFOLIO
SUB-ACCOUNT
--------------
<S> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Funds:
Money Market
Portfolio
Shares 108,750,992
Cost $108,750,992
Market Value....... --
North American
Government
Securities Portfolio
Shares 743,033
Cost $7,512,350
Market Value....... --
Balanced Growth
Portfolio
Shares 5,797,361
Cost $78,208,232
Market Value....... --
Utilities Portfolio
Shares 4,243,893
Cost $57,437,318
Market Value....... --
Dividend Growth
Portfolio
Shares 29,122,513
Cost $486,982,477
Market Value....... --
Value-Added Market
Portfolio
Shares 7,678,132
Cost $108,750,636
Market Value....... --
Growth Portfolio
Shares 2,622,153
Cost $36,924,259
Market Value....... --
American Value
Portfolio
Shares 14,276,821
Cost $233,572,499
Market Value....... --
Global Equity
Portfolio
Shares 7,429,316
Cost $89,457,600
Market Value....... $ 109,136,654
Due from Hartford Life
and Annuity Insurance
Company............... 87,328
Receivable from fund
shares sold........... 3
--------------
Total Assets........... 109,223,985
--------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... 3
Payable for fund shares
purchased............. 87,317
--------------
Total Liabilities...... 87,320
--------------
Net Assets (variable
annuity contract
liabilities).......... $ 109,136,665
--------------
--------------
</TABLE>
<PAGE>
SA-4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- - --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
- - --------------------------------------------------------------------------------
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
DEVELOPING EMERGING
GROWTH MARKETS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Funds:
Developing Growth
Portfolio
Shares 3,578,880
Cost $56,405,776
Market Value....... $74,476,490 --
Emerging Markets
Portfolio
Shares 1,528,452
Cost $16,180,728
Market Value....... -- $12,090,056
Diversified Income
Portfolio
Shares 8,133,256
Cost $82,730,409
Market Value....... -- --
Mid-Cap Growth
Portfolio
Shares 2,085,218
Cost $22,559,366
Market Value....... -- --
Investments in Morgan
Stanley Universal
Funds:
High Yield Portfolio
Shares 976,514
Cost $10,528,106
Market Value....... -- --
Mid-Cap Portfolio
Shares 498,912
Cost $6,985,481
Market Value....... -- --
Emerging Markets Debt
Portfolio
Shares 42,730
Cost $328,410
Market Value....... -- --
Investments in Van
Kampen Funds:
Strategic Stock
Portfolio
Shares 464,524
Cost $5,261,926
Market Value....... -- --
Enterprise Portfolio
Shares 193,425
Cost $3,847,144
Market Value....... -- --
Due from Hartford Life
and Annuity Insurance
Company............... 126,198 132
Receivable from fund
shares sold........... 2 1
----------- -----------
Total Assets........... 74,602,690 12,090,189
----------- -----------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... 2 1
Payable for fund shares
purchased............. 123,373 151
----------- -----------
Total Liabilities...... 123,375 152
----------- -----------
Net Assets (variable
annuity contract
liabilities).......... $74,479,315 $12,090,037
----------- -----------
----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-5
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED MID-CAP EMERGING
INCOME GROWTH HIGH YIELD MID-CAP MARKETS DEBT STRATEGIC STOCK ENTERPRISE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ------------ ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Funds:
Developing Growth
Portfolio
Shares 3,578,880
Cost $56,405,776
Market Value....... -- -- -- -- -- -- --
Emerging Markets
Portfolio
Shares 1,528,452
Cost $16,180,728
Market Value....... -- -- -- -- -- -- --
Diversified Income
Portfolio
Shares 8,133,256
Cost $82,730,409
Market Value....... $80,763,229 -- -- -- -- -- --
Mid-Cap Growth
Portfolio
Shares 2,085,218
Cost $22,559,366
Market Value....... -- $24,730,691 -- -- -- -- --
Investments in Morgan
Stanley Universal
Funds:
High Yield Portfolio
Shares 976,514
Cost $10,528,106
Market Value....... -- -- $10,106,921 -- -- -- --
Mid-Cap Portfolio
Shares 498,912
Cost $6,985,481
Market Value....... -- -- -- $7,418,821 -- -- --
Emerging Markets Debt
Portfolio
Shares 42,730
Cost $328,410
Market Value....... -- -- -- -- $ 260,654 -- --
Investments in Van
Kampen Funds:
Strategic Stock
Portfolio
Shares 464,524
Cost $5,261,926
Market Value....... -- -- -- -- -- $5,541,771 --
Enterprise Portfolio
Shares 193,425
Cost $3,847,144
Market Value....... -- -- -- -- -- -- $4,330,789
Due from Hartford Life
and Annuity Insurance
Company............... 155,793 55,025 6,044 181 5 4,648 25,755
Receivable from fund
shares sold........... -- 1 14 2 10 1 10
----------- ----------- ----------- ------------ ------------- ---------------- ------------
Total Assets........... 80,919,022 24,785,717 10,112,979 7,419,004 260,669 5,546,420 4,356,554
----------- ----------- ----------- ------------ ------------- ---------------- ------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... -- 1 14 2 -- 1 10
Payable for fund shares
purchased............. 155,795 55,018 6,032 30 -- 4,639 25,838
----------- ----------- ----------- ------------ ------------- ---------------- ------------
Total Liabilities...... 155,795 55,019 6,046 32 -- 4,640 25,848
----------- ----------- ----------- ------------ ------------- ---------------- ------------
Net Assets (variable
annuity contract
liabilities).......... $80,763,227 $24,730,698 $10,106,933 $7,418,972 $ 260,669 $5,541,780 $4,330,706
----------- ----------- ----------- ------------ ------------- ---------------- ------------
----------- ----------- ----------- ------------ ------------- ---------------- ------------
</TABLE>
<PAGE>
SA-6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- - --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
- - --------------------------------------------------------------------------------
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ----------- ---------------
<S> <C> <C> <C>
INDIVIDUAL DEFERRED ANNUITY
CONTRACTS IN THE ACCUMULATION
PERIOD:
High Yield Portfolio............. 981,503 $ 9.993200 $ 9,808,356
Mid-Cap Portfolio................ 731,306 10.071717 7,365,507
Emerging Markets Debt
Portfolio....................... 37,080 6.752049 250,363
Strategic Stock Portfolio........ 536,323 10.283526 5,515,296
Enterprise Portfolio............. 386,144 10.652197 4,113,285
---------------
SUB-TOTAL........................ 27,052,807
---------------
GROUP DEFERRED ANNUITY CONTRACTS IN
THE ACCUMULATION PERIOD:
Money Market Portfolio........... 9,133,825 11.727893 107,120,521
Money Market Portfolio........... 148,500 10.129111 1,504,171
North American Government
Securities Portfolio............ 631,154 11.642026 7,347,914
North American Government
Securities Portfolio............ 16,324 10.072324 164,417
Balanced Portfolio............... 5,292,106 17.858730 94,510,294
Balanced Portfolio............... 37,695 10.799540 407,091
Utilities Portfolio.............. 3,879,082 20.391484 79,100,247
Utilities Portfolio.............. 25,954 11.264217 292,355
Dividend Growth Portfolio........ 25,789,514 24.846842 640,787,982
Dividend Growth Portfolio........ 90,218 10.879279 981,503
Value-Added Market Portfolio..... 7,412,924 19.843369 147,097,386
Value-Added Market Portfolio..... 17,943 10.761452 193,092
Growth Portfolio................. 2,574,841 18.529740 47,711,134
Growth Portfolio................. 7,419 10.831089 80,352
American Value Portfolio......... 12,902,060 25.729172 331,959,327
American Value Portfolio......... 69,868 11.159476 779,688
Global Equity Portfolio.......... 7,310,875 14.917879 109,062,753
Global Equity Portfolio.......... 6,852 10.474352 71,767
Developing Growth Portfolio...... 3,663,550 20.317799 74,435,264
Developing Growth Portfolio...... 3,187 10.865081 34,631
Emerging Markets Portfolio....... 1,512,432 7.980718 12,070,292
Emerging Markets Portfolio....... 1,275 9.182775 11,705
Diversified Income Portfolio..... 6,373,017 12.576658 80,151,254
Diversified Income Portfolio..... 59,341 9.978254 592,123
Mid-Cap Portfolio................ 2,074,870 11.913063 24,718,055
Mid-Cap Portfolio................ 1,207 10.476762 12,642
High Yield Portfolio............. 29,867 9.996828 298,577
Mid-Cap Portfolio................ 4,792 11.157546 53,465
Emerging Markets Debt
Portfolio....................... 1,228 8.390427 10,305
Strategic Stock Portfolio........ 2,482 10.668966 26,484
Enterprise Portfolio............. 19,479 11.162071 217,421
---------------
SUB-TOTAL........................ 1,761,804,212
---------------
TOTAL ACCUMULATION PERIOD........ 1,788,857,019
---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-7
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ----------- ---------------
<S> <C> <C> <C>
GROUP ANNUITY CONTRACTS IN THE
ANNUITY PERIOD:
Money Market Portfolio........... 10,799 $ 11.727893 $ 126,651
North American Government
Securities Portfolio............ 2,529 11.642026 29,444
Balanced Portfolio............... 2,503 17.858730 44,700
Utilities Portfolio.............. 503 20.391484 10,254
Dividend Growth Portfolio........ 15,386 24.846842 382,290
Value-Added Market Portfolio..... 2,664 19.843369 52,870
Growth Portfolio................. 559 18.529740 10,365
American Value Portfolio......... 2,076 25.729172 53,404
Global Equity Portfolio.......... 144 14.917879 2,145
Developing Growth Portfolio...... 464 20.317799 9,420
Emerging Markets Portfolio....... 1,008 7.980718 8,042
Diversified Income Portfolio..... 1,578 12.576658 19,850
---------------
SUB-TOTAL........................ 749,435
---------------
GRAND TOTAL........................ $ 1,789,606,454
---------------
---------------
</TABLE>
<PAGE>
SA-8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- - --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
- - --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
NORTH AMERICAN
GOVERNMENT
MONEY MARKET SECURITIES
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------- ---------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $4,487,479 $246,126
EXPENSES:
Mortality and expense
undertakings.......... (1,252,629) (80,549)
------------- ---------------
Net investment income
(loss).............. 3,234,850 165,577
------------- ---------------
CAPITAL GAINS INCOME..... -- --
------------- ---------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- 558
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- (10,221)
------------- ---------------
Net gain (loss) on
investments......... -- (9,663)
------------- ---------------
Net increase
(decrease) in net
assets resulting
from operations..... $3,234,850 $155,914
------------- ---------------
------------- ---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-9
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE-ADDED AMERICAN
BALANCED UTILITIES DIVIDEND GROWTH MARKET GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ---------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 2,174,572 $ 1,282,646 $10,407,073 $ 1,612,810 $ -- $ 1,769,370
EXPENSES:
Mortality and expense
undertakings.......... (1,119,956) (834,504) (7,831,366) (1,892,218) (588,893) (3,640,226)
------------ ------------ ---------------- ------------- ------------ ------------
Net investment income
(loss).............. 1,054,616 448,142 2,575,707 (279,408) (588,893) (1,870,856)
------------ ------------ ---------------- ------------- ------------ ------------
CAPITAL GAINS INCOME..... 1,697,873 657,872 23,297,871 1,970,707 1,177,870 22,283,610
------------ ------------ ---------------- ------------- ------------ ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (35,053) (5,860) (116,773) (165,573) (47,737) (129,194)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 6,624,190 10,977,754 63,796,492 11,736,937 4,134,094 47,944,751
------------ ------------ ---------------- ------------- ------------ ------------
Net gain (loss) on
investments......... 6,589,137 10,971,894 63,679,719 11,571,364 4,086,357 47,815,557
------------ ------------ ---------------- ------------- ------------ ------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 9,341,626 $ 12,077,908 $89,553,297 $ 13,262,663 $ 4,675,334 $ 68,228,311
------------ ------------ ---------------- ------------- ------------ ------------
------------ ------------ ---------------- ------------- ------------ ------------
<CAPTION>
GLOBAL
EQUITY
PORTFOLIO
SUB-ACCOUNT
------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $ 1,324,949
EXPENSES:
Mortality and expense
undertakings.......... (1,416,119)
------------
Net investment income
(loss).............. (91,170)
------------
CAPITAL GAINS INCOME..... 368,656
------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (522,068)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 11,960,357
------------
Net gain (loss) on
investments......... 11,438,289
------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 11,715,775
------------
------------
</TABLE>
<PAGE>
SA-10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- - --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
- - --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DEVELOPING EMERGING
GROWTH MARKETS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 165,170 $ 199,262
EXPENSES:
Mortality and expense
undertakings.......... (1,027,959) (224,682)
----------- -----------
Net investment income
(loss).............. (862,789) (25,420)
----------- -----------
CAPITAL GAINS INCOME..... 110,206 44,837
----------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (327,553) (1,361,056)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 5,740,263 (4,702,323)
----------- -----------
Net gain (loss) on
investments......... 5,412,710 (6,063,379)
----------- -----------
Net increase
(decrease) in net
assets resulting
from operations..... $ 4,660,127 $(6,043,962)
----------- -----------
----------- -----------
</TABLE>
* From inception, April 1, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-11
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED MID-CAP EMERGING
INCOME GROWTH HIGH YIELD MID-CAP MARKETS DEBT STRATEGIC STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
----------- ------------ ------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 5,025,183 $ 135,342 $ 551,406 $ 16,572 $ 30,898 $--
EXPENSES:
Mortality and expense
undertakings.......... (949,349) (299,108) (54,533) (37,103) (1,403) (23,290)
----------- ------------ ------------- ------------- ------------- --------
Net investment income
(loss).............. 4,075,834 (163,766) 496,873 (20,531) 29,495 (23,290)
----------- ------------ ------------- ------------- ------------- --------
CAPITAL GAINS INCOME..... 85,594 198,842 96,662 161,531 -- --
----------- ------------ ------------- ------------- ------------- --------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 548 (166,311) (1,146) 458 (1,631) 53
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (2,456,320) 790,477 (421,185) 433,339 (67,755) 279,845
----------- ------------ ------------- ------------- ------------- --------
Net gain (loss) on
investments......... (2,455,772) 624,166 (422,331) 433,797 (69,386) 279,898
----------- ------------ ------------- ------------- ------------- --------
Net increase
(decrease) in net
assets resulting
from operations..... $ 1,705,656 $ 659,242 $ 171,204 $574,797 $(39,891) $256,608
----------- ------------ ------------- ------------- ------------- --------
----------- ------------ ------------- ------------- ------------- --------
<CAPTION>
ENTERPRISE
PORTFOLIO
SUB-ACCOUNT*
-------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $--
EXPENSES:
Mortality and expense
undertakings.......... (18,104)
-------------
Net investment income
(loss).............. (18,104)
-------------
CAPITAL GAINS INCOME..... --
-------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (1,243)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 483,645
-------------
Net gain (loss) on
investments......... 482,402
-------------
Net increase
(decrease) in net
assets resulting
from operations..... $464,298
-------------
-------------
</TABLE>
* From inception, April 1, 1998, to December 31, 1998.
<PAGE>
SA-12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- - --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
- - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
NORTH AMERICAN
MONEY MARKET GOVERMENT SECURITIES
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ ---------------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 3,234,850 $ 165,577
Capital gains income... -- --
Net realized gain
(loss) on security
transactions.......... -- 558
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- (10,221)
------------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ 3,234,850 155,914
------------ -----------
UNIT TRANSACTIONS:
Purchases.............. 26,624,283 1,435,170
Net transfers.......... 22,818,051 1,932,564
Surrenders for benefit
payments and fees..... (18,966,767 ) (689,182)
Net annuity
transactions.......... 122,565 28,537
------------ -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 30,598,132 2,707,089
------------ -----------
Total increase
(decrease) in net
assets................ 33,832,982 2,863,003
NET ASSETS:
Beginning of period.... 74,918,361 4,678,772
------------ -----------
End of period.......... $108,751,343 $7,541,775
------------ -----------
------------ -----------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
NORTH AMERICAN
MONEY MARKET GOVERMENT SECURITIES
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ ---------------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 3,091,495 $ 145,013
Capital gains income... -- --
Net realized gain
(loss) on security
transactions.......... -- (263)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 38,369
------------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ 3,091,495 183,119
------------ -----------
UNIT TRANSACTIONS:
Purchases.............. 64,717,334 1,138,836
Net transfers.......... (63,595,299 ) (44,078)
Surrenders for benefit
payments and fees..... (10,838,772 ) (426,779)
Net annuity
transactions.......... -- --
------------ -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (9,716,737 ) 667,979
------------ -----------
Total increase
(decrease) in net
assets................ (6,625,242 ) 851,098
NET ASSETS:
Beginning of period.... 81,543,603 3,827,674
------------ -----------
End of period.......... $74,918,361 $4,678,772
------------ -----------
------------ -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-13
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE-ADDED AMERICAN
BALANCED UTILITIES DIVIDEND GROWTH MARKET GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ---------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 1,054,616 $ 448,142 $ 2,575,707 $ (279,408) $ (588,893) $ (1,870,856)
Capital gains income... 1,697,873 657,872 23,297,871 1,970,707 1,177,870 22,283,610
Net realized gain
(loss) on security
transactions.......... (35,053) (5,860) (116,773) (165,573) (47,737) (129,194)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 6,624,190 10,977,754 63,796,492 11,736,937 4,134,094 47,944,751
---------------- ---------------- ---------------- -------------- ------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 9,341,626 12,077,908 89,553,297 13,262,663 4,675,334 68,228,311
---------------- ---------------- ---------------- -------------- ------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 9,515,720 10,420,385 61,282,019 11,743,594 5,811,059 31,893,265
Net transfers.......... 14,734,535 12,899,339 59,525,570 7,479,605 2,982,317 38,226,729
Surrenders for benefit
payments and fees..... (3,951,159) (4,262,502) (32,837,181) (5,597,839) (2,297,690) (14,448,089)
Net annuity
transactions.......... 15,874 (2,553) 271,624 12,632 (1,811) 18,420
---------------- ---------------- ---------------- -------------- ------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 20,314,970 19,054,669 88,242,032 13,637,992 6,493,875 55,690,325
---------------- ---------------- ---------------- -------------- ------------- --------------
Total increase
(decrease) in net
assets................ 29,656,596 31,132,577 177,795,329 26,900,655 11,169,209 123,918,636
NET ASSETS:
Beginning of period.... 65,305,489 48,270,279 464,356,446 120,442,693 36,632,642 208,873,783
---------------- ---------------- ---------------- -------------- ------------- --------------
End of period.......... $ 94,962,085 $ 79,402,856 $642,151,775 $ 147,343,348 $ 47,801,851 $ 332,792,419
---------------- ---------------- ---------------- -------------- ------------- --------------
---------------- ---------------- ---------------- -------------- ------------- --------------
<CAPTION>
GLOBAL
EQUITY
PORTFOLIO
SUB-ACCOUNT
--------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ (91,170)
Capital gains income... 368,656
Net realized gain
(loss) on security
transactions.......... (522,068)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 11,960,357
--------------
Net increase (decrease)
in net assets
resulting from
operations............ 11,715,775
--------------
UNIT TRANSACTIONS:
Purchases.............. 8,280,760
Net transfers.......... 5,278,620
Surrenders for benefit
payments and fees..... (5,716,942)
Net annuity
transactions.......... (440)
--------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 7,841,998
--------------
Total increase
(decrease) in net
assets................ 19,557,773
NET ASSETS:
Beginning of period.... 89,578,892
--------------
End of period.......... $ 109,136,665
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
VALUE-ADDED AMERICAN
BALANCED UTILITIES DIVIDEND GROWTH MARKET GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ---------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 349,565 $ 567,984 $ 2,299,595 $ 28,854 $ (332,587) $ (1,697,234)
Capital gains income... 153,577 134,400 12,570,055 189,721 117,643 3,034,595
Net realized gain
(loss) on security
transactions.......... (30,616) 7,972 (17,569) 30,754 (18,550) (68,035)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 6,868,859 8,330,451 57,370,303 19,452,060 5,016,132 39,904,216
---------------- ---------------- ---------------- -------------- ------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 7,341,385 9,040,807 72,222,384 19,701,389 4,782,638 41,173,542
---------------- ---------------- ---------------- -------------- ------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 18,839,623 8,183,839 132,652,810 27,666,361 12,427,733 45,122,601
Net transfers.......... 6,155,476 175,689 35,404,176 11,734,255 3,567,836 17,691,903
Surrenders for benefit
payments and fees..... (3,322,915) (3,224,364) (16,271,820) (3,984,638) (1,013,872) (6,922,611)
Net annuity
transactions.......... 8,967 9,844 3,406 1,734 6,199 (6,552)
---------------- ---------------- ---------------- -------------- ------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 21,681,151 5,145,008 151,788,572 35,417,712 14,987,896 55,885,341
---------------- ---------------- ---------------- -------------- ------------- --------------
Total increase
(decrease) in net
assets................ 29,022,536 14,185,815 224,010,956 55,119,101 19,770,534 97,058,883
NET ASSETS:
Beginning of period.... 36,282,953 34,084,464 240,345,490 65,323,592 16,862,108 111,814,900
---------------- ---------------- ---------------- -------------- ------------- --------------
End of period.......... $ 65,305,489 $ 48,270,279 $464,356,446 $ 120,442,693 $ 36,632,642 $ 208,873,783
---------------- ---------------- ---------------- -------------- ------------- --------------
---------------- ---------------- ---------------- -------------- ------------- --------------
<CAPTION>
GLOBAL
EQUITY
PORTFOLIO
SUB-ACCOUNT
-------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ (412,774)
Capital gains income... 115,160
Net realized gain
(loss) on security
transactions.......... 36,445
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 4,176,748
-------------
Net increase (decrease)
in net assets
resulting from
operations............ 3,915,579
-------------
UNIT TRANSACTIONS:
Purchases.............. 27,675,147
Net transfers.......... 8,014,517
Surrenders for benefit
payments and fees..... (3,499,654)
Net annuity
transactions.......... (252)
-------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 32,189,758
-------------
Total increase
(decrease) in net
assets................ 36,105,337
NET ASSETS:
Beginning of period.... 53,473,555
-------------
End of period.......... $ 89,578,892
-------------
-------------
</TABLE>
<PAGE>
SA-14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- - --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
- - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DEVELOPING EMERGING
GROWTH MARKETS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ (862,789) $ (25,420)
Capital gains income... 110,206 44,837
Net realized gain
(loss) on security
transactions.......... (327,553) (1,361,056)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 5,740,263 (4,702,323)
----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 4,660,127 (6,043,962)
----------- -----------
UNIT TRANSACTIONS:
Purchases.............. 4,110,151 726,460
Net transfers.......... (5,495,094) (3,374,149)
Surrenders for benefit
payments and fees..... (4,440,843) (1,031,340)
Net annuity
transactions.......... (3,733) (3,230)
----------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (5,829,519) (3,682,259)
----------- -----------
Total increase
(decrease) in net
assets................ (1,169,392) (9,726,221)
NET ASSETS:
Beginning of period.... 75,648,707 21,816,258
----------- -----------
End of period.......... $74,479,315 $12,090,037
----------- -----------
----------- -----------
</TABLE>
* From inception, April 1, 1998, to December 31, 1998.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
DEVELOPING EMERGING
GROWTH MARKETS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)..................... $ (784,298) $ (214,476)
Capital gains income........ -- --
Net realized gain (loss) on
security transactions...... (5,287) (289,528)
Net unrealized appreciation
(depreciation) of
investments during the
period..................... 8,288,212 (422,890)
----------- -----------
Net increase (decrease) in
net assets resulting from
operations................. 7,498,627 (926,894)
----------- -----------
UNIT TRANSACTIONS:
Purchases................... 13,609,919 7,234,504
Net transfers............... 1,398,815 665,359
Surrenders for benefit
payments and fees.......... (3,560,130) (1,087,778)
Net annuity transactions.... (3,225) 3,713
----------- -----------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 11,445,379 6,815,798
----------- -----------
Total increase (decrease) in
net assets................. 18,944,006 5,888,904
NET ASSETS:
Beginning of period......... 56,704,701 15,927,354
----------- -----------
End of period............... $75,648,707 $21,816,258
----------- -----------
----------- -----------
</TABLE>
** From inception, January 21, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-15
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED MID-CAP EMERGING
INCOME GROWTH HIGH YIELD MID-CAP MARKETS DEBT STRATEGIC STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
----------- ----------- ------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 4,075,834 $ (163,766) $ 496,873 $ (20,531) $ 29,495 $ (23,290)
Capital gains income... 85,594 198,842 96,662 161,531 -- --
Net realized gain
(loss) on security
transactions.......... 548 (166,311) (1,146) 458 (1,631) 53
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (2,456,320) 790,477 (421,185) 433,339 (67,755) 279,845
----------- ----------- ------------- ------------- ------------- ----------------
Net increase (decrease)
in net assets
resulting from
operations............ 1,705,656 659,242 171,204 574,797 (39,891) 256,608
----------- ----------- ------------- ------------- ------------- ----------------
UNIT TRANSACTIONS:
Purchases.............. 8,572,861 4,768,336 3,719,605 2,520,643 119,619 1,952,495
Net transfers.......... 21,054,049 2,911,337 6,350,686 4,446,588 185,592 3,478,285
Surrenders for benefit
payments and fees..... (5,684,565) (810,632) (134,562) (123,056) (4,651) (145,608)
Net annuity
transactions.......... 6,816 -- -- -- -- --
----------- ----------- ------------- ------------- ------------- ----------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 23,949,161 6,869,041 9,935,729 6,844,175 300,560 5,285,172
----------- ----------- ------------- ------------- ------------- ----------------
Total increase
(decrease) in net
assets................ 25,654,817 7,528,283 10,106,933 7,418,972 260,669 5,541,780
NET ASSETS:
Beginning of period.... 55,108,410 17,202,415 -- -- -- --
----------- ----------- ------------- ------------- ------------- ----------------
End of period.......... $80,763,227 $24,730,698 $10,106,933 $7,418,972 $260,669 $5,541,780
----------- ----------- ------------- ------------- ------------- ----------------
----------- ----------- ------------- ------------- ------------- ----------------
<CAPTION>
ENTERPRISE
PORTFOLIO
SUB-ACCOUNT*
-------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ (18,104)
Capital gains income... --
Net realized gain
(loss) on security
transactions.......... (1,243)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 483,645
-------------
Net increase (decrease)
in net assets
resulting from
operations............ 464,298
-------------
UNIT TRANSACTIONS:
Purchases.............. 1,417,282
Net transfers.......... 2,480,461
Surrenders for benefit
payments and fees..... (31,335)
Net annuity
transactions.......... --
-------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 3,866,408
-------------
Total increase
(decrease) in net
assets................ 4,330,706
NET ASSETS:
Beginning of period.... --
-------------
End of period.......... $4,330,706
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
DIVERSIFIED MID-CAP
INCOME GROWTH
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT**
----------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)..................... $ 2,714,644 $ 10,736
Capital gains income........ 85,168 --
Net realized gain (loss) on
security transactions...... (5,596) (7,656)
Net unrealized appreciation
(depreciation) of
investments during the
period..................... 109,953 1,380,848
----------- --------------
Net increase (decrease) in
net assets resulting from
operations................. 2,904,169 1,383,928
----------- --------------
UNIT TRANSACTIONS:
Purchases................... 20,848,788 9,195,939
Net transfers............... 4,855,360 6,858,060
Surrenders for benefit
payments and fees.......... (3,059,195) (235,512)
Net annuity transactions.... 12,363 --
----------- --------------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 22,657,316 15,818,487
----------- --------------
Total increase (decrease) in
net assets................. 25,561,485 17,202,415
NET ASSETS:
Beginning of period......... 29,546,925 --
----------- --------------
End of period............... $55,108,410 $17,202,415
----------- --------------
----------- --------------
</TABLE>
<PAGE>
SA-16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- - --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION:
Separate Account Three (the Account) is a separate investment account within
Hartford Life & Annuity Insurance Company (the Company) and is registered
with the Securities and Exchange Commission (SEC) as a unit investment trust
under the Investment Company Act of 1940, as amended. Both the Company and
the Account are subject to supervision and regulation by the Department of
Insurance of the State of Connecticut and the SEC. The Account invests
deposits by variable annuity 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 is accrued as of the ex-dividend date. Capital gains income
represents those dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investments in shares of the Morgan Stanley Dean
Witter Select Dimensions Investment Series, the Morgan Stanley Universal
Funds, Inc. and the Van Kampen American Capital Life Investment Trust
Mutual Funds is valued at the closing net asset value per share as
determined by the appropriate Fund as of December 31, 1998.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no
federal income taxes are payable with respect to the operations of the
Account.
d) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the period. Operating results in
the future could vary from the amounts derived from management's
estimates.
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 up to 1.50%
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. These expenses
are reflected in Surrenders for benefit payments and fees on the
accompanying statements of changes in net assets.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- - --------------------------------------------------------------------------------
To the Board of Directors of
Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory balance sheets of Hartford Life and
Annuity Insurance Company (a Connecticut Corporation and wholly owned subsidiary
of Hartford Life Insurance Company) (the Company) as of December 31, 1998 and
1997, and the related statutory statements of operations, changes in capital and
surplus, and cash flows for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these statutory
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 1 of notes to statutory financial
statements. When statutory financial statements are presented for purposes other
than for filing with a regulatory agency, generally accepted auditing standards
require that an auditors' report on them state whether they are presented in
conformity with generally accepted accounting principles. The accounting
practices used by the Company vary from generally accepted accounting principles
as explained and quantified in Note 1.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the statutory financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of the Company as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998.
However, in our opinion, the statutory financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998 in
conformity with statutory accounting practices as described in Note 1.
/s/ Arthur Andersen LLP
Hartford, Connecticut
January 26, 1999
F-1 PROSPECTUS
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
BALANCE SHEETS
(STATUTORY BASIS)
($000)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Assets
Bonds........................................... $ 1,453,792 $ 1,501,311
Common stocks................................... 40,650 64,408
Mortgage loans.................................. 59,548 85,103
Policy loans.................................... 47,212 36,533
Cash and short-term investments................. 469,955 309,432
Other invested assets........................... 2,188 20,942
----------- -----------
Total cash and invested assets................ 2,073,345 2,017,729
Investment income due and accrued............... 20,126 15,878
Premium balances receivable..................... 333 389
Receivables from affiliates..................... -- 1,269
Other assets.................................... 45,358 22,788
Separate account assets......................... 32,876,278 23,208,728
----------- -----------
Total Assets.................................. $35,015,440 $25,266,781
----------- -----------
----------- -----------
Liabilities
Aggregate reserves for future benefits.......... $ 579,140 $ 605,183
Policy and contract claims...................... 5,667 5,672
Liability for premium and other deposit funds... 2,011,672 1,795,149
Asset valuation reserve......................... 21,782 13,670
Payable to affiliates........................... 19,271 20,972
Other liabilities............................... (974,882) (754,393)
Separate account liabilities.................... 32,876,278 23,208,728
----------- -----------
Total liabilities............................. 34,538,928 24,894,981
----------- -----------
Capital and Surplus
Common stock.................................... 2,500 2,500
Gross paid-in and contributed surplus........... 226,043 226,043
Unassigned funds................................ 247,969 143,257
----------- -----------
Total capital and surplus..................... 476,512 371,800
----------- -----------
Total liabilities, capital and surplus............ $35,015,440 $25,266,781
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-2 PROSPECTUS
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(STATUTORY BASIS)
($000)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Premiums and annuity considerations............. $ 469,343 $ 296,645 $ 250,244
Annuity and other fund deposits................. 2,051,251 1,981,246 1,897,347
Net investment income........................... 129,982 102,285 98,441
Commissions and expense allowances on
reinsurance ceded.............................. 444,241 396,921 370,637
Reserve adjustment on reinsurance ceded......... 3,185,590 3,672,076 3,864,395
Other revenues.................................. 458,190 288,632 161,906
----------- ----------- -----------
Total revenues................................ 6,738,597 6,737,805 6,642,970
----------- ----------- -----------
Benefits and expenses
Death and annuity benefits...................... 43,390 66,176 60,194
Disability and other benefit payments........... 6,114 7,316 6,555
Surrenders...................................... 739,663 454,417 270,165
Commissions and other expenses.................. 666,515 564,077 491,637
Increase (Decrease) in aggregate reserves for
future benefits................................ (26,043) 33,213 27,351
Increase in liability for premium and other
deposit funds.................................. 216,523 640,006 207,156
Net transfers to separate accounts.............. 4,956,007 4,914,980 5,492,964
----------- ----------- -----------
Total benefits and expenses................... 6,602,169 6,680,185 6,556,022
----------- ----------- -----------
Net gain from operations
Before federal income tax (benefit) expense..... 136,428 57,620 86,948
Federal income tax (benefit) expense............ 35,887 (14,878) 19,360
----------- ----------- -----------
Net gain from operations.......................... 100,541 72,498 67,588
Net realized capital gains, after tax........... 2,085 1,544 407
----------- ----------- -----------
Net income........................................ $ 102,626 $ 74,042 $ 67,995
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-3 PROSPECTUS
<PAGE>
Hartford Life and Annuity Insurance Company
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
(STATUTORY BASIS)
($000)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Common stock,
Beginning and end of year....................... $ 2,500 $ 2,500 $ 2,500
----------- ----------- -----------
Gross paid-in and contributed surplus,
Beginning and end of year....................... $ 226,043 $ 226,043 $ 226,043
----------- ----------- -----------
Unassigned funds
Balance, beginning of year...................... $ 143,257 $ 74,570 $ 9,791
Net income...................................... 102,626 74,042 67,995
Change in net unrealized capital gains (losses)
on common stocks and other invested assets..... 1,688 2,186 (5,171)
Change in asset valuation reserve............... (8,112) (6,228) 568
Change in non-admitted assets................... (1,277) (1,313) 1,387
Credit on reinsurance ceded..................... 9,787 -- --
----------- ----------- -----------
Balance, end of year............................ $ 247,969 $ 143,257 $ 74,570
----------- ----------- -----------
Capital and surplus,
End of year..................................... $ 476,512 $ 371,800 $ 303,113
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-4 PROSPECTUS
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(STATUTORY BASIS)
($000)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Operations
Premiums and annuity considerations............. $ 2,520,655 $ 2,277,874 $ 2,147,627
Investment income............................... 127,425 101,991 106,178
Other income.................................... 4,092,964 4,381,718 4,396,892
----------- ----------- -----------
Total income.................................. 6,741,044 6,761,583 6,650,697
----------- ----------- -----------
Benefits paid................................... 790,051 529,733 338,998
Federal income taxes (received) paid on
operations..................................... 25,780 (14,499) 28,857
Other expenses.................................. 5,859,063 5,754,725 6,254,139
----------- ----------- -----------
Total benefits and expenses................... 6,674,894 6,269,959 6,621,994
----------- ----------- -----------
Net cash from operations...................... 66,150 491,624 28,703
----------- ----------- -----------
Proceeds from investments
Bonds........................................... 633,926 614,413 871,019
Common stocks................................... 34,010 11,481 72,100
Mortgage loans.................................. 85,275 -- --
Other........................................... 127 152 10
----------- ----------- -----------
Net investment proceeds....................... 753,338 626,046 943,129
----------- ----------- -----------
Taxes paid on capital gains..................... -- -- 936
Other cash provided............................. 1,269 -- 41,998
----------- ----------- -----------
Total proceeds................................ 820,757 1,117,670 1,012,894
----------- ----------- -----------
Cost of investments acquired
Bonds........................................... 586,913 848,267 914,523
Common stocks................................... 7,012 28,302 82,495
Mortgage loans.................................. 59,702 85,103 --
Other........................................... 1,168 18,548 130
----------- ----------- -----------
Total investments acquired.................... 654,795 980,220 997,148
----------- ----------- -----------
Other cash applied
Other........................................... 5,439 4,848 12,220
----------- ----------- -----------
Total other cash applied...................... 5,439 4,848 12,220
----------- ----------- -----------
Total applications............................ 660,234 985,068 1,009,368
----------- ----------- -----------
Net change in cash and short-term investments..... 160,523 132,602 3,526
Cash and short-term investments, beginning of
year............................................. 309,432 176,830 173,304
----------- ----------- -----------
Cash and short-term investments, end of year...... $ 469,955 $ 309,432 $ 176,830
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-5 PROSPECTUS
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(STATUTORY BASIS)
DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
- - --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Hartford Life and Annuity Insurance Company ("ILA" or "the Company"), formerly
known as ITT Hartford Life and Annuity Insurance Company, is a wholly owned
subsidiary of Hartford Life Insurance Company ("HLIC"), which is an indirect
subsidiary of Hartford Life, Inc. ("HLI"), which is majority owned by The
Hartford Financial Services Group, Inc. ("The Hartford"), formerly a wholly
owned subsidiary of ITT Corporation ("ITT"). On February 10, 1997, HLI filed a
registration statement, as amended, with the Securities and Exchange Commission
relating to the initial public offering of HLI Class A Common Stock (the
"Offering"). Pursuant to the Offering on May 22, 1997, HLI sold to the public 26
million shares, representing 18.6% of the equity ownership of HLI. On December
19, 1995, ITT Corporation distributed all the outstanding shares of The Hartford
to ITT shareholders of record in an action known herein as the "Distribution".
As a result of the Distribution, The Hartford became an independent, publicly
traded company. During 1996, ILA re-domesticated from the State of Wisconsin to
the State of Connecticut.
ILA offers a complete line of ordinary and universal life insurance, individual
annuities and certain supplemental accident and health benefit coverages.
BASIS OF PRESENTATION
The accompanying ILA statutory basis financial statements were prepared in
conformity with statutory accounting practices prescribed or permitted by the
National Association of Insurance Commissioners ("NAIC"), the State of
Connecticut Department of Insurance and the State of Wisconsin for the 1996
period, as applicable. Certain prior year amounts and balances have been
reclassified to conform with current year presentation.
Current prescribed statutory accounting practices include accounting
publications of the National Association of Insurance Commissioners ("NAIC"), as
well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass accounting practices approved by State
Insurance Departments. The Company does not follow any permitted statutory
accounting practices that have a material effect on statutory surplus, statutory
net income or risk-based capital.
Final approval of the NAIC's proposed "Comprehensive Guide" on statutory
accounting principles was distributed in 1998. The requirements are effective
January 1, 2001, and are not expected to have a material impact on statutory
surplus of the Company.
The preparation of financial statements in conformity with statutory accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reported period. Actual results could differ
from those estimates. The most significant estimates include those used in
determining the liability for aggregate reserves for future benefits and the
liability for premium and other deposit funds. Although some variability is
inherent in these estimates, management believes the amounts provided are
adequate.
Statutory accounting practices and generally accepted accounting principles
("GAAP") differ in certain significant respects. These differences principally
involve:
(1) treatment of policy acquisition costs (commissions, underwriting and selling
expenses, premium taxes, etc.) which are charged to expense when incurred
for statutory purposes rather than on a pro-rata basis over the expected
life of the policy for GAAP purposes;
(2) recognition of premium revenues, which for statutory purposes are generally
recorded as collected or when due during the premium paying period of the
contract and which for GAAP purposes, for universal life policies and
investment products, generally, are only recorded for policy charges for the
cost of insurance, policy administration and surrender charges assessed to
policy account balances. Also, for GAAP purposes, premiums for traditional
life insurance policies are recognized as revenues when they are due from
policyholders and the retrospective deposit method is used in accounting for
universal life and other types of contracts where the payment pattern is
irregular or surrender charges are a significant source of profit. The
prospective deposit method is used for GAAP purposes where investment
margins are the primary source of profit;
(3) development of liabilities for future policy benefits, which for statutory
purposes predominantly use interest rate and mortality assumptions
prescribed by the NAIC which may vary considerably from interest and
mortality assumptions used for GAAP financial reporting;
(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;
F-6 PROSPECTUS
<PAGE>
(5) excluding certain GAAP assets designated as non-admitted assets (e.g.,
negative Interest Maintenance Reserve, past due agents' balances and
furniture and equipment) from the balance sheet for statutory purposes by
directly charging surplus;
(6) establishing accruals for post-retirement and post-employment health care
benefits currently, or using a twenty year phase-in approach, whereas GAAP
liabilities are recorded upon adoption of the applicable standard;
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve); as well as the deferral and amortization of realized
gains and losses, motivated by changes in interest rates during the period
the asset is held, into income over the remaining life to maturity of the
asset sold (Interest Maintenance Reserve); whereas on a GAAP basis, no such
formula reserve is required and realized gains and losses are recognized in
the period the asset is sold;
(8) the reporting of reserves and benefits net of reinsurance ceded, where risk
transfer has taken place, whereas on a GAAP basis, reserves are reported
gross of reinsurance with reserve credits presented as recoverable assets;
as well as, the accounting for retroactive reinsurance which is immediately
charged to surplus for statutory accounting purposes whereas GAAP precludes
immediate gain recognition unless the ceding enterprise's liability to its
policyholders is extinguished; as well as reinsurance ceded that fails to
meet GAAP risk transfer guidelines would result in deposit accounting for
GAAP where as for statutory, reserves ceded and assumed would be reflected
in the statutory basis statements of operations;
(9) the reporting of fixed maturities at amortized cost, whereas GAAP requires
that fixed maturities be classified as "held-to-maturity",
"available-for-sale" or "trading", based on the Company's intentions with
respect to the ultimate disposition of the security and its ability to
affect those intentions. The Company's bonds were classified on a GAAP basis
as "available-for-sale" and accordingly, those investments and common stocks
were reflected at fair value with the corresponding impact included as a
component of Stockholder's Equity designated as "Net unrealized capital
gains (losses) on securities net of tax". For statutory reporting purposes,
Change in Net Unrealized Capital Gains (Losses) on Common Stocks and Other
Invested Assets includes the change in unrealized gains (losses) on common
stock reported at fair value; and
(10) separate account liabilities are valued on the Commissioner's Annuity
Reserve Valuation Method ("CARVM"), with the surplus generated recorded as a
liability to the general account (and a contra liability on the balance
sheet of the general account), whereas GAAP liabilities are valued at
account value.
As of and for the years ended December 31, the significant differences between
Statutory and GAAP basis net income and capital and surplus for the Company are
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
GAAP Net Income.................... $ 74,525 $ 58,050 $ 41,202
Amortization and deferral of policy
acquisition costs, net............ (331,882) (345,657) (341,571)
Change in unearned revenue
reserve........................... 22,131 4,641 55,504
Deferred taxes..................... 2,476 47,092 2,090
Separate accounts.................. 259,287 282,818 306,978
Asset impairments and write-
downs............................. 17,250 -- --
Benefit reserve adjustment......... 32,759 24,666 (1,013)
Deposit accounting for Lyndon
reinsurance (Note 3).............. 24,627 -- --
Other, net......................... 1,453 2,432 4,805
------------ ------------ ------------
Statutory Net Income............... $ 102,626 $ 74,042 $ 67,995
------------ ------------ ------------
------------ ------------ ------------
GAAP Capital and Surplus........... $ 648,097 $ 570,469 $ 503,887
Deferred policy acquisition
costs............................. (1,615,653) (1,283,771) (938,114)
Unearned revenue reserve........... 156,920 134,789 130,148
Deferred taxes..................... 68,936 64,522 12,823
Separate accounts.................. 1,183,642 924,355 640,101
Asset impairments and write-
downs............................. 17,250 -- --
Unrealized gains on bonds.......... (26,119) (21,451) (7,978)
Benefit reserve adjustment......... 65,029 16,378 7,035
Asset valuation reserve............ (21,782) (13,670) (7,442)
Adjustment relating to Lyndon
contribution (Note 3)............. -- (23,671) (36,126)
Other, net......................... 192 3,850 (1,221)
------------ ------------ ------------
Statutory Capital and Surplus...... $ 476,512 $ 371,800 $ 303,113
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
As more fully described in Note 3, Lyndon Insurance Company (Lyndon) was
contributed to the Company on June 30, 1995. The GAAP net assets contributed
exceeded the statutory basis net assets by $41,277 as of December 31, 1995,
relating primarily to statutory reserves for future benefits, GAAP deposit
accounting receivables and deferred tax liabilities. In 1998, the majority of
the former Lyndon's assumed business was recaptured by the unaffiliated direct
writer.
AGGREGATE RESERVES FOR FUTURE BENEFITS AND LIABILITY FOR PREMIUM AND OTHER
DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits were
computed in accordance with actuarial standards. Reserves for life insurance
policies are generally based on the 1958 and 1980 Commissioner's Standard
Ordinary Mortality Tables and various valuation rates ranging from 2.5% to 6%.
Accumulation and on-benefit annuity reserves are based principally on individual
annuity tables at various rates ranging from 2.5% to 8.75% and using CARVM.
Accident and health reserves are established using a two year preliminary term
method and morbidity tables based on Company experience.
ILA has established separate accounts to segregate the assets and liabilities of
certain annuity contracts that must be segregated from the Company's general
assets under the terms of the contracts. The assets consist primarily of
marketable securities reported at market value. Premiums, benefits and expenses
of
F-7 PROSPECTUS
<PAGE>
these contracts are reported in the statutory basis statements of operations.
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds that are deemed
ineligible to be held at amortized cost by the NAIC Securities Valuation Office
("SVO") are carried at the appropriate SVO published value. When a permanent
reduction in the value of publicly traded securities occurs, the decrease is
reported as a realized loss and the carrying value is adjusted accordingly.
Short-term investments consist of money market funds and are stated at cost,
which approximates fair value. Common stocks are carried at fair value with the
current year change in the difference from cost reflected in surplus. Other
invested assets are generally recorded at fair value.
The Company uses a variety of derivative financial instruments as part of an
overall risk management strategy. These instruments, including interest rate and
foreign currency swaps, caps, and floors are used as a means of hedging exposure
to price, foreign currency and/or interest rate risk on planned investment
purchases or existing assets and liabilities. The Company does not hold or issue
derivative financial instruments for trading purposes. Derivatives must be
designated at inception as a hedge measured for effectiveness both at inception
and on an ongoing basis. The Company's correlation threshold for hedge
designation is 80% to 120%. If correlation, which is assessed monthly and
measured based on a rolling three month average, falls outside the 80% to 120%
range, hedge accounting will be terminated.
Interest rate swaps involve the periodic exchange of payments without the
exchange of underlying principal or notional amounts. Net receipts or payments
are accrued and recognized over the life of the swap agreement as an adjustment
to net investment income. Should the swap be terminated the gains or losses are
adjusted into the basis of the asset or liability and amortized over the
remaining life. Should the hedged asset be sold or liability terminated without
terminating the swap position, any swap gains or losses are immediately
recognized in net investment income. Interest rate swaps purchased in
anticipation of an asset purchase ("anticipatory transaction") are recognized
consistent with the underlying asset components such that the settlement
component is recognized in the statutory basis statements of operations while
the change in market value is recognized as an unrealized gain or loss. Foreign
currency swaps are similar to interest rate swaps except there is an initial
exchange of principal in two currencies and an agreement to re-exchange the
currencies at a future date, at an agreed upon exchange rate.
Premiums paid on purchased floor or cap agreements and the premium received on
issued cap or floor agreements (used for risk management) are adjusted into the
basis of the applicable asset and amortized over the asset life. Gains or losses
on termination of such positions are adjusted into the basis of the asset or
liability and amortized over the remaining asset life. Net payments are
recognized as an adjustment to income or basis adjusted and amortized depending
on the specific hedge strategy.
Derivatives used to create a synthetic asset must meet synthetic accounting
criteria, including designation at inception and consistency of terms between
the synthetic and the instrument being replicated. Consistent with industry
practice, synthetic instruments are accounted for like the financial instrument
they are intended to replicate. Derivatives which fail to meet risk management
criteria subsequent to acquisition, are accounted for at fair market value with
the impact reflected in the statutory basis statements of operations.
Open forward commitment contracts are marked to market through surplus. Such
contracts are accounted for at settlement by recording the purchase of specified
securities at the previously committed price. Gains or losses resulting from
termination of the forward commitment contracts before the delivery of the
securities are recognized immediately in the statutory basis statements of
operations as a component of Net Realized Capital Gains, after tax.
The Asset Valuation Reserve ("AVR") is designed to provide a standardized
reserving process for realized and unrealized losses due to default and equity
risks associated with invested assets. The reserve increased $8,112 and $6,228
in 1998 and 1997, respectively and decreased $(568) in 1996. Additionally, the
Interest Maintenance Reserve ("IMR") captures net realized capital gains and
losses, net of applicable income taxes, resulting from changes in interest rates
and amortizes these gains or losses into income over the life of the mortgage
loan or bond sold. The IMR balance as of December 31, 1998 and December 31, 1997
was $452 and $(193), respectively and is reflected in Other Liabilities and as a
component of non-admitted assets in Unassigned Funds for each of the years then
ended. For the years ended December 31, 1998, 1997 and 1996, amortization of IMR
is included in Other Revenues and was $(207), $(85) and $(392), respectively.
Realized capital gains and losses, net of taxes not included in IMR are reported
in the statutory basis statements of operations. Realized investment gains and
losses are determined on a specific identification basis.
OTHER LIABILITIES
The amount reflected in other liabilities includes a receivable from the
separate accounts of $1,187 million and $923 million as of December 31, 1998 and
1997, respectively. The balances are classified in accordance with NAIC
prescribed practices.
MORTGAGE LOANS
Mortgage loans, which are carried at cost and approximate fair value, include
investments in assets backed by mortgage loan pools.
F-8 PROSPECTUS
<PAGE>
2. INVESTMENTS:
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Interest income from bonds and
short-term investments............ $ 123,370 $ 100,475 $ 89,940
Interest income from policy
loans............................. 3,133 1,958 1,846
Interest and dividends from other
investments....................... 4,482 1,005 7,864
--------- --------- ---------
Gross investment income............ 130,985 103,438 99,650
Less: investment expenses.......... 1,003 1,153 1,209
--------- --------- ---------
Net investment income.............. $ 129,982 $ 102,285 $ 98,441
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON COMMON STOCKS
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Gross unrealized capital gains.... $ 2,204 $ 537 $ 713
Gross unrealized capital losses... (1,871) (1,820) (4,160)
--------- --------- ---------
Net unrealized capital
(losses)/gains................... 333 (1,283) (3,447)
Balance, beginning of year........ (1,283) (3,447) 1,724
--------- --------- ---------
Change in net unrealized capital
gains (losses) on Common
stocks........................... $ 1,616 $ 2,164 $ (5,171)
--------- --------- ---------
--------- --------- ---------
</TABLE>
(C) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON BONDS AND
SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Gross unrealized capital
gains.......................... $ 10,905 $ 23,357 $ 11,821
Gross unrealized capital
losses......................... (833) (1,906) (3,842)
--------- --------- ---------
Net unrealized capital gains.... 10,072 21,451 7,979
Balance, beginning of year...... 21,451 7,979 20,877
--------- --------- ---------
Change in net unrealized capital
gains on bonds and short-term
investments.................... $ (11,379) $ 13,472 $ (12,898)
--------- --------- ---------
--------- --------- ---------
</TABLE>
(D) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Bonds and short-term investments.... $ 1,314 $ (120) $ 2,756
Common stocks....................... 1,624 -- --
Real estate and other............... (1) 114 --
--------- --------- ---------
Realized capital (losses) gains..... 2,937 (6) 2,756
Capital gains (benefit) tax......... -- (831) 936
--------- --------- ---------
Net realized capital gains.......... 2,937 825 1,820
Amounts transferred to IMR.......... 852 (719) 1,413
--------- --------- ---------
Net realized capital gains.......... $ 2,085 $ 1,544 $ 407
--------- --------- ---------
--------- --------- ---------
</TABLE>
(E) OFF-BALANCE SHEET INVESTMENTS
The Company had no significant financial instruments with off-balance sheet risk
as of December 31, 1998.
(F) CONCENTRATION OF CREDIT RISK
The Company has invested in securities of a single issuer, Bankers Trust
Corporation, in an amount greater than 10% of the Company's statutory capital
and surplus. The statement value of this investment was $105,221 as of December
31, 1998. The NAIC ratings on these holdings were 1z and 2. Excluding this and
U.S. government and government agency investments, the Company had no other
significant concentrations of credit risk as of December 31, 1998.
(G) BONDS, SHORT-TERM INVESTMENTS AND COMMON STOCKS
<TABLE>
<CAPTION>
1998
------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored.................................... $ 4,982 $ 35 $ (2) $ 5,015
-- Guaranteed and sponsored -- asset-backed.................... 75,615 -- -- 75,615
States, municipalities and political subdivisions................ 10,402 415 -- 10,817
International governments........................................ 7,466 568 -- 8,034
Public utilities................................................. 94,475 1,330 (39) 95,766
All other corporate.............................................. 607,679 8,473 (792) 615,360
All other corporate -- asset-backed.............................. 505,900 -- -- 505,900
Short-term investments........................................... 343,783 -- -- 343,783
Certificates of deposit.......................................... 130,216 84 -- 130,300
Parents, subsidiaries and affiliates............................. 117,057 -- -- 117,057
---------- ---------- ----- ----------
Total bonds and short-term investments........................... $1,897,575 $10,905 $(833) $1,907,647
---------- ---------- ----- ----------
---------- ---------- ----- ----------
</TABLE>
F-9 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Common stock -- unaffiliated................................. $ 4,933 $ 290 $ (50) $ 5,173
Common stock -- affiliated................................... 35,384 1,914 (1,821) 35,477
--------- ---------- ---------- ----------
Total common stocks.......................................... $40,317 $2,204 $(1,871) $40,650
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
1997
------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored.................................... $ 11,114 $ 55 $ (51) $ 11,118
-- Guaranteed and sponsored -- asset-backed.................... 55,506 1,056 (269) 56,293
States, municipalities and political subdivisions................ 26,404 329 -- 26,733
International governments........................................ 7,609 500 -- 8,109
Public utilities................................................. 73,024 754 (132) 73,646
All other corporate.............................................. 517,715 14,110 (704) 531,121
All other corporate -- asset-backed.............................. 630,069 5,005 (739) 634,335
Short-term investments........................................... 277,330 33 (8) 277,355
Certificates of deposit.......................................... 93,770 1,515 (3) 95,282
Parents, subsidiaries and affiliates............................. 86,100 -- -- 86,100
---------- ---------- ---------- ----------
Total bonds and short-term investments........................... $1,778,641 $23,357 $(1,906) $1,800,092
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Common stock -- unaffiliated................................. $30,307 $537 $ -- $30,844
Common stock -- affiliated................................... 35,384 -- (1,820) 33,564
--------- ----- ---------- ----------
Total common stocks.......................................... $65,691 $537 $(1,820) $64,408
--------- ----- ---------- ----------
--------- ----- ---------- ----------
</TABLE>
The amortized cost and estimated fair value of bonds and short-term investments
as of December 31, 1998 by estimated maturity year are shown below. Asset-backed
securities, including mortgage backed securities and collaterialized mortgage
obligations, are distributed to maturity year based on ILA's estimates of the
rate of future prepayments of principal over the remaining lives of the
securities. Expected maturities differ from contractual maturities due to call
or repayment provisions.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
MATURITY COST FAIR VALUE
- - ----------------------------------- ------------ ------------
<S> <C> <C>
One year or less................... $ 788,845 $ 792,826
Over one year through five years... 689,025 692,811
Over five years through ten
years............................. 308,661 310,357
Over ten years..................... 111,044 111,653
------------ ------------
Total.............................. $ 1,897,575 $ 1,907,647
------------ ------------
------------ ------------
</TABLE>
Proceeds from sales and maturities of investments in bonds and short-term
investments during 1998, 1997 and 1996 were $1,354,563, $1,435,820 and
$1,139,073, respectively, resulting in gross realized gains of $1,705, $964 and
$3,675, respectively, and gross realized losses of $391, $1,084 and $919,
respectively, before transfers to IMR.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Assets
Bonds and short-term
investments..................... $ 1,898 $ 1,908 $ 1,779 $ 1,800
Common stocks.................... 41 41 64 64
Policy loans..................... 47 47 37 37
Mortgage loans................... 60 60 85 85
Other invested assets............ 2 2 21 21
Liabilities
Liabilities on investment
contracts....................... $ 2,053 $ 2,129 $ 1,911 $ 1,835
</TABLE>
The estimated fair value of bonds and short-term investments was determined by
the Company primarily using NAIC market values. The carrying amounts for policy
loans approximates fair value. The fair value of mortgage loans was determined
by discounting future
F-10 PROSPECTUS
<PAGE>
expected cash flows using interest rates currently being offered for similar
loans. The fair value of liabilities on investment contracts is determined by
forecasting future cash flows and discounting the forecasted cash flows at
current market interest rates.
3. AGGREGATE RESERVES FOR FUTURE BENEFITS
The Company's existing reserves consist of life, health, annuity and
supplementary contracts. The Company cedes and assumes insurance to and from
non-affiliated insurers in order to limit its maximum loss. Such transfers do
not relieve the Company or the unaffiliated reinsured of their primary
liabilities. The Company cedes to RGA Reinsurance Company and its affiliate
Employers Reassurance Corporation, on a modified coinsurance basis, 80% of the
variable annuity business written since 1994 and 100% of the variable life and
variable universal life excess sales load refund obligation effective 1998.
There were no material reinsurance recoverables from reinsurers outstanding as
of, and for the years ended, December 31, 1998 and 1997.
A summary of reinsurance information as of and for the years ended December 31,
follows:
<TABLE>
<CAPTION>
1998 DIRECT ASSUMED CEDED NET
- - ----------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Premium and Annuity
Considerations.................... $ 483,328 $ 24,954 $ (38,939) $ 469,343
Death, Annuity, Disability and
Other Benefits.................... $ 64,331 $ 1,574 $ (16,401) $ 49,504
Surrenders......................... $ 739,663 $ -- $ -- $ 739,663
Aggregate Reserves for Future
Benefits.......................... $ 713,425 $ -- $ (134,285) $ 579,140
Policy and Contract Claims......... $ 5,895 $ 85 $ (313) $ 5,667
<CAPTION>
1997 DIRECT ASSUMED CEDED NET
- - ----------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Premium and Annuity
Considerations.................... $ 266,427 $ 51,630 $ (21,412) $ 296,645
Death, Annuity, Disability and
Other Benefits.................... $ 79,779 $ 839 $ (7,126) $ 73,492
Surrenders......................... $ 454,417 $ -- $ -- $ 454,417
Aggregate Reserves for Future
Benefits.......................... $ 651,820 $ -- $ (46,637) $ 605,183
Policy and Contract Claims......... $ 5,861 $ 157 $ (346) $ 5,672
<CAPTION>
1996 DIRECT ASSUMED CEDED NET
- - ----------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Premium and Annuity
Considerations.................... $ 226,612 $ 33,817 $ (10,185) $ 250,244
Death, Annuity, Disability and
Other Benefits.................... $ 34,950 $ 35,138 $ (3,339) $ 66,749
Surrenders......................... $ 270,165 $ -- $ -- $ 270,165
</TABLE>
In connection with the distribution described in Note 1, on June 30, 1995, the
assets of Lyndon were contributed to the Company. The statutory basis assets in
excess of statutory basis liabilities was approximately $112 million and was
reflected as an increase in Gross Paid-In and Contributed Surplus at December
31, 1995. In 1998, the majority of former Lyndon's assumed business was
recaptured by the unaffiliated direct writer. A ceding commission of $25,622 and
change in reserve of $26,404 for the year ended December 31, 1998, is reflected
in Other Revenue and Increase/(Decrease) in Aggregate Reserves for Future
Benefits in the statutory basis statements of operations, respectively.
Analysis of Annuity Actuarial Reserves and Deposit Liabilities by Withdrawal
Characteristics as of December 31, 1998 (including general and separate account
liabilities) are as follows:
<TABLE>
<CAPTION>
% OF
SUBJECT TO DISCRETIONARY WITHDRAWAL: AMOUNT TOTAL
- - --------------------------------------- ----------- ---------
<S> <C> <C>
With market value adjustment........... $ 4,563 0.0%
At book value less current surrender
charge of 5% or more.................. 1,378,056 4.1%
At market value........................ 31,087,511 93.8%
----------- ---------
Total with adjustment or at market
value................................. 32,470,130 97.9%
At book value without adjustment
(minimal or no charge or
adjustment)........................... 665,159 2.0%
Not subject to discretionary
withdrawal............................ 19,739 0.1%
----------- ---------
Reinsurance ceded...................... 33,155,028
Total, net......................... $33,155,028
-----------
-----------
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Transactions between the Company and its affiliates within The Hartford relate
principally to tax settlements, reinsurance, rental and service fees, capital
contributions and payments of dividends. The Company has also invested in bonds
of its affiliates, Hartford Financial Services Corporation and HL Investment
Advisors, Inc., and common stock of its subsidiary, ITT Hartford Life, LTD.
5. FEDERAL INCOME TAXES:
The Company and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. Federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were filing separate Federal, state and local
income tax returns.
As long as The Hartford continues to own at least 80% of the combined voting
power and 80% of the value of the outstanding capital stock of HLI, the Company
will be included for Federal income tax purposes in the consolidated group of
which The Hartford is the common parent. It is the intention of The Hartford and
its non-life subsidiaries to file a single consolidated Federal income tax
return. The life insurance companies will file a separate consolidated Federal
income tax return. Federal income taxes (received) paid by the Company for
operations and capital gains were $25,780, $(14,499) and $29,793 in 1998,
F-11 PROSPECTUS
<PAGE>
1997 and 1996, respectively. The effective tax rate was 26%, (26)% and 22% in
1998, 1997 and 1996, respectively.
The Company is currently under audit by the Internal Revenue Service (IRS) for
the three year tax period ending 1995. The audit is not yet complete. As of
December 31, 1998, the Company does not currently expect any material
adjustments to arise from this audit.
The following schedule provides a reconciliation of the tax provision at the
U.S. Federal Statutory rate to Federal income tax (benefit) expense (in
millions):
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Tax provision at U.S. Federal statutory
rate.................................. $ 48 $ 20 $ 30
Tax deferred acquisition costs......... 25 25 27
Statutory to tax reserve differences... 8 1 --
Unrealized gain on separate accounts... (41) (44) (21)
Investments and other.................. (4) (17) (17)
--- --- ---
Federal income tax (benefit) expense... $ 36 $ (15) $ 19
--- --- ---
--- --- ---
</TABLE>
6. CAPITAL AND SURPLUS AND SHAREHOLDER DIVIDEND RESTRICTIONS:
The maximum amount of dividends which can be paid, without prior approval, by
State of Connecticut insurance companies to shareholders is generally restricted
to the greater of 10% of surplus as of the preceding December 31st or the net
gain from operations for the previous year. Dividends are paid as determined by
the Board of Directors and are not cumulative. No dividends were paid in 1998,
1997 and 1996. The amount available for dividend in 1999 is $100,541.
7. PENSION PLANS AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:
HLI's employees are included in The Hartford's non-contributory defined benefit
pension plans. These plans provide pension benefits that are based on years of
service and the employee's compensation during the last ten years of employment.
HLI's funding policy is to contribute annually an amount between the minimum
funding requirements set forth in the Employee Retirement Income Security Act of
1974, as amended, and the maximum amount that can be deducted for U.S. Federal
income tax purposes. Generally, pension costs are funded through the purchase of
affiliated group pension contracts. The cost to HLI was approximately $9,000 in
1998 and $7,000 in both 1997 and 1996.
HLI also provides, through The Hartford, certain health care and life insurance
benefits for eligible retired employees. A substantial portion of HLI's
employees may become eligible for these benefits upon retirement. HLI's
contribution for health care benefits will depend on the retiree's date of
retirement and years of service. In addition, the plan has a defined dollar cap
which limits average company contributions. HLI has prefunded a portion of the
health care and life insurance obligations through trust funds where such
prefunding can be accomplished on a tax effective basis. Postretirement health
care and life insurance benefits expense, allocated by The Hartford, was
immaterial to the results of operations for 1998, 1997 and 1996.
The assumed rate in the per capita cost of health care (the health care trend
rate) was 7.8% for 1998, decreasing ratably to 5.0% in the year 2003. Increasing
the health care trend rates by one percent per year would have an immaterial
impact on the accumulated postretirement benefit obligation and the annual
expense. To the extent that the actual experience differs from the inherent
assumptions, the effect will be amortized over the average future service of
covered employees.
8. SEPARATE ACCOUNTS:
The Company maintains separate account assets and liabilities totaling $32.9
billion and $23.2 billion as of December 31, 1998 and 1997, respectively.
Separate account assets are reported at fair value and separate account
liabilities are determined in accordance with CARVM, which approximates the
market value less applicable surrender charges. Separate account assets are
segregated from other investments, the policyholder assumes the investment risk,
and the investment income and gains and losses accrue directly to the
policyholder. Separate account management fees, net of minimum guarantees, were
$360 million, $252 million and $144 million in 1998, 1997 and 1996,
respectively, and are recorded as a component of other revenues on the statutory
basis statements of operations.
9. COMMITMENTS AND CONTINGENCIES:
As of December 31, 1998, the Company had no material contingent liabilities, nor
had the Company committed any surplus funds for any contingent liabilities or
arrangements. The Company is involved in pending and threatened litigation in
the normal course of its business in which claims for monetary and punitive
damages have been asserted. Although there can be no assurances, at the present
time the Company does not anticipate that the ultimate liability arising from
such pending or threatened litigation, after consideration of provisions made
for potential losses and costs of defense, will have a material adverse effect
on the statutory capital and surplus of the Company.
As discussed in Note 5, issues may potentially be raised by the IRS in future
audits of open years. Management does not believe that possible audit
adjustments will have a material effect on the statutory capital and surplus of
the Company.
Under insurance guaranty fund laws in each state, insurers licensed to do
business can be assessed up to prescribed limits for policyholder losses
incurred by insolvent companies. The amount of any future assessments on ILA
under these laws cannot be reasonably estimated. Most of the laws do provide,
however, that an assessment may be excused or deferred if it would threaten an
insurer's own financial strength. Additionally, guaranty fund assessments are
used to reduce state premium taxes paid by the Company in certain states. ILA
paid guaranty fund assessments of $1,043, $1,544 and $1,262 in 1998, 1997 and
1996, respectively. ILA incurred guaranteed fund expense of $548 in 1998, 1997
and 1996.
F-12 PROSPECTUS
<PAGE>
PART C
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
(b) (1) Resolution of the Board of Directors of Hartford Life and Annuity
Insurance Company ("Hartford") authorizes the establishment of
the Separate Account.(1)
(2) Not applicable.
(3) (a) Principal Underwriter Agreement.(2)
(3) (b) Form of Dealer Agreement.(2)
(4) Form of Individual Flexible Premium Variable Annuity Contract.(3)
(5) Form of Application.(3)
(6) (a) Certificate of Incorporation of Hartford.(2)
(6) (b) Bylaws of Hartford.(1)
(7) Not applicable.
(8) Not applicable.
(9) Opinion and Consent of Lynda Godkin, Senior Vice President,
General Counsel and Corporate Secretary.
- - -----------------
(1) Incorporated by reference to Post-Effective Amendment No. 2, to the
Registration Statement File No. 33-80732, dated May 1, 1995.
(2) Incorporated by reference to Post-Effective Amendment No. 3, to the
Registration Statement File No. 33-80732, dated April 29, 1996.
(3) Incorporated by reference to the initial filing to the Registration
Statement File No. 333-69491, filed on December 22, 1998.
<PAGE>
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(11) No financial statements are omitted.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
Item 25. Directors and Officers of the Depositor
- - -------------------------------------------------------------------------------
NAME, AGE POSITION WITH HARTFORD
- - -------------------------------------------------------------------------------
Wendell J. Bossen Vice President
- - -------------------------------------------------------------------------------
Gregory A. Boyko Senior Vice President, Director*
- - -------------------------------------------------------------------------------
Peter W. Cummins Senior Vice President
- - -------------------------------------------------------------------------------
Timothy M. Fitch Vice President & Actuary
- - -------------------------------------------------------------------------------
Mary Jane B. Fortin Vice President & Chief Accounting Officer
- - -------------------------------------------------------------------------------
David T. Foy Senior Vice President & Treasurer
- - -------------------------------------------------------------------------------
Lynda Godkin Senior Vice President, General Counsel, and
Corporate Secretary, Director*
- - -------------------------------------------------------------------------------
Lois W. Grady Senior Vice President
- - -------------------------------------------------------------------------------
Stephen T. Joyce Vice President
- - -------------------------------------------------------------------------------
Michael D. Keeler Vice President
- - -------------------------------------------------------------------------------
Robert A. Kerzner Senior Vice President
- - -------------------------------------------------------------------------------
Thomas M. Marra Executive Vice President, Director*
- - -------------------------------------------------------------------------------
Steven L. Matthiesen Vice President
- - -------------------------------------------------------------------------------
Craig R. Raymond Senior Vice President and Chief Actuary
- - -------------------------------------------------------------------------------
Lowndes A. Smith President and Chief Executive Officer,
Director*
- - -------------------------------------------------------------------------------
David M. Znamierowski Senior Vice President, Director*
- - -------------------------------------------------------------------------------
Unless otherwise indicated, the principal business address of each of the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
*Denotes Board of Directors.
<PAGE>
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Filed herewith as Exhibit 16.
Item 27. Number of Contract Owners
As of February 28, 1999, there were 27,023 Contract Owners.
Item 28. Indemnification
Under Section 33-772 of the Connecticut General Statutes, unless
limited by its certificate of incorporation, the Registrant must
indemnify a director who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party
because he is or was a director of the corporation against reasonable
expenses incurred by him in connection with the proceeding.
The Registrant may indemnify an individual made a party to a
proceeding because he is or was a director against liability
incurred in the proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Registrant, and, with respect to any criminal
proceeding, had no reason to believe his conduct was unlawful.
Conn. Gen. Stat. Section 33-771(a). Additionally, pursuant to Conn.
Gen. Stat. Section 33-776, the Registrant may indemnify officers
and employees or agents for liability incurred and for any expenses
to which they becomes subject by reason of being or having been an
employees or officers of the Registrant. Connecticut law does not
prescribe standards for the indemnification of officers, employees
and agents and expressly states that their indemnification may be
broader than the right of indemnification granted to directors.
The foregoing statements are specifically made subject to the
detailed provisions of Section 33-770 et seq.
Notwithstanding the fact that Connecticut law obligates the
Registrant to indemnify only a director that was successful on the
merits in a suit, under Article VIII, Section 2 of the Registrant's
bylaws, the Registrant must indemnify both directors and officers
of the Registrant who are parties or threatened to be parties to a
legal proceeding by reason of his being or having been a director
or officer of the Registrant for any expenses if he acted in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the company, and with respect to
criminal proceedings, had no reason to believe his conduct was
unlawful. Unless otherwise mandated by a court, no indemnification
shall be made if such officer or director is adjudged to be liable
for negligence or misconduct in the performance of his duty to the
Registrant.
<PAGE>
Additionally, the directors and officers of Hartford and Hartford
Securities Distribution Company, Inc. ("HSD") are covered under a
directors and officers liability insurance policy issued to The
Hartford Financial Services Group, Inc. and its subsidiaries. Such
policy will reimburse the Registrant for any payments that it shall
make to directors and officers pursuant to law and will, subject to
certain exclusions contained in the policy, further pay any other
costs, charges and expenses and settlements and judgments arising
from any proceeding involving any director or officer of the
Registrant in his past or present capacity as such, and for which
he may be liable, except as to any liabilities arising from acts
that are deemed to be uninsurable.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 29. Principal Underwriters
(a) HSD acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - Separate Account One
Hartford Life Insurance Company - Separate Account Two
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account I)
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account II)
Hartford Life Insurance Company - Separate Account Two (QP Variable
Account)
Hartford Life Insurance Company - Separate Account Two (Variable
Account "A")
Hartford Life Insurance Company - Separate Account Two (NQ Variable
Account)
Hartford Life Insurance Company - Putnam Capital Manager Trust
Separate Account
Hartford Life Insurance Company - Separate Account Three
Hartford Life Insurance Company - Separate Account Five
<PAGE>
Hartford Life Insurance Company - Separate Account Seven
Hartford Life and Annuity Insurance Company - Separate Account One
Hartford Life and Annuity Insurance Company - Putnam Capital Manager
Trust Separate Account Two
Hartford Life and Annuity Insurance Company - Separate Account Three
Hartford Life and Annuity Insurance Company - Separate Account Five
Hartford Life and Annuity Insurance Company - Separate Account Six
Alpine Life Insurance Company - Separate Account One
Alpine Life Insurance Company - Separate Account Two
American Maturity Life Insurance Company - Separate Account AMLVA
Royal Life Insurance Company - Separate Account One
Royal Life Insurance Company - Separate Account Two
(b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
------------------ ----------------------------------
Lowndes A. Smith President and Chief Executive Officer,
Director
Thomas M. Marra Executive Vice President, Director
Robert A. Kerzner Executive Vice President
Lynda Godkin Senior Vice President, General Counsel
and Corporate Secretary, Director
Peter W. Cummins Senior Vice President
David T. Foy Treasurer
George R. Jay Controller
Unless otherwise indicated, the principal business address of
each the above individuals is P. O. Box 2999, Hartford,
Connecticut 06104-2999.
Item 30. Location of Accounts and Records
All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder are maintained by Hartford at 200 Hopmeadow Street,
Simsbury, Connecticut 06089.
<PAGE>
Item 31. Management Services
All management contracts are discussed in Part A and Part B of this
Registration Statement.
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective amendment to
this Registration Statement as frequently as is necessary to ensure
that the audited financial statements in the Registration Statement
are never more than 16 months old so long as payments under the
variable annuity Contracts may be accepted.
(b) The Registrant hereby undertakes to include either (1) as part of any
application to purchase a Contract offered by the Prospectus, a space
that an applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written communication
affixed to or included in the Prospectus that the applicant can remove
to send for a Statement of Additional Information.
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to be
made available under this Form promptly upon written or oral request.
(d) Hartford hereby represents that the aggregate fees and charges under
the Contract are reasonable in relation to the services rendered, the
expenses expected to be incurred, and the risks assumed by Hartford.
The Registrant is relying on the no-action letter issued by the
Division of Investment Management to American Counsel of Life
Insurance, Ref. No. IP-6-88, November 28, 1988. Registrant has
complied with conditions one through four of the no-action letter.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this Registration Statement to be signed on its
behalf, in the Town of Simsbury, and State of Connecticut on this 9th day of
April, 1999.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT THREE
(Registrant)
By: Thomas M. Marra *By: /s/ Marianne O'Doherty
------------------------------------------ ----------------------
Thomas M. Marra, Executive Vice President* Marianne O'Doherty
Attorney-in-Fact
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Depositor)
By: Thomas M. Marra
------------------------------------------
Thomas M. Marra, Executive Vice President*
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons and in the capacities and on
the dates indicated.
Gregory A. Boyko, Senior Vice President,
Director *
Lynda Godkin, Senior Vice President,
General Counsel, and Corporate Secretary, *By: /s/ Marianne O'Doherty
-----------------------
Director * Marianne O'Doherty
Thomas M. Marra, Executive Vice Attorney-in-Fact
President, Director*
Lowndes A. Smith, President and Dated: April 9, 1999
Chief Executive Officer, Director *
David M. Znamierowski, Senior Vice President,
Director*
<PAGE>
EXHIBIT INDEX
(9) Opinion and Consent of Lynda Godkin, Senior Vice President, General Counsel
and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(15) Power of Attorney.
(16) Organizational Chart.
<PAGE>
Exhibit 9
[LOGO]
[HARTFORD LIFE]
April 9, 1999
LYNDA GODKIN
SENIOR VICE PRESIDENT, GENERAL COUNSEL &
CORPORATE SECRETARY
Board of Directors
Hartford Life and Annuity Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SEPARATE ACCOUNT THREE
FILE NO. 333-69491
Dear Sir/Madam:
I have acted as General Counsel to Hartford Life and Annuity Insurance
Company (the "Company"), a Connecticut insurance company, and Hartford Life
and Annuity Insurance Company Separate Account Three (the "Account") in
Connecticut with the registration of an indefinite amount of securities in
the form of flexible premium variable annuity insurance contracts (the
"Contracts") with the Securities and Exchange Commission under the Securities
Act of 1933, as amended. I have examined such documents (including the Form
N-4 Registration Statement) and reviewed such questions of law as I
considered necessary and appropriate, and on the basis of such examination
and review, it is my opinion that:
1. The Company is a corporation duly organized and validly existing as a stock
life insurance company under the laws of the State of Connecticut and is
duly authorized to by the Insurance Department of the State of Connecticut
to issue the Contacts.
2. The Account is a duly authorized and existing separate account established
pursuant to the provisions of Section 38a-433 of the Connecticut Statutes.
3. To the extent so provided under the Contracts, that portion of the assets
of the Account equal to the reserves and other contract liabilities with
respect to the Account will not be chargeable with liabilities arising out
of any other business that the Company may conduct.
4. The Contracts, when issued as contemplated by the Form N-4 registration
statement, will constitute legal, validly issued and binding obligations of
the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form N-4
Registration Statement for the Contracts and the Account.
Sincerely yours,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
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. 333-69491 for Hartford Life and Annuity
Insurance Company Separate Account Three on Form N-4.
Hartford, Connecticut /s/ Arthur Andersen LLP
April 12, 1999
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
POWER OF ATTORNEY
-----------------
Gregory A. Boyko
David T. Foy
Lynda Godkin
Thomas M. Marra
Lowndes A. Smith
David M. Znamierowski
do hereby jointly and severally authorize Lynda Godkin, Christine Repasy,
Marianne O'Doherty, Thomas S. Clark and Brian Lord to sign as their agent,
any Registration Statement, pre-effective amendment, post-effective amendment
and any application for exemptive relief of the Hartford Life and Annuity
Insurance Company under the Securities Act of 1933 and/or the Investment
Company Act of 1940, and do hereby ratify any such signatures heretofore made
by such persons.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for
the purpose herein set forth.
/s/ Gregory A. Boyko Dated as of January 15, 1999
- - ------------------------------
Gregory A. Boyko
/s/ David T. Foy Dated as of January 15, 1999
- - ------------------------------
David T. Foy
/s/ Lynda Godkin Dated as of January 15, 1999
- - ------------------------------
Lynda Godkin
/s/ Thomas M. Marra Dated as of January 15, 1999
- - ------------------------------
Thomas M. Marra
/s/ Lowndes A. Smith Dated as of January 15, 1999
- - ------------------------------
Lowndes A. Smith
/s/ David M. Znamierowski Dated as of January 15, 1999
- - ------------------------------
David M. Znamierowski
<PAGE>
ORGANIZATIONAL CHART
<TABLE>
<CAPTION>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
---------------------------------------------
NUTMEG INSURANCE COMPANY |
(CONNECTICUT) THE HARTFORD INVESTMENT
| MANAGEMENT COMPANY
HARTFORD FIRE INSURANCE COMPANY (DELAWARE)
(CONNECTICUT) |
| |
HARTFORD ACCIDENT AND INDEMNITY COMPANY HARTFORD INVESTMENT
(CONNECTICUT) SERVICES, INC.
| (CONNECTICUT)
HARTFORD LIFE, INC.
(DELAWARE)
|
HARTFORD LIFE & ACCIDENT INSURANCE COMPANY
(CONNECTICUT)
|
|
|
-------------------------------------------------------------------------------------------------------------------------
| | | | | | | | |
ITT HARTFORD LIFE | | | | | | HLIC PLANCO
INTERNATIONAL LTD. | | | | | | CANADA FINANCIAL
(CONNECTICUT) | | | | | | HOLDINGS, INC. SERVICES,
| | | | | | | (CANADA) INCORPORATED
| | | | | | | | (PENNSYLVANIA)
| | | | | | | | |
| | ALPINE LIFE HARTFORD FINANCIAL HARTFORD LIFE HARTFORD AMERICAN | |
| | INSURANCE SERVICES LIFE INSURANCE COMPANY FINANCIAL MATURITY LIFE | |
| | COMPANY INSURANCE CO. (CONNECTICUT) SERVICES, LLC INSURANCE COMPANY | |
| | (CONNECTICUT) (CONNECTICUT) | (DELAWARE) (CONNECTICUT) | PLANCO, INC.
| | | | | | (PENNSYLVANIA)
| | ------------------------------------- | AML FINANCIAL, INC. |
HARTFORD CALMA | | | | | (CONNECTICUT) |
COMPANY | ROYAL LIFE HARTFORD HARTFORD | HARTFORD
(FLORIDA) | INSURANCE INTERNATIONAL LIFE AND | LIFE INSURANCE
| COMPANY LIFE REASSURANCE ANNUITY INSURANCE | COMPANY
| OF AMERICA CORP. COMPANY | OF CANADA
|(CONNECTICUT) (CONNECTICUT) (CONNECTICUT) | (CANADA)
| | |
| | |
| ITT HARTFORD |
| LIFE, LTD. |
| (BERMUDA) |
| |
| |
----------| ---------------------------------------------------------------------------------------------
| | | | | |
INTERNATIONAL MS FUND HL INVESTMENT HARTFORD HARTFORD SECURITIES HARTFORD COMP. EMP.
CORPORATE AMERICA 1993-K ADVISORS, LLC EQUITY SALES DISTRIBUTION BENEFITS SERVICE
MARKETING GROUP, INC. SPE, INC. (CONNECTICUT) COMPANY, INC. COMPANY, INC. COMPANY
(CONNECTICUT) (DELAWARE) | (CONNECTICUT) (CONNECTICUT) (CONNECTICUT)
| |
| |
THE EVERGREEN HARTFORD INVESTMENT
GROUP, INC. FINANCIAL SERVICES
(NEW YORK) COMPANY
(DELAWARE)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
NUTMEG INSURANCE COMPANY
(CONNECTICUT)
|
HARTFORD FIRE INSURANCE COMPANY
(CONNECTICUT)
|
----------------------------------------------------------------------------------------------------------------------------
| | |
| | ITT HARTFORD LIFE
| | -------INTERNATIONAL LTD.
| | | (CONNECTICUT)
| | | |
| | | ITT HARTFORD
| | | ----SUDAMERICANA
| | | | HOLDING S.A.
| | | | (ARGENTINA)
| | | |------------------------------------------------------
| | | | | |
| | | | HARTFORD GALICIA INSTITUTO DE
| | | | SEGUROS VIDA COMPANIA SALTA COMPANIA DE
| | | |--------DE VIDA DE SEGUROS S.A. SEGUROS DE VIDA S.A.
| | | | (URUGUAY) (ARGENTINA) (ARGENTINA)
| | | |
| | ICATU | | ITT HARTFORD
| | HARTFORD | |-----SEGUROS DE VIDA
| | SEGUROS S.A.----------| | (ARGENTINA)
| | (BRAZIL) | |
| | | | |
| | | | | ITT HARTFORD
| | -- ----------| | |------SEGUROS DE
| | | | | | RETIRO S.A.
| | | | | | (ARGENTINA)
|-----------|----------------|---------------|---|--------------------------------------------------------------------------
| | | | | |
| | | ICATU HARTFORD | | CONSULTORA DE CAPITALES
| | | FUNDO DE PENSAO | | S.A. SOCIEDAD GERENTE
| | | (BRAZIL) | |----DE FONDOS COMUNES
| | | | | | DE ENVERSION
| | | | | | (ARGENTINA)
| | | ICATU HARTFORD | |
| | | CAPITALIZACAO S.A. | | CLARIDAD
| | | (BRAZIL) | | ADMINISTRADORA DE
| | | | | |---FONDOS DE JUBILACIONES
| | | BRAZILCAP | | Y PENSIONES S.A.
| | | CAPITALIZACAO S.A. | | (ARGENTINA)
| | | (BRAZIL) | |
| | | | |
| | -------------------------- | |
| |--------------- | | |
| | | | |
HARTFORD FIRE HARTFORD FIRE | | |------- SEGPOOL S.A.
INTERNATIONAL------------INTERNATIONAL, LTD. | | | (ARGENTINA)
(GERMANY) GMBH (CONNECTICUT) | | |
(WEST GERMANY) | | |
| | |
ICATU HARTFORD | | | THESIS S.A.
ADMINISTRACAO | | |-------- (ARGENTINA)
DE BENEFICIOS LTDA-- | | |
(BRAZIL) | |
| |
----------------- |
| |
CAB |--------- U.O.R., S.A.
CORPORATION (ARGENTINA)
(BRITISH VIRGIN ISLANDS)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
NUTMEG INSURANCE COMPANY
(CONNECTICUT)
|
HARTFORD FIRE INSURANCE COMPANY
(CONNECTICUT)
|
- - --------------------------------------------------------------------------------------------------------------------------------|
| |
THE HARTFORD INTERNATIONAL |
|-----------------------------------------------------------------------FINANCIAL SERVICES GROUP, INC. |
| | | (DELAWARE) |
| | | ----------------------|----------------- |
| | | | | | | |
ZWOLSCHE | | ITT HARTFORD LONDON AND | HARTFORD |
ALGEMEENE N.V. | | INTERNATIONAL, LTD. EDINBURGH | EUROPE, INC. |
(NETHERLANDS) | | (U.K.) INSURANCE GROUP, LTD.| (DELAWARE) |
| | | (U.K.) | |
| | | | | |
| | | ------------- | |
| | | | | |
| ITT ASSURANCES HARTFORD INTERNATIONAL | LONDON AND --ITT ERCOS |
| S.A. INSURANCE CO., N.V. |--- EDINBURGH DE SEGUROS Y |
| ZWOLSCHE ALGEMEENE (FRANCE) (BELGIUM) | INSURANCE CO., LTD. REASEGUROS S.A.|
|----SCHADEVERZEKERING | | (U.K.) (SPAIN) |
--------| N.V.----------------------------------- | | | |
| | (NETHERLANDS) | | | | |
Z.A. | | | | EXCESS INSURANCE |
- - --VERZEKERINGEN | | | | COMPANY LTD. |
| N.V. | ZWOLSCHE ALGEMEENE | | | (U.K.) |
| (BELGIUM) |------HERVERZEKERING B.V. | | | |
| | -----| (NETHERLANDS) | | | LONDON AND |
| | | | | | |--- EDINBURGH LIFE |
| Z.A. LUX S.A. | | | | ASSURANCE CO., LTD. |
| (LUXEMBURG) | ZWOLSCHE ALGEMEENE | | | (U.K.) |
| |--LEVENS-VERZEKERING N.V.------------ | | | |
| | (NETHERLANDS) | | | | |
- - ----------------|------------------------------------|------------|------|--------------|---------------------------------------|
| | | | | | |
| -------- | | | | |
| | | | | | | |
| ZWOLSCHE | ZWOLSCHE ALGEMEENE ZWOLSCHE ALGEMEENE | | | |
| ALGEMEENE |-----HYPOTHEKEN N.V. BELEGGINGEN III B.V. | | | |
| EUROPA B.V. | (NETHERLANDS) (NETHERLANDS) | | | |
| (NETHERLANDS) | ---------- | | |
- - --------| | | | | |
| EXPLOITATIEMAAT- BELEGGINGSMAAT- | | |
|----- SCHAPPIJ SCHAPPIJ | | |
| BUIZERDLAAN B.V. BUIZERDLAAN B.V. | | |
| (NETHERLANDS) (NETHERLANDS) | | |
| | | |
| | | -----
| HOLLAND | |-------------------------- |
|---- BELEGGINGSGROEP B.V. | | | |
(NETHERLANDS) | |----------------- | |
| -------| | | |
| | | | | |
| | | | | |
F.A. KNIGHT | MACALISTER & LONDON AND | HARTFORD FIRE
& SON N.V. | DUNDAS, LTD. EDINBURGH | INTERNATIONAL
(BELGIUM) | (SCOTLAND) TRUSTEES, LTD. | SERVICIOS
| (U.K.) | (SPAIN)
------------------------- -----------
| | |
FENCOURT QUOTEL LONDON AND
PRINTERS, LTD. INSURANCE EDINBURGH
(U.K.) SYSTEMS, LTD. SERVICES, LTD.
(U.K.) (U.K.)
|
EUROSURE
INSURANCE
MARKETING, LTD.
(U.K.)
</TABLE>
