ITT HARTFORD LIFE & ANNUITY INSUR CO SEPARATE ACCOUNT THREE, 497, 1999-10-06

ITT HARTFORD LIFE & ANNUITY INSUR CO SEPARATE ACCOUNT THREE
497, 1999-10-06

Previous: CENTRAL EUROPEAN MEDIA ENTERPRISES LTD, SC 13D/A, 1999-10-06

Next: HARTFORD LIFE INSURANCE CO SEPARATE ACCOUNT THREE, 497, 1999-10-06

<PAGE>

SELECT DIMENSIONS ASSETMANAGER
SEPARATE ACCOUNT THREE
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102-5085
TELEPHONE: 1-800-862-6668 (CONTRACT OWNERS)
1-800-862-4397 (ACCOUNT EXECUTIVES) [LOGO]

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

This Prospectus describes information you should know before you purchase the
Select Dimensions AssetManager variable annuity. Please read it carefully.

Select Dimensions AssetManager variable annuity is a contract between you and
Hartford Life and Annuity Insurance Company where you agree to make at least one
Premium Payment to us and we agree to make a series of Annuity Payouts at a
later date. This Annuity is a flexible premium, tax-deferred, variable annuity
offered to both individuals and groups. It is:

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 Payouts.

x Variable, because the value of your Annuity will fluctuate with the
performance of the underlying funds.
------------------------------------------------------------------------------

At the time you purchase your Annuity, you allocate your Premium Payment to
"Sub-Accounts". These are subdivisions of our Separate Account, an account that
keeps your Annuity assets separate from our company assets. The Sub-Accounts
then purchase shares of mutual funds set up exclusively for variable annuity or
variable life insurance products. These funds are not the same mutual funds that
you buy through your stockbroker or through a retail mutual fund. They may have
similar investment strategies and the same portfolio managers as retail mutual
funds. This Annuity offers you Funds with investment strategies ranging from
conservative to aggressive and you may pick those Funds that meet your
investment goals and risk tolerance. The Sub-Accounts and the Funds are listed
below:

- - 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 (Effective September 7, 1999,
closed to new investments or transfers of existing Contract Values).

- - 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 OPPORTUNITIES SUB-ACCOUNT (formerly named as American Value
Sub-Account) which purchases shares of American Opportunities Portfolio
(formerly named as American Value Portfolio) of the Morgan Stanley Dean Witter
Select Dimensions Investment Series

- - MID-CAP EQUITY SUB-ACCOUNT (formerly named Mid-Cap Growth Sub-Account) which
purchases shares of Mid-Cap Equity Portfolio (formerly named 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 (Effective
September 7, 1999, closed to new investments or transfers of existing Contract
Values).

- - DEVELOPING GROWTH SUB-ACCOUNT which purchases shares of Developing Growth
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series
<PAGE>
- - EMERGING MARKETS SUB-ACCOUNT which purchases shares of Emerging Markets
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series (effective September 7, 1999, closed to new investments or transfers of
existing Contract Values).

- - 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.

- - EMERGING MARKETS EQUITY SUB-ACCOUNT which purchases shares of Emerging Markets
Equity Portfolio of the Morgan Stanley Dean Witter Universal Funds, Inc.

- - FIXED INCOME SUB-ACCOUNT which purchases shares of Fixed Income Portfolio of
the Morgan Stanley Dean Witter Universal Funds, Inc.

- - ACTIVE INTERNATIONAL ALLOCATION SUB-ACCOUNT which purchases shares of Active
International Allocation 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

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 ("SEC"). We have included the Table of
Contents for the Statement of Additional Information at the end of this
prospectus.

Although we file the prospectus and the Statement of Additional Information with
the SEC, the SEC doesn't approve or disapprove these securities or determine if
the information is truthful or complete. Anyone who represents that the SEC does
these things may be guilty of a criminal offense. This Prospectus and the
Statement of Additional Information can also be obtained from the SEC's website
(HTTP://WWW.SEC.GOV).

This Annuity IS NOT:

- A bank deposit or obligation

- Federally insured

- Endorsed by any bank or governmental agency

This Annuity may not be available for sale in all states.
- --------------------------------------------------------------------------------
PROSPECTUS DATED: OCTOBER 1, 1999
STATEMENT OF ADDITIONAL INFORMATION DATED: OCTOBER 1, 1999
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
- --------------------------------------------------------------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
----------------------------------------------------------------------------
DEFINITIONS 4
----------------------------------------------------------------------------
FEE TABLE 6
----------------------------------------------------------------------------
ACCUMULATION UNIT VALUES 10
----------------------------------------------------------------------------
HIGHLIGHTS 12
----------------------------------------------------------------------------
GENERAL CONTRACT INFORMATION 13
----------------------------------------------------------------------------
Hartford Life and Annuity Insurance Company 13
----------------------------------------------------------------------------
The Separate Account 13
----------------------------------------------------------------------------
The Funds 13
----------------------------------------------------------------------------
The Investment Advisers 15
----------------------------------------------------------------------------
PERFORMANCE RELATED INFORMATION 16
----------------------------------------------------------------------------
THE CONTRACT 17
----------------------------------------------------------------------------
Purchases and Contract Value 17
----------------------------------------------------------------------------
Charges and Fees 18
----------------------------------------------------------------------------
Death Benefit 19
----------------------------------------------------------------------------
Surrenders 21
----------------------------------------------------------------------------
ANNUITY PAYOUTS 23
----------------------------------------------------------------------------
OTHER PROGRAMS AVAILABLE 25
----------------------------------------------------------------------------
OTHER INFORMATION 25
----------------------------------------------------------------------------
Year 2000 26
----------------------------------------------------------------------------
Legal Matters and Experts 27
----------------------------------------------------------------------------
More Information 27
----------------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS 27
----------------------------------------------------------------------------
APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS 32
----------------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION 35
----------------------------------------------------------------------------
</TABLE>
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

DEFINITIONS

These terms are capitalized when used throughout this prospectus. Please refer
to these defined terms if you have any questions as you read your prospectus.

ACCOUNT: Any of the Sub-Accounts.

ACCUMULATION UNITS: If you allocate your Premium Payment to any of the
Sub-Accounts, we will convert those payments into Accumulation Units in the
selected Sub-Accounts. Accumulation Units are valued at the end of each
Valuation Day and are used to calculate the value of your Contract prior to
Annuitization.

ACCUMULATION UNIT VALUE: The daily price of Accumulation Units on any Valuation
Day.

ADMINISTRATIVE OFFICE OF THE COMPANY: Our location and overnight mailing address
is: 200 Hopmeadow Street, Simsbury, Connecticut 06089. Our standard mailing
address is: Investment Product Services, P.O. Box 5085, Hartford, CT 06102-5085.

ANNIVERSARY VALUE: The value equal to the Contract Value as of a Contract
Anniversary, increased by the dollar amount of any Premium Payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary.

ANNUAL MAINTENANCE FEE: An annual $30 charge deducted on a Contract Anniversary
or upon full Surrender if the Contract Value at either of those times is less
than $100,000. The charge is deducted proportionately from each Account in which
you are invested.

ANNUITANT: The person on whose life the Contract is based. The Annuitant may not
be changed after your Contract is issued.

ANNUITY CALCULATION DATE: The date we calculate the first Annuity Payout.

ANNUITY PAYOUT: The money we pay out after the Annuity Commencement Date for the
duration and frequency you select.

ANNUITY PAYOUT OPTION: Any of the options available for payout after the Annuity
Commencement Date or death of the Contract Owner or Annuitant.

ANNUITY UNIT: The unit of measure we use to calculate the value of your Annuity
Payouts under a variable dollar amount Annuity Payout Option.

ANNUITY UNIT VALUE: The daily price of Annuity Units on any Valuation Day.

BENEFICIARY: The person(s) entitled to receive a Death Benefit upon the death of
the Contract Owner or Annuitant.

CHARITABLE REMAINDER TRUST: An irrevocable trust, where an individual donor
makes a gift to the trust, and in return receives an income tax deduction. In
addition, the individual donor has the right to receive a percentage of the
trust earnings for a specified period of time.

CODE: The Internal Revenue Code of 1986, as amended.

COMMUTED VALUE: The present value of any remaining guaranteed Annuity Payouts.

CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before the Annuity Commencement Date. You must name
a Contingent Annuitant before the original Annuitant's death.

CONTRACT ANNIVERSARY: The anniversary of the date we issued your Contract. If
the Contract Anniversary falls on a Non-Valuation Day, then the Contract
Anniversary will be the next Valuation Day.

CONTRACT OWNER OR YOU: The owner or holder of this Annuity. We do not capitalize
"you" in the prospectus.

CONTRACT VALUE: The total value of the Accounts on any Valuation Day.

CONTRACT YEAR: Any 12 month period between Contract Anniversaries, beginning
with the date the Contract was issued.

DEATH BENEFIT: The amount payable after the Contract Owner or the Annuitant
dies.

DOLLAR COST AVERAGING: A program that allows you to systematically make
transfers between Accounts available in your Contract.

GENERAL ACCOUNT: This account holds our company assets and any assets not
allocated to a Separate Account. The assets in this account are available to the
creditors of Hartford.

HARTFORD, WE OR OUR: Hartford Life and Annuity Insurance Company. Only Hartford
is a capitalized term in the prospectus.

INTEREST ACCUMULATION VALUE: This is the amount which we use for the purpose of
calculating the optional interest accumulation death benefit.

JOINT ANNUITANT: The person on whose life Annuity Payouts are based if the
Annuitant dies after Annuitization. You may name a Joint Annuitant only if your
Annuity Payout Option provides for a survivor. The Joint Annuitant may not be
changed.

MAXIMUM ANNIVERSARY VALUE: This is the highest Anniversary Value prior to the
deceased's 81st birthday or the date of death, if earlier.

NET INVESTMENT FACTOR: This is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next, and is also used to calculate
your Annuity Payout amount.

NON-QUALIFIED CONTRACT: A Contract that is not defined as a tax-qualified
retirement plan by the Code.

NON-VALUATION DAY: Any day the New York Stock Exchange is not open for trading.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
- --------------------------------------------------------------------------------

PAYEE: The person or party you designate to receive Annuity Payouts.

PREMIUM PAYMENT: Money sent to us to be invested in your Annuity.

PREMIUM TAX: A tax charged by a state or municipality on Premium Payments.

QUALIFIED CONTRACT: A Contract that is defined as a tax-qualified retirement
plan in the Code.

REQUIRED MINIMUM DISTRIBUTION: A federal requirement that individuals age 70 1/2
and older must take a distribution from their tax-qualified retirement account
by December 31, each year. For employer sponsored Qualified Contracts, the
individual must begin taking distributions at the age of 70 1/2 or upon
retirement, whichever comes later.

SUB-ACCOUNT VALUE: The value on or before the Annuity Calculation Date, which is
determined on any day by multiplying the number of Accumulation Units by the
Accumulation Unit Value for that Sub-Account.

SURRENDER: A complete or partial withdrawal from your Contract.

SURRENDER VALUE: The amount we pay you if you terminate your Contract before the
Annuity Commencement Date. The Surrender Value is equal to the Contract Value
minus any applicable charges.

VALUATION DAY: Every day the New York Stock Exchange is open for trading. Values
of the Separate Account are determined as of the close of the New York Stock
Exchange, generally 4:00 p.m. Eastern Time.

VALUATION PERIOD: The time span between the close of trading on the New York
Stock Exchange from one Valuation Day to the next.
<PAGE>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

FEE TABLE
Contract Owner Transaction Expenses
(All Sub-Accounts)
<TABLE>
<CAPTION>
PRIOR TO
ANNUITIZATION
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
Sales Load Imposed on Purchases (as a percentage of Premium Payments) None
- ------------------------------------------------------------------------------------------------------------------------
Deferred Sales Charge (as a percentage of amounts Surrendered) None
- ------------------------------------------------------------------------------------------------------------------------
Annual Maintenance Fee (1) $ 30
- ------------------------------------------------------------------------------------------------------------------------
Separate Account Annual Expenses (as percentage of average Sub-Account Value)
Mortality and Expense Risk Charge 1.50 %
- ------------------------------------------------------------------------------------------------------------------------
Administration Fees 0.15 %
- ------------------------------------------------------------------------------------------------------------------------
Total Separate Account Annual Expenses 1.65 %
- ------------------------------------------------------------------------------------------------------------------------
Optional Charges
Optional Interest Accumulation Death Benefit (as a percentage of daily Sub-Account Value) 0.15 %
- ------------------------------------------------------------------------------------------------------------------------
Total Separate Account Annual Expenses with Optional Interest Accumulation Death Benefit 1.80 %
- ------------------------------------------------------------------------------------------------------------------------

<CAPTION>
AFTER

ANNUITIZATION

<S> <C>
- ---------------------------------------------------------------------------------------------------------
Sales Load Imposed on Purchases (as a percentage of Premium Payments) None

- ---------------------------------------------------------------------------------------------------------
Deferred Sales Charge (as a percentage of amounts Surrendered) None

- ---------------------------------------------------------------------------------------------------------
Annual Maintenance Fee (1) $ 30

- ---------------------------------------------------------------------------------------------------------
Separate Account Annual Expenses (as percentage of average Sub-Account Value)
Mortality and Expense Risk Charge 1.25 %

- ---------------------------------------------------------------------------------------------------------
Administration Fees 0.15 %

- ---------------------------------------------------------------------------------------------------------
Total Separate Account Annual Expenses 1.40 %

- ---------------------------------------------------------------------------------------------------------
Optional Charges
Optional Interest Accumulation Death Benefit (as a percentage of daily Sub-Account Value) 0.15 %

- ---------------------------------------------------------------------------------------------------------
Total Separate Account Annual Expenses with Optional Interest Accumulation Death Benefit 1.55 %

- ---------------------------------------------------------------------------------------------------------
</TABLE>

(1) An annual $30 charge deducted on a Contract Anniversary or upon full
Surrender if the Contract Value at either of those times is less than
$100,000. The charge is deducted proportionately from each Account in which
you are invested.

The purpose of the Fee Tables and Examples is to assist you in understanding
various costs and expenses that you will pay directly or indirectly. The Fee
Tables and Examples reflect expenses of the Separate Account and underlying
Funds. We will deduct any Premium Taxes that apply.

The Examples should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. The Annual
Maintenance Fee has been reflected in the Examples by a method intended to show
the "average" impact of the Annual Maintenance Fee on an investment in the
Separate Account. We do this by approximating an "average" 0.08% annual charge.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
- --------------------------------------------------------------------------------

Annual Fund Operating Expenses
(As a percentage of net assets)

<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
MANAGEMENT FEES OTHER EXPENSES
INCLUDING WAIVERS EXPENSES INCLUDING WAIVERS
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS
INVESTMENT SERIES:
Money Market Portfolio 0.50% 0.05% 0.55%
--------------------------------------------------------------------------------------------------------
North American Government Securities Portfolio 0.65% 0.50% 1.15%
--------------------------------------------------------------------------------------------------------
Diversified Income Portfolio 0.40% 0.09% 0.49%
--------------------------------------------------------------------------------------------------------
Balanced Growth Portfolio 0.62% 0.09% 0.71%
--------------------------------------------------------------------------------------------------------
Utilities Portfolio 0.65% 0.06% 0.71%
--------------------------------------------------------------------------------------------------------
Dividend Growth Portfolio 0.60% 0.03% 0.63%
--------------------------------------------------------------------------------------------------------
Value-Added Market Portfolio 0.50% 0.05% 0.55%
--------------------------------------------------------------------------------------------------------
Growth Portfolio 0.81% 0.25% 1.06%
--------------------------------------------------------------------------------------------------------
American Opportunities Portfolio 0.62% 0.04% 0.66%
--------------------------------------------------------------------------------------------------------
Mid-Cap Equity Portfolio (formerly Mid-Cap
Growth) (1) 0.75% 0.23% 0.98%
--------------------------------------------------------------------------------------------------------
Global Equity Portfolio 1.00% 0.10% 1.10%
--------------------------------------------------------------------------------------------------------
Developing Growth Portfolio 0.50% 0.09% 0.59%
--------------------------------------------------------------------------------------------------------
Emerging Markets Portfolio 1.25% 0.48% 1.73%
--------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS,
INC.:
High Yield Portfolio (2) 0.15% 0.65% 0.80%
--------------------------------------------------------------------------------------------------------
Mid-Cap Value Portfolio (2) 0.23% 0.82% 1.05%
--------------------------------------------------------------------------------------------------------
Emerging Markets Debt Portfolio (2) 0.27% 1.25% 1.52%
--------------------------------------------------------------------------------------------------------
Emerging Markets Equity Portfolio (2) 0.00% 1.95% 1.95%
--------------------------------------------------------------------------------------------------------
Fixed Income Portfolio (2) 0.06% 0.64% 0.70%
--------------------------------------------------------------------------------------------------------
Active International Allocation Portfolio (2) 0.53% 0.62% 1.15%
--------------------------------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST:
Strategic Stock Portfolio (3) 0.00% 0.65% 0.65%
--------------------------------------------------------------------------------------------------------
Enterprise Portfolio (3) 0.46% 0.14% 0.60%
--------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Mid-Cap Equity Portfolio commenced operations on January 21, 1997. The
Investment Manager has undertaken to assume all expenses of this Portfolio
(except for any brokerage fees) and to waive the compensation provided for
this Portfolio in its Management Agreement with the Fund until such time as
the Portfolio attains $50 million of net assets or until December 31, 1999,
whichever occurs first.

(2) With respect to the High Yield, Mid-Cap Value, Emerging Markets Debt,
Emerging Markets Equity, Active International Allocation, and Fixed Income
Portfolios, the investment advisers have voluntarily agreed to waive their
investment advisory fees and to reimburse certain expenses of the Portfolios
if such fees would cause their respective "Total Fund Operating Expenses" to
exceed certain limits. The annual expense ratios for the Active
International Allocation Portfolio have been estimated. 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
OTHER OPERATING
PORTFOLIO MANAGEMENT FEES EXPENSES EXPENSES
<S> <C> <C> <C>
-----------------------------------------------------------------------
High Yield 0.50% 0.65% 1.15%
-----------------------------------------------------------------------
Mid-Cap Value 0.75% 0.82% 1.57%
-----------------------------------------------------------------------
Emerging Markets Debt 0.80% 1.25% 2.05%
-----------------------------------------------------------------------
Emerging Markets Equity 1.25% 2.20% 3.45%
-----------------------------------------------------------------------
Fixed Income 0.40% 0.64% 1.04%
-----------------------------------------------------------------------
Active International Allocation 0.80% 0.62% 1.42%
-----------------------------------------------------------------------
</TABLE>

<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

(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 the aforementioned
reductions, it is estimated that "Management Fees", "Other Expenses" and
"Total Fund Operating Expenses" for the Portfolios would have been as
follows:

EXAMPLE

The following Example assumes that the Optional Interest Accumulation Death
Benefit was elected:
<TABLE>
<CAPTION>
If you Surrender your Contract If you annuitize your Contract If you do not Surrender your
at the end of the applicable at the end of the applicable Contract, you would pay the
time period you would pay the time period you would pay the following expenses on a $1,000
following expenses on a $1,000 following expenses on a $1,000 investment, assuming a 5%
investment, assuming a 5% investment, assuming a 5% annual return on assets:
annual return on assets: annual return on assets:

<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market $ 25 $ 76 $ 130 $ 277 $ 22 $ 68 $ 116 $ 251 $ 25 $ 76 $ 130 $ 277
---------------------------------------------------------------------------------------------------------------------------------
North American Government
Securities $ 31 $ 94 $ 160 $ 337 $ 28 $ 86 $ 147 $ 311 $ 31 $ 94 $ 160 $ 337
---------------------------------------------------------------------------------------------------------------------------------
Diversified Income $ 24 $ 74 $ 127 $ 271 $ 21 $ 66 $ 113 $ 244 $ 24 $ 74 $ 127 $ 271
---------------------------------------------------------------------------------------------------------------------------------
Balanced Growth $ 26 $ 81 $ 138 $ 293 $ 23 $ 73 $ 125 $ 267 $ 26 $ 81 $ 138 $ 293
---------------------------------------------------------------------------------------------------------------------------------
Utilities $ 26 $ 81 $ 138 $ 293 $ 23 $ 73 $ 125 $ 267 $ 26 $ 81 $ 138 $ 293
---------------------------------------------------------------------------------------------------------------------------------
Dividend Growth $ 26 $ 78 $ 134 $ 285 $ 22 $ 70 $ 120 $ 259 $ 26 $ 78 $ 134 $ 285
---------------------------------------------------------------------------------------------------------------------------------
Value-Added Market $ 25 $ 76 $ 130 $ 277 $ 22 $ 68 $ 116 $ 251 $ 25 $ 76 $ 130 $ 277
---------------------------------------------------------------------------------------------------------------------------------
Growth $ 30 $ 92 $ 156 $ 328 $ 27 $ 83 $ 143 $ 303 $ 30 $ 92 $ 156 $ 328
---------------------------------------------------------------------------------------------------------------------------------
American Value $ 26 $ 79 $ 136 $ 288 $ 23 $ 71 $ 122 $ 262 $ 26 $ 79 $ 136 $ 288
---------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity $ 29 $ 89 $ 152 $ 320 $ 26 $ 81 $ 138 $ 295 $ 29 $ 89 $ 152 $ 320
---------------------------------------------------------------------------------------------------------------------------------
Global Equity $ 30 $ 93 $ 158 $ 332 $ 27 $ 85 $ 145 $ 307 $ 30 $ 93 $ 158 $ 332
---------------------------------------------------------------------------------------------------------------------------------
Developing Growth $ 25 $ 77 $ 132 $ 281 $ 22 $ 69 $ 118 $ 255 $ 25 $ 77 $ 132 $ 281
---------------------------------------------------------------------------------------------------------------------------------
Emerging Markets $ 37 $ 112 $ 189 $ 391 $ 34 $ 104 $ 176 $ 367 $ 37 $ 112 $ 189 $ 391
---------------------------------------------------------------------------------------------------------------------------------
High Yield $ 27 $ 84 $ 143 $ 302 $ 24 $ 75 $ 129 $ 276 $ 27 $ 84 $ 143 $ 302
---------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value $ 30 $ 91 $ 155 $ 327 $ 27 $ 83 $ 142 $ 302 $ 30 $ 91 $ 155 $ 327
---------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt $ 35 $ 106 $ 179 $ 371 $ 31 $ 97 $ 166 $ 347 $ 35 $ 106 $ 179 $ 371
---------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity $ 39 $ 118 $ 200 $ 410 $ 36 $ 110 $ 187 $ 387 $ 39 $ 118 $ 200 $ 410
---------------------------------------------------------------------------------------------------------------------------------
Fixed Income $ 26 $ 81 $ 138 $ 292 $ 23 $ 72 $ 124 $ 266 $ 26 $ 81 $ 138 $ 292
---------------------------------------------------------------------------------------------------------------------------------
Active International
Allocation $ 31 $ 94 $ 160 $ 337 $ 28 $ 86 $ 147 $ 311 $ 31 $ 94 $ 160 $ 337
---------------------------------------------------------------------------------------------------------------------------------
Strategic Stock $ 26 $ 79 $ 135 $ 287 $ 23 $ 71 $ 122 $ 261 $ 26 $ 79 $ 135 $ 287
---------------------------------------------------------------------------------------------------------------------------------
Enterprise $ 25 $ 78 $ 132 $ 282 $ 22 $ 69 $ 119 $ 256 $ 25 $ 78 $ 132 $ 282
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
- --------------------------------------------------------------------------------

EXAMPLE

The following Example assumes that the Optional Interest Accumulation Death
Benefit was not elected:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
If you Surrender your Contract If you annuitize your Contract If you do not Surrender your
at the end of the applicable at the end of the applicable Contract, you would pay the
time period you would pay the time period you would pay the following expenses on a $1,000
following expenses on a $1,000 following expenses on a $1,000 investment, assuming a 5%
investment, assuming a 5% investment, assuming a 5% annual return on assets:
annual return on assets: annual return on assets:

SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
Money Market $ 23 $ 71 $ 122 $ 262 $ 20 $ 63 $ 109 $ 235 $ 23 $ 71 $ 122 $ 262
---------------------------------------------------------------------------------------------------------------------------------
North American Government
Securities $ 29 $ 90 $ 153 $ 322 $ 26 $ 81 $ 139 $ 297 $ 29 $ 90 $ 153 $ 322
---------------------------------------------------------------------------------------------------------------------------------
Diversified Income $ 23 $ 70 $ 119 $ 255 $ 19 $ 61 $ 105 $ 228 $ 23 $ 70 $ 119 $ 255
---------------------------------------------------------------------------------------------------------------------------------
Balanced Growth $ 25 $ 76 $ 130 $ 278 $ 22 $ 68 $ 117 $ 252 $ 25 $ 76 $ 130 $ 278
---------------------------------------------------------------------------------------------------------------------------------
Utilities $ 25 $ 76 $ 130 $ 278 $ 22 $ 68 $ 117 $ 252 $ 25 $ 76 $ 130 $ 278
---------------------------------------------------------------------------------------------------------------------------------
Dividend Growth $ 24 $ 74 $ 126 $ 270 $ 21 $ 65 $ 113 $ 243 $ 24 $ 74 $ 126 $ 270
---------------------------------------------------------------------------------------------------------------------------------
Value-Added Market $ 23 $ 71 $ 122 $ 262 $ 20 $ 63 $ 109 $ 235 $ 23 $ 71 $ 122 $ 262
---------------------------------------------------------------------------------------------------------------------------------
Growth $ 28 $ 87 $ 148 $ 313 $ 25 $ 79 $ 135 $ 288 $ 28 $ 87 $ 148 $ 313
---------------------------------------------------------------------------------------------------------------------------------
American Opportunities $ 24 $ 75 $ 128 $ 273 $ 21 $ 66 $ 114 $ 246 $ 24 $ 75 $ 128 $ 273
---------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity $ 18 $ 54 $ 94 $ 203 $ 14 $ 46 $ 80 $ 175 $ 18 $ 54 $ 94 $ 203
---------------------------------------------------------------------------------------------------------------------------------
Global Equity $ 29 $ 88 $ 150 $ 317 $ 26 $ 80 $ 137 $ 292 $ 29 $ 88 $ 150 $ 317
---------------------------------------------------------------------------------------------------------------------------------
Developing Growth $ 24 $ 73 $ 124 $ 266 $ 20 $ 64 $ 111 $ 239 $ 24 $ 73 $ 124 $ 266
---------------------------------------------------------------------------------------------------------------------------------
Emerging Markets $ 35 $ 107 $ 182 $ 377 $ 32 $ 99 $ 169 $ 353 $ 35 $ 107 $ 182 $ 377
---------------------------------------------------------------------------------------------------------------------------------
High Yield $ 26 $ 79 $ 135 $ 287 $ 23 $ 71 $ 122 $ 261 $ 26 $ 79 $ 135 $ 287
---------------------------------------------------------------------------------------------------------------------------------
Mid Cap Value $ 28 $ 87 $ 148 $ 312 $ 25 $ 78 $ 134 $ 287 $ 28 $ 87 $ 148 $ 312
---------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt $ 33 $ 101 $ 171 $ 357 $ 30 $ 93 $ 158 $ 333 $ 33 $ 101 $ 171 $ 357
---------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity $ 38 $ 114 $ 192 $ 397 $ 34 $ 106 $ 179 $ 373 $ 38 $ 114 $ 192 $ 397
---------------------------------------------------------------------------------------------------------------------------------
Fixed Income $ 25 $ 76 $ 130 $ 277 $ 22 $ 68 $ 116 $ 251 $ 25 $ 76 $ 130 $ 277
---------------------------------------------------------------------------------------------------------------------------------
Active International
Allocation $ 29 $ 90 $ 153 $ 322 $ 26 $ 81 $ 139 $ 297 $ 29 $ 90 $ 153 $ 322
---------------------------------------------------------------------------------------------------------------------------------
Strategic Stock $ 24 $ 74 $ 127 $ 272 $ 21 $ 66 $ 114 $ 245 $ 24 $ 74 $ 127 $ 272
---------------------------------------------------------------------------------------------------------------------------------
Enterprise $ 24 $ 73 $ 125 $ 267 $ 21 $ 65 $ 111 $ 240 $ 24 $ 73 $ 125 $ 267
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

ACCUMULATION UNIT VALUES

(For an Accumulation Unit outstanding throughout the period)

The following information has been derived from the audited financial statements
of the Separate Account, which have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and should be read in conjunction with those statements which are
included in the Statement of Additional Information, which is incorporated by
reference in this Prospectus. The Emerging Markets Equity, Fixed Income, and
Active International Allocation Sub-Accounts are new Sub-Accounts and are not
shown below.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
<S> <C>
- -------------------------------------------------------------------------------------------------------------
MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.129
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 149
- -------------------------------------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT SECURITIES SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.072
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 16
- -------------------------------------------------------------------------------------------------------------
DIVERSIFIED INCOME SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.978
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 59
- -------------------------------------------------------------------------------------------------------------
BALANCED GROWTH SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.800
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 38
- -------------------------------------------------------------------------------------------------------------
UTILITIES SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.264
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 26
- -------------------------------------------------------------------------------------------------------------
DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.879
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 90
- -------------------------------------------------------------------------------------------------------------
VALUE-ADDED MARKET SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.761
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of (in thousands) 18
- -------------------------------------------------------------------------------------------------------------
GROWTH SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.831
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 7
- -------------------------------------------------------------------------------------------------------------
<PAGE>
</TABLE>

HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C>
AMERICAN OPPORTUNITIES SUB-ACCOUNT (FORMERLY AMERICAN VALUE SUB-ACCOUNT)
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.159
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 70
- -------------------------------------------------------------------------------------------------------------
MID-CAP EQUITY SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.477
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 1
- -------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.474
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 7
- -------------------------------------------------------------------------------------------------------------
DEVELOPING GROWTH SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.865
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 3
- -------------------------------------------------------------------------------------------------------------
EMERGING MARKETS SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.183
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 1
- -------------------------------------------------------------------------------------------------------------
HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.997
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 30
- -------------------------------------------------------------------------------------------------------------
MID CAP VALUE SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.158
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 5
- -------------------------------------------------------------------------------------------------------------
EMERGING MARKETS DEBT SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 8.390
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 1
- -------------------------------------------------------------------------------------------------------------
STRATEGIC STOCK SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.669
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 2
- -------------------------------------------------------------------------------------------------------------
ENTERPRISE SUB-ACCOUNT
Accumulation Unit Value at beginning of period $10.000
- -------------------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.162
- -------------------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in thousands) 19
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

HIGHLIGHTS

HOW DO I PURCHASE THIS ANNUITY?

You must complete our application or order request and submit it to us for
approval with your first Premium Payment. Your first Premium Payment must be at
least $10,000 and subsequent Premium Payments must be at least $500, unless you
take advantage of Automatic Additions or are part of certain retirement plans.

- For a limited time, usually within ten days after you receive your Contract,
you may cancel your Annuity. You may bear the investment risk for your
Premium Payment prior to our receipt of your request for cancellation.

WHAT TYPE OF SALES CHARGE WILL I PAY?

You don't pay a sales charge when you purchase your Annuity.

IS THERE AN ANNUAL MAINTENANCE FEE?

We deduct this $30.00 fee each year on your Contract Anniversary or when you
fully Surrender your Annuity, if, on either of those dates, the value of your
Annuity is less than $100,000.

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:

Before the Annuity Commencement Date, a mortality and expense risk charge is
subtracted daily and is equal to an annual charge of 1.50% of your Contract
Value invested in the Funds. After the Annuity Commencement Date, the mortality
and expense risk charge drops to 1.25% of your Contract Value invested in the
Funds.

The second type of charge is the fee you pay for the Funds.

Currently, Fund charges range from 0.49% to 1.73% annually of the average daily
value of the amount you have invested in the Funds. See the Annual Fund
Operating Expenses table for more complete information and the Funds'
prospectuses accompanying this prospectus.

The third type of charge is the administration fee which is subtracted daily and
is equal to an annual rate of 0.15% of Sub-Account Value during both the
accumulation and annuity phases of the Contract.

If you elect the Optional Death Benefit, we will subtract an additional charge
on a daily basis which is equal to an annual charge of .15% of your Contract
Value invested in the Funds.

CAN I TAKE OUT ANY OF MY MONEY?

You may Surrender all or part of the amounts you have invested at any time
before we start making Annuity Payouts, or after Annuity Payouts begin under the
Payment for a Period Certain Annuity Payout Option.

- - You may have to pay income tax on the money you take out and, if you Surrender
before you are age 59 1/2, you may have to pay an income tax penalty.

WILL HARTFORD PAY A DEATH BENEFIT?

Your Contract has a Death Benefit which is equal to the amount payable under the
standard Death Benefit or the Interest Accumulation Death Benefit ("Optional
Death Benefit"). We pay the Death Benefit if the Contract Owner, joint owner or
Annuitant, die before we begin to make annuity payments. The Death Benefit
amount will remain invested in the Sub-Accounts according to your last
instructions and will fluctuate with the performance of the underlying Funds. We
calculate the Death Benefit as of the date we receive a certified death
certificate or other legal document acceptable to us.

If you do not elect the Optional Death Benefit, the Death Benefit will be the
greater of:

- - The total Premium Payments you have made to us minus any amounts you have
Surrendered;

- - The Contract Value of your annuity, or

- - Your Maximum Anniversary Value, which is described below.

The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, Premium Payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death, whichever is earlier. The Anniversary
Value is equal to the Contract Value as of a Contract Anniversary, increased by
the dollar amount of any Premium Payments made since that anniversary and
reduced by the dollar amount of any partial Surrenders since that anniversary.
The Maximum Anniversary Value is equal to the greatest Anniversary Value
attained from this series of calculations.

If you elect the Optional Death Benefit, the Death Benefit will be the greater
of:

- - the total Premium Payments you have made to us minus any Surrenders:

- - the Contract Value of your annuity;

- - your Maximum Anniversary Value or

- - your Interest Accumulation Value.

Assuming you have not taken any Surrenders, your Interest Accumulation Value is
calculated by accumulating interest on your Premium Payments at a rate of 5% per
year up to the deceased's 81(st) birthday or date of death, whichever is
earlier. If you have taken any Surrenders, the 5% will be accumulated on your
Premium Payments, but we will make an adjustment for any of the Surrenders. This
adjustment will reduce the Death Benefit under the Optional Death Benefit
proportionally for the Surrenders. The Death Benefit under the Optional Death
Benefit is limited to a maximum of 200% of Premium Payments, less
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
proportional adjustments for any Surrenders. If you elect the Optional Death
Benefit, we will subtract an additional charge on a daily basis which is equal
to an annual charge of .15% of your Contract Value invested in the Funds.

The Optional Death Benefit may not be available if the Contract Owner or
Annuitant is age 75 or older. The Optional Death Benefit is not available in
Washington.

If you purchase your Contract after September 30, 1999, you must elect the
Optional Death Benefit at the time you send us your initial Premium Payment.

WHAT ANNUITY PAYOUT OPTIONS ARE AVAILABLE?

When it comes time for us to make payouts, you may choose one of the following
Annuity Payout Options: Option 1 -- Life Annuity, Option 2 -- Life Annuity with
a Cash Refund, Option 3 -- Life Annuity with Payments for a Period Certain,
Option 4 -- Joint and Last Survivor Life Annuity, Option 5 -- Joint and Last
Survivor Life Annuity with Payments for Period Certain and Option 6: Payments
For a Period Certain. We may make other Annuity Payout Options available at any
time.

You must begin to take payouts by the Annuitant's 90th birthday or the end of
the 10th Contract Year, whichever is 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 Payout Option you want before
that time, we will make payments under Option 3 -- Life Annuity with Payments
for a ten year Period Certain.

GENERAL CONTRACT INFORMATION
- --------------------------------------------------------------------------------

HARTFORD LIFE AND ANNUITY INSURANCE COMPANY

Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut. Our offices are
located in Simsbury, Connecticut; however, our mailing address is P.O. Box 2999,
Hartford, CT 06104-2999. We are ultimately controlled by The Hartford Financial
Services Group, Inc., one of the largest financial service providers in the
United States.

HARTFORD'S RATINGS

<TABLE>
<CAPTION>
EFFECTIVE DATE
RATING AGENCY OF RATING RATING BASIS OF RATING
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
A.M. Best and Company, Inc. 1/1/99 A+ Financial performance
- -------------------------------------------------------------------------------------------------
Standard & Poor's 5/3/99 AA Insurer financial 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 SEC of the management or the investment practices of the Separate Account
or Hartford. The Separate Account meets the definition of "Separate Account"
under federal securities law. This Separate Account holds only assets for
variable annuity contracts. The Separate Account:

- - Holds assets for your benefit and the benefit of other Contract Owners, and
the persons entitled to the payouts described in the Contract.

- - Is not subject to the liabilities arising out of any other business Hartford
may conduct.

- - Is not affected by the rate of return of Hartford's General Account or by the
investment performance of any of Hartford's other Separate Accounts.

- - May be subject to liabilities from a Sub-Account of the Separate Account that
holds assets of other variable annuity contracts offered by the Separate
Account, which are not described in this Prospectus.

- - Is credited with income and gains, and takes losses, whether or not realized,
from the assets it holds.

We do not guarantee the investment results of the Separate Account. There is no
assurance that the value of your Annuity will equal the total of the payments
you make to us.

THE FUNDS

The underlying investment for the Contracts are shares of the portfolios of
Morgan Stanley Dean Witter Select Dimensions Investment Series, Morgan Stanley
Dean Witter Universal Funds, Inc., and Van Kampen Life Investment Trust, all
open-ended management investment companies. The underlying portfolios
corresponding to each Sub-Account and their investment objectives are described
below. Hartford reserves the right, subject to compliance with the law, to offer
additional 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
<PAGE>
14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 (EFFECTIVE SEPTEMBER 7, 1999,
CLOSED TO NEW INVESTMENTS OR TRANSFERS OF EXISTING CONTRACT VALUES). -- 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 capital appreciation.

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 OPPORTUNITIES PORTFOLIO (FORMERLY NAMED AS 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 EQUITY PORTFOLIO (FORMERLY NAMED 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.

EMERGING MARKETS PORTFOLIO (EFFECTIVE SEPTEMBER 7, 1999, CLOSED TO NEW
INVESTMENTS OR TRANSFERS OF EXISTING CONTRACT VALUES). -- 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.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
- --------------------------------------------------------------------------------

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.

EMERGING MARKETS EQUITY PORTFOLIO -- Seeks long-term capital appreciation by
investing primarily in equity securities of issuers in emerging market
countries.

FIXED INCOME PORTFOLIO -- Seeks above-average total return over a market cycle
of three to five years by investing primarily in a diversified portfolio of
fixed income securities.

ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO -- Seeks long-term capital
appreciation by investing primarily in accordance with country and sector
weightings determined by the investment adviser in equity securities of non-U.S.
issuers which, in the aggregate, replicate broad-market indices.

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 Equity 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, Emerging Markets Equity Portfolio and
Active International Allocation Portfolio. As the investment adviser, MSDW
Investment Managment, 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, Fixed Income 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, 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 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 Funds may be sold to our other
separate accounts and our insurance company affiliates or other unaffiliated
insurance companies to serve as the
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
underlying investment for both variable annuity contracts and variable life
insurance policies, a practice known as "mixed and shared funding." As a result,
there is a possibility that a material conflict may arise between the interests
of Contract Owners, and of owners of other contracts whose contract values are
allocated to one or more of these other separate accounts investing in any one
of the Funds. In the event of any such material conflicts, we will consider what
action may be appropriate, including removing the Fund from the Separate Account
or replacing the Fund with another underlying fund. There are certain risks
associated with mixed and shared funding, as disclosed in the Funds' prospectus.

VOTING RIGHTS -- We are the legal owners of all Fund shares held in the Separate
Account and we have the right to vote at the Fund's shareholder meetings. To the
extent required by federal securities laws or regulations, we will:

- - Notify you of any Fund shareholders' meeting if the shares held for your
Contract may be voted.

- - Send proxy materials and a form of instructions that you can use to tell us
how to vote the Fund shares held for your Contract.

- - Arrange for the handling and tallying of proxies received from Contract
Owners.

- - Vote all Fund shares attributable to your Contract according to instructions
received from you, and

- - Vote all Fund shares for which no voting instructions are received in the same
proportion as shares for which instructions have been received.

If any federal securities laws or regulations, or their present interpretation,
change to permit us to vote Fund shares on our own, we may decide to do so. You
may attend any Shareholder Meeting at which shares held for your Contract may be
voted. After we begin to make Annuity Payouts to you, the number of votes you
have will decrease.

SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF FUNDS -- We reserve the right, subject
to any applicable law, to make certain changes to the Funds offered under Your
Contract. We may, in our sole discretion, establish new Funds. New Funds will be
made available to existing Contract Owners as we determine appropriate. We may
also close one or more Funds to additional Payments or transfers from existing
Sub-Accounts.

We reserve the right to eliminate the shares of any of the Funds for any reason
and to substitute shares of another registered investment company for the shares
of any Fund already purchased or to be purchased in the future by the Separate
Account. To the extent required by the Investment Company Act of 1940 (the "1940
Act"), substitutions of shares attributable to your interest in a Fund will not
be made until we have the approval of the Commission and we have notified you of
the change.

In the event of any substitution or change, we may, by appropriate endorsement,
make any changes in the Contract necessary or appropriate to reflect the
substitution or change. If we decide that it is in the best interest of
Contracts Owners, the Separate Account may be operated as a management company
under the 1940 Act or any other form permitted by law, may be de-registered
under the 1940 Act in the event such registration is no longer required, or may
be combined with one or more other Separate Accounts.

PERFORMANCE RELATED INFORMATION
- --------------------------------------------------------------------------------

The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.

When a Sub-Account advertises its STANDARDIZED TOTAL RETURN, it will usually be
calculated since the inception of the Separate Account 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.

In addition to the standardized total return, the Sub-Account may advertise a
NON-STANDARDIZED TOTAL RETURN that predates the inception of the Separate
Account. 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
Annual Maintenance Fee is not deducted. Therefore, non-standardized total return
for a Sub-Account is higher than standardized total return for a Sub-Account.
These non-standardized returns must be accompanied by standardized total
returns.

If applicable, the Sub-Accounts may advertise YIELD IN ADDITION TO TOTAL RETURN.
The yield will be computed in the following manner: The net investment income
per unit earned during a recent one month period is divided by the unit value on
the last day of the period. This figure includes the recurring charges at the
Separate Account level including the Annual Maintenance Fee.

The Money Market Fund Sub-Account may advertise YIELD AND EFFECTIVE YIELD. The
yield of a Sub-Account is based upon the income earned by the Sub-Account over a
seven-day period and then annualized, i.e. the income earned in the period is
assumed to be earned every seven days over a 52-week period and stated as a
percentage of the investment. Effective yield is calculated similarly but when
annualized, the income earned by the investment is assumed to be reinvested in
Sub-Account units and thus
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
- --------------------------------------------------------------------------------
compounded in the course of a 52-week period. Yield and effective yield include
the recurring charges at the Separate Account level including the Annual
Maintenance Fee.

The Separate Account may also disclose YIELD for periods prior to the date the
Separate Account commenced operations. For these periods, performance
information for the Sub-Accounts will be calculated based on the performance of
the underlying Funds and the assumption that the Sub-Accounts were in existence
for the same periods as those of the underlying Funds, with a level of charges
equal to those currently assessed against the Sub-Accounts. No yield disclosure
for periods prior to the date of the Separate Account will be used without the
yield disclosure for periods as of the inception of the Separate Account.

We may provide information on various topics to Contract Owners and prospective
Contract Owners in advertising, sales literature or other materials. These
topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as systematic investing, Dollar Cost Averaging
and asset allocation), the advantages and disadvantages of investing in
tax-deferred and taxable instruments, customer profiles and hypothetical
purchase scenarios, financial management and tax and retirement planning, and
other investment alternatives, including comparisons between the Contract and
the characteristics of and market for such alternatives.

THE CONTRACT
- --------------------------------------------------------------------------------

PURCHASES AND CONTRACT VALUE

WHAT TYPES OF CONTRACTS ARE AVAILABLE?

The Contract is an individual or group tax-deferred variable annuity contract.
It is designed for retirement planning purposes and may be purchased by any
individual, group or trust, including:

- - Any trustee or custodian for a retirement plan qualified under Sections 401(a)
or 403(a) of the Code;

- - Annuity purchase plans adopted by public school systems and certain tax-exempt
organizations according to Section 403(b) of the Code;

- - Individual Retirement Annuities adopted according to Section 408 of the Code;

- - Employee pension plans established for employees by a state, a political
subdivision of a state, or an agency of either a state or a political
subdivision of a state, and

- - Certain eligible deferred compensation plans as defined in Section 457 of the
Code.

The examples above represent Qualified Contracts, as defined by the Code. In
addition, individuals and trusts can also purchase Contracts that are not part
of a tax qualified retirement plan. These are known as Non-Qualified Contracts.

HOW DO I PURCHASE A CONTRACT?

You may purchase a Contract by completing and submitting an application or an
order request along with an initial Premium Payment. For most Contracts, the
minimum Premium Payment is $10,000. For additional Premium Payments, the minimum
Premium Payment is $500. Under certain situations, we may allow smaller Premium
Payments, for example, if you enroll in Automatic Additions or are part of
certain tax qualified retirement plans. Prior approval is required for Premium
Payments of $1,000,000 or more.

You and your Annuitant must not be older than age 90 on the date that your
Contract is issued. You must be of legal age in the state where the Contract is
being purchased or a guardian must act on your behalf.

HOW ARE PREMIUM PAYMENTS APPLIED TO MY CONTRACT?

Your initial Premium Payment will be invested within two Valuation Days of our
receipt of a properly completed application or an order request and the Premium
Payment. If we receive your subsequent Premium Payment before the close of the
New York Stock Exchange, it will be priced on the same Valuation Day. If we
receive your Premium Payment after the close of the New York Stock Exchange, it
will be processed on the next Valuation Day. If we receive your Premium Payment
on a Non-Valuation Day, the amount will be invested on the next Valuation Day.
Unless we receive new instructions, we will invest the Premium Payment based on
your last allocation instructions. We will send you a confirmation when we
invest your Premium Payment.

If the request or other information accompanying the Premium Payment is
incomplete when received, we will hold the money in a non-interest bearing
account for up to five Valuation Days while we try to obtain complete
information. If we cannot obtain the information within five Valuation Days, we
will either return the Premium Payment and explain why the Premium Payment could
not be processed or keep the Premium Payment if you authorize us to keep it
until your provide the necessary information.

CAN I CANCEL MY CONTRACT AFTER I PURCHASE IT?

We want you to be satisfied with the Contract you have purchased. We urge you to
closely examine its provisions. If for any reason you are not satisfied with
your Contract, simply return it within ten days after you receive it with a
written request for cancellation that indicates your tax-withholding
instructions. In some states, you may be allowed more time to cancel your
Contract. We may require additional information, including a signature
guarantee, before we can cancel your Contract.

You bear the investment risk from the time the Contract is issued until we
receive your complete cancellation request.
<PAGE>
18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

The amount we pay you upon cancellation depends on the requirements of the state
where you purchased your Contract, the method of purchase, the type of Contract
you purchased and your age.

HOW IS THE VALUE OF MY CONTRACT CALCULATED BEFORE THE ANNUITY COMMENCEMENT DATE?

The Contract Value is the sum of all Accounts. There are two things that affect
your Sub-Account value: (1) the number of Accumulation Units and (2) the
Accumulation Unit Value. The Sub-Account value is determined by multiplying the
number of Accumulation Units by the Accumulation Unit Value. Therefore, on any
Valuation Day your Contract Value reflects the investment performance of the
Sub-Accounts and will fluctuate with the performance of the underlying Funds.

When Premium Payments are credited to your Sub-Accounts, they are converted into
Accumulation Units by dividing the amount of your Premium Payments, minus any
Premium Taxes, by the Accumulation Unit Value for that day. The more Premium
Payments you put into your Contract, the more Accumulation Units you will own.
You decrease the number of Accumulation Units you have by requesting Surrenders,
transferring money out of an Account, settling a Death Benefit claim or by
annuitizing your Contract.

To determine the current Accumulation Unit Value, we take the prior Valuation
Day's Accumulation Unit Value and multiply it by the Net Investment Factor for
the current Valuation Day.

The Net Investment Factor is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next. The Net Investment Factor for
each Sub-Account equals:

- - The net asset value per share of each Fund held in the Sub-Account at the end
of the current Valuation Day divided by

- - The net asset value per share of each Fund held in the Sub-Account at the end
of the prior Valuation Day; minus

- - The daily mortality and expense risk charge adjusted for the number of days in
the period, and any other applicable charge, including any Option Death
Benefit Charge.

We will send you a statement in each calendar quarter, which tells you how many
Accumulation Units you have, their value and your total Contract Value.

CAN I TRANSFER FROM ONE SUB-ACCOUNT TO ANOTHER?

TRANSFERS BETWEEN SUB-ACCOUNTS -- You may transfer from one Sub-Account to
another before and after the Annuity Commencement Date at no extra charge. Your
transfer request will be processed on the day that it is received as long as it
is received on a Valuation Day before the close of the New York Stock Exchange.
Otherwise, your request will be processed on the following Valuation Day. We
will send you a confirmation when we process your transfer. You are responsible
for verifying transfer confirmations and promptly advising us of any errors
within 30 days of receiving the confirmation.

SUB-ACCOUNT TRANSFER RESTRICTIONS -- We reserve the right to limit the number of
transfers to 12 per Contract Year, with no transfers occurring on consecutive
Valuation Days. We also have the right to restrict transfers if we believe that
the transfers could have an adverse effect on other Contract Owners. In all
states except New York, Florida, Maryland and Oregon, we may:

- - Require a minimum time period between each transfer,

- - Limit the dollar amount that may be transferred on any one Valuation Day, and

- - Not accept transfer requests from an agent acting under a power of attorney
for more than one Contract Owner.

We also have a restriction in place that involves individuals who act under a
power of attorney for multiple Contract Owners. If the value of the Contract
Owner's Accounts add up to more than $2 million, we will not accept transfer
instructions from the power of attorney unless the power of attorney has entered
into a Third Party Transfer Services Agreement with us.

Some states may have different restrictions.

TELEPHONE TRANSFERS -- In most states, you can make transfers by calling us at
(800) 862-6668. Hartford, our agents or our affiliates are NOT responsible for
losses resulting from telephone requests that we believe are genuine. We will
use reasonable procedures to confirm that telephone instructions are genuine,
including requiring that callers provide certain identification information and
recording all telephone transfer instructions. We may suspend, modify, or
terminate telephone transfer privileges at any time.

POWER OF ATTORNEY -- You may authorize another person to make transfers on your
behalf by submitting a completed Power of Attorney form. Once we have the
completed form on file, we will accept transfer instructions from your
designated third party, subject to any transfer restrictions in place, until we
receive new instructions in writing from you. You will not be able to make
transfers or other changes to your Contract if you have authorized someone else
to act under a Power of Attorney.

CHARGES AND FEES

There are 5 charges and fees associated with the Contract and the Optional Death
Benefit charge:

1. MORTALITY AND EXPENSE RISK CHARGE

For assuming risks under the Contract before the Annuity Commencement Date, we
will deduct a daily charge at the annual rate of 1.50 % of Contract Value
(estimated at .95% for mortality and .55% for expenses). After the Annuity
Commencement Date, we will deduct a daily charge totaling 1.25% per year of
Contract Value (estimated at .90% for mortality and .35% for expense).

- - MORTALITY RISK -- There are two types of mortality risks that we assume, those
made while your Premium Payments are accumulating and those made once Annuity
Payouts have begun.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
- --------------------------------------------------------------------------------

During the period your Premium Payments are accumulating, we are required to
cover any difference between the Death Benefit paid and the Surrender Value.
These differences may occur during periods of declining value. The risk that we
bear during this period is that actual mortality rates may be lower than
anticipated.

Once Annuity Payouts have begun, we may be required to make Annuity Payouts as
long as the Annuitant is living, regardless of how long the Annuitant lives. We
would be required to make these payments if the Payout Option chosen is the Life
Annuity, Life Annuity With Payments for a Period Certain or Joint and Last
Survivor Life Annuity Payout Option. The risk that we bear during this period is
that the actual mortality rates, in aggregate, may be lower than the expected
mortality rates.

- - EXPENSE RISK -- We also bear an expense risk that the Annual Maintenance Fee
collected before the Annuity Commencement Date may not be enough to cover the
actual cost of selling, distributing and administering the Contract.

Although variable Annuity Payouts will fluctuate with the performance of the
underlying Fund selected, your Annuity Payouts will NOT be affected by (a) the
actual mortality experience of our Annuitants, or (b) our actual expenses if
they are greater than the deductions stated in the Contract. Because we cannot
be certain how long our Annuitants will live, we charge this percentage fee
based on the mortality tables currently in use. The mortality and expense risk
charge enables us to keep our commitments and to pay you as planned.

2. ADMINISTRATION FEE

To cover the costs of administering your Contract, we deduct a daily charge
which is equal to an annual rate of 0.15% of Sub-Account Value during both the
accumulation and annuity phases of the Contract. There is not necessarily a
relationship between the amount of administrative charge deducted for your
Contract and the amount of expenses that are attributed to your Contract.

3. ANNUAL MAINTENANCE FEE

The Annual Maintenance Fee is a flat fee that is deducted from your Contract
Value to reimburse us for expenses relating to the administrative maintenance of
the Contract and the Accounts. The annual $30 charge is deducted on a Contract
Anniversary or when the Contract is fully Surrendered if the Contract Value at
either of those times is less than $100,000. The charge is deducted
proportionately from each Account in which you are invested.

WHEN IS THE ANNUAL MAINTENANCE FEE WAIVED?

We will waive the Annual Maintenance Fee if your Contract Value is $100,000 or
more on your Contract Anniversary or when you fully Surrender your Contract. We
reserve the right to waive the Annual Maintenance Fee under certain conditions.

4. PREMIUM TAXES

We deduct Premium Taxes, if required, by a state or other government agency.
Some states collect the taxes when Premium Payments are made; others collect at
Annuitization. Since we pay Premium Taxes when they are required by applicable
law, we may deduct them from your Contract when we pay the taxes, upon
Surrender, or on the Annuity Commencement Date. The Premium Tax rate varies by
state or municipality. Currently, the maximum rate charged by any state is 3.5%
and 4% in Puerto Rico.

5. CHARGES AGAINST THE FUNDS

The Separate Account purchases shares of the Funds at net asset value. The net
asset value of the Fund shares reflects investment advisory fees and
administrative expenses already deducted from the assets of the Funds. These
charges are described in the Funds' prospectuses accompanying this Prospectus.

OPTIONAL DEATH BENEFIT CHARGE: If you elect the Optional Death Benefit, we will
subtract an additional charge on a daily basis which is equal to an annual
charge of .15% of your Contract Value invested in the Funds.

WE MAY OFFER, IN OUR DISCRETION, REDUCED FEES AND CHARGES INCLUDING, BUT NOT
LIMITED TO THE MORTALITY AND EXPENSE RISK CHARGE, AND THE ANNUAL MAINTENANCE
FEE, FOR CERTAIN CONTRACTS (INCLUDING EMPLOYER SPONSORED SAVINGS PLANS) WHICH
MAY RESULT IN DECREASED COSTS AND EXPENSES. REDUCTIONS IN THESE FEES AND CHARGES
WILL NOT BE UNFAIRLY DISCRIMINATORY AGAINST ANY CONTRACT OWNER.

DEATH BENEFIT

WHAT IS THE DEATH BENEFIT AND HOW IS IT CALCULATED?

Your Contract has a Death Benefit which is equal to the amounts payable under
the standard Death Benefit or the Optional Death Benefit. We pay the Death
Benefit if the Contract Owner, joint owner or Annuitant, die before we begin to
make annuity payments. The Death Benefit amount will remain invested in the
Sub-Accounts according to your last instructions and will fluctuate with the
performance of the underlying Funds. We calculate the Death Benefit as of the
date we receive a certified death certificate or other legal document acceptable
to us.

If you do not elect the Optional Death Benefit, the Death Benefit will be the
greater of:

- - the total Premium Payments you have made to us minus any amounts you have
Surrendered;

- - The Contract Value of your annuity, or

- - Your Maximum Anniversary Value, which is described below.

The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, Premium Payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death, whichever is earlier. The Anniversary
Value is equal to the Contract Value as of a Contract Anniversary, increased by
the dollar amount of any Premium
<PAGE>
20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 resulting from this series of
calculations.

If you elect the Optional Death Benefit, the Death Benefit will be the greater
of:

- - the total Premium Payments you have made to us minus any Surrenders;

- - the Contract Value of your annuity;

- - your Maximum Anniversary Value or

- - your Interest Accumulation Value.

Assuming you have not taken any Surrenders, your 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, whichever is earlier.
If you have taken any Surrenders, the 5% will be accumulated on your Premium
Payments, but we will make an adjustment for any of the Surrenders. This
adjustment will reduce the Death Benefit under the Optional Death Benefit
proportionally for the Surrenders. The Death Benefit under the Optional Death
Benefit is limited to a maximum of 200% of Premium Payments, less proportional
adjustments for any Surrenders. If you elect the Optional Death Benefit, we will
subtract an additional charge on a daily basis which is equal to an annual
charge of .15% of your Contract Value invested in the Funds.

The Optional Death Benefit may not be available if the Contract Owner or
Annuitant is age 75 or older. The Optional Death Benefit is not available in
Washington.

If you purchase your Contract after September 30, 1999, you must elect the
Optional Death Benefit at the time you send us your initial Premium Payment.

HOW IS THE DEATH BENEFIT PAID?

The Death Benefit may be taken in one lump sum or under any of the Annuity
Payout Options then being offered by us. On the date we receive complete
instructions from the Beneficiary, we will compute the Death Benefit amount to
be paid out or applied to a selected Annuity Payout Option. When there is more
than one Beneficiary, we will calculate the Death Benefit amount for each
Beneficiary's portion of the proceeds and then pay it out or apply it to a
selected Annuity Payout Option according to each Beneficiary's instructions. If
we receive the complete instructions on a Non-Valuation Day, computations will
take place on the next Valuation Day.

The Beneficiary may elect, under the Annuity Proceeds Settlement Option, to
leave proceeds from the Death Benefit with us for up to five years from the date
of the Contract Owner's death if the Contract Owner died before the Annuity
Commencement Date. Once we receive a certified death certificate or other legal
document acceptable to us, the Beneficiary can: (a) make Sub-Account transfers
and (b) take Surrenders.

REQUIRED DISTRIBUTIONS -- If the Contract Owner dies before the Annuity
Commencement Date, the Death Benefit must be distributed within five years after
death. The Beneficiary can choose any Annuity Payout Option that results in
complete Annuity Payout within five years.

If the Contract Owner dies on or after the Annuity Commencement Date under an
Annuity Payout Option with a Death Benefit, any remaining value must be
distributed at least as rapidly as under the payment method being used as of the
Contract Owner's death.

If the Contract Owner is not an individual (e.g. a trust), then the original
Annuitant will be treated as the Contract Owner in the situations described
above and any change in the original Annuitant will be treated as the death of
the Contract Owner.

WHO WILL RECEIVE THE DEATH BENEFIT?

The distribution of the Death Benefit is based on whether death is before, on or
after the Annuity Commencement Date.

<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
- --------------------------------------------------------------------------------

IF DEATH OCCURS BEFORE
THE ANNUITY COMMENCEMENT DATE:

<TABLE>
<CAPTION>
IF THE DECEASED IS THE .
. . AND . . . AND . . . THEN THE . . .
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Contract Owner There is a surviving joint The Annuitant is living or Joint Contract Owner
Contract Owner deceased receives the Death
Benefit.
- ------------------------------------------------------------------------------------------------------------
Contract Owner There is no surviving The Annuitant is living or Designated Beneficiary
joint Contract Owner deceased receives the Death
Benefit.
- ------------------------------------------------------------------------------------------------------------
Contract Owner There is no surviving The Annuitant is living or Contract Owner's estate
joint Contract Owner and deceased receives the Death
the Beneficiary Benefit.
predeceases the Contract
Owner
- ------------------------------------------------------------------------------------------------------------
Annuitant The Contract Owner is There is no named Death Benefit is paid to
living Contingent Annuitant the Contract Owner(s) and
not the designated
Beneficiary.
- ------------------------------------------------------------------------------------------------------------
Annuitant The Contract Owner is The Contingent Annuitant Contingent Annuitant
living is living becomes the Annuitant, and
the Contract continues.
</TABLE>

IF DEATH OCCURS ON OR AFTER
THE ANNUITY COMMENCEMENT DATE:

<TABLE>
<CAPTION>
IF THE DECEASED IS THE .
. . AND . . . THEN THE . . .
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Contract Owner The Annuitant is living Designated Beneficiary becomes the
Contract Owner.
- ------------------------------------------------------------------------------------------------------------
Annuitant The Contract Owner is living Contract Owner receives the Death
Benefit.
- ------------------------------------------------------------------------------------------------------------
Annuitant The Annuitant is also the Contract Owner Designated Beneficiary receives the
Death Benefit.
</TABLE>

THESE ARE THE MOST COMMON DEATH BENEFIT SCENARIOS, HOWEVER, THERE ARE OTHERS.
SOME OF THE ANNUITY PAYOUT OPTIONS MAY NOT RESULT IN A DEATH BENEFIT PAYOUT. IF
YOU HAVE QUESTIONS ABOUT THESE AND ANY OTHER SCENARIOS, PLEASE CONTACT YOUR
REGISTERED REPRESENTATIVE OR US.

WHAT SHOULD THE BENEFICIARY CONSIDER?

ALTERNATIVES TO THE REQUIRED DISTRIBUTIONS -- The selection of an Annuity Payout
Option and the timing of the selection will have an impact on the tax treatment
of the Death Benefit. To receive favorable tax treatment, the Annuity Payout
Option selected: (a) cannot extend beyond the Beneficiary's life or life
expectancy, and (b) must begin within one year of the date of death.

If these conditions are NOT met, the Death Benefit will be treated as a lump sum
payment for tax purposes. This sum will be taxable in the year in which it is
considered received.

SPOUSAL CONTRACT CONTINUATION -- If the Beneficiary is the Contract Owner's
spouse, the Beneficiary may elect to continue the Contract as the contract
owner, receive the death benefit in one lump sum payment or elect an Annuity
Payout Option. 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. This spousal continuation is available only once for each
Contract.

SURRENDERS

WHAT KINDS OF SURRENDERS ARE AVAILABLE?

FULL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE -- When you Surrender your
Contract before the Annuity Commencement Date, the Surrender Value of the
Contract will be made in a lump sum payment. The Surrender Value is the Contract
Value minus any applicable Premium Taxes and the Annual Maintenance Fee. The
Surrender Value may be more or less than the amount of the Premium Payments made
to a Contract.

PARTIAL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE -- You may request a
partial Surrender of Contract Values at any time before the Annuity Commencement
Date. There are two restrictions:

- - The partial Surrender amount must be at least equal to $100, our current
minimum for partial Surrenders, and

- - The Contract must have a minimum Contract Value of $500 after the Surrender.
The minimum Contract Value in New York must be $1000 after the Surrender. We
reserve the right to close your Contract and pay the full Surrender Value if
the
<PAGE>
22 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Contract Value is under the minimum after the Surrender. If your Contract was
issued in Texas, a remaining value of $500 is not required to continue the
Contract if Premium Payments were made in the last two Contract Years.

FULL SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- You may Surrender your
Contract on or after the Annuity Commencement Date only if you selected the
Payment For a Period Certain Annuity Payout Option. Under this option, we pay
you the Commuted Value of your Contract. The Commuted Value is determined on the
day we receive your written request for Surrender.

PARTIAL SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- Partial Surrenders are
permitted after the Annuity Commencement Date if you elect the Payments for a
Period Certain Annuity Payout Option, but check with your tax advisor because
there may be adverse tax consequences.

HOW DO I REQUEST A SURRENDER?

Requests for full Surrenders must be in writing. Requests for partial Surrenders
can be made in writing or by telephone. We will send your money within seven
days of receiving complete instructions. However, we may postpone payment of
Surrenders whenever: (a) the New York Stock Exchange is closed, (b) trading on
the New York Stock Exchange is restricted by the SEC, (c) the SEC permits and
orders postponement, or (d) the SEC determines that an emergency exists to
restrict valuation.

WRITTEN REQUESTS -- To request a full or partial Surrender, complete a Surrender
Form or send us a letter, signed by you, stating:

- - the dollar amount that you want to receive, either before or after we withhold
taxes and deduct for any applicable charges,

- - your tax withholding amount or percentage, if any, and

- - your mailing address.

If there are joint Contract Owners, both must authorize all Surrenders. For a
partial Surrender, specify the Accounts that you want your Surrender to come
from, otherwise, the Surrender will be taken in proportion to the value in each
Account.

TELEPHONE REQUESTS -- To request a partial Surrender by telephone, we must have
received your completed Telephone Redemption Program Enrollment Form. If there
are joint Contract Owners, both must sign this form. By signing the form, you
authorize us to accept telephone instructions for partial Surrenders from either
Contract Owner. Telephone authorization will remain in effect until we receive a
written cancellation notice from you or your joint Contract Owner, we
discontinue the program; or you are no longer the owner of the Contract. There
are some restrictions on telephone surrenders, please call us with any
questions.

We may record telephone calls and use other procedures to verify information and
confirm that instructions are genuine. We will not be liable for losses or
expenses arising from telephone instructions reasonably believed to be genuine.
WE MAY MODIFY THE REQUIREMENTS FOR TELEPHONE REDEMPTIONS AT ANY TIME.

Telephone Surrender instructions received before the close of the New York Stock
Exchange will be processed on that Valuation Day. Otherwise, your request will
be processed on the next Valuation Day.

COMPLETING A POWER OF ATTORNEY FORM FOR ANOTHER PERSON TO ACT ON YOUR BEHALF MAY
PREVENT YOU FROM MAKING SURRENDERS VIA TELEPHONE.

WHAT SHOULD BE CONSIDERED ABOUT TAXES?

There are certain tax consequences associated with Surrenders:

PRIOR TO AGE 59 1/2 -- If you make a Surrender prior to age 59 1/2, there may be
adverse tax consequences including a 10% federal income tax penalty on the
taxable portion of the Surrender payment. Surrendering before age 59 1/2 may
also affect the continuing tax-qualified status of some Contracts.

WE DO NOT MONITOR SURRENDER REQUESTS. TO DETERMINE WHETHER A SURRENDER IS
PERMISSIBLE, WITH OR WITHOUT FEDERAL INCOME TAX PENALTY, PLEASE CONSULT YOUR
PERSONAL TAX ADVISER.

MORE THAN ONE CONTRACT ISSUED IN THE SAME CALENDAR YEAR -- If you own more than
one contract issued by us or our affiliates in the same calendar year, then
these contracts may be treated as one contract for the purpose of determining
the taxation of distributions prior to the Annuity Commencement Date. Please
consult your tax adviser for additional information.

INTERNAL REVENUE CODE SECTION 403(B) ANNUITIES -- As of December 31, 1988, all
section 403(b) annuities have limits on full and partial Surrenders.
Contributions to your Contract made after December 31, 1988 and any increases in
cash value after December 31, 1988 may not be distributed unless you are: (a)
age 59 1/2, (b) no longer employed, (c) deceased, (d) disabled, or (e)
experiencing a financial hardship (cash value increases may not be distributed
for hardships prior to age 59 1/2). Distributions prior to age 59 1/2 due to
financial hardship; unemployment or retirement may still be subject to a penalty
tax of 10%.

WE ENCOURAGE YOU TO CONSULT WITH YOUR TAX ADVISER BEFORE MAKING ANY SURRENDERS.
PLEASE SEE THE "FEDERAL TAX CONSIDERATIONS" SECTION FOR MORE INFORMATION.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
- --------------------------------------------------------------------------------

ANNUITY PAYOUTS

THIS SECTION DESCRIBES WHAT HAPPENS WHEN WE BEGIN TO MAKE REGULAR ANNUITY
PAYOUTS FROM YOUR CONTRACT. YOU, AS THE CONTRACT OWNER, SHOULD ANSWER FIVE
QUESTIONS:

1. When do you want Annuity Payouts to begin?
2. Which Annuity Payout Option do you want to use?
3. How often do you want to receive Annuity Payouts?
4. What level of Assumed Investment Return should you choose?
5. Do you want Annuity Payouts to be fixed or variable or a combination?

Please check with your financial advisor to select the Annuity Payout Option
that best meets your income needs.

1. WHEN DO YOU WANT ANNUITY PAYOUTS TO BEGIN?

You select an Annuity Commencement Date when you purchase your Contract or at
any time before you begin receiving Annuity Payouts. You may change the Annuity
Commencement Date by notifying us within thirty days prior to the date. The
Annuity Commencement Date cannot be deferred beyond the Annuitant's 90th
birthday or the end of the 10th Contract Year, whichever is later unless you
elect a later date to begin redeeming payments subject to the laws and
regulations then in effect and our approval. If this Contract is issued to the
trustee of a Charitable Remainder Trust, the Annuity Commencement Date may be
deferred to the Annuitant's 100th birthday.

The Annuity Calculation Date is when the amount of your Annuity Payout is
determined. This occurs within five Valuation Days before your selected Annuity
Commencement Date.

All Annuity Payouts, regardless of frequency, will occur on the same day of the
month as the Annuity Commencement Date. After the initial payout, if an Annuity
Payout date falls on a Non-Valuation Day, the Annuity Payout is computed on the
prior Valuation Day. If the Annuity Payout date does not occur in a given month
due to a leap year or months with only 28 days (i.e. the 31st), the Annuity
Payout will be computed on the last Valuation Day of the month.

2. WHICH ANNUITY PAYOUT OPTION DO YOU WANT TO USE?

Your Contract contains the Annuity Payout Options described below. The Annuity
Proceeds Settlement Option is an option that can be elected by the Beneficiary
after the death of the Contract Owner and is described in the "Death Benefit"
section. We may at times offer other Annuity Payout Options.

OPTION 1 -- LIFE ANNUITY -- We make Annuity Payouts as long as the Annuitant is
living. When the Annuitant dies, we stop making Annuity Payouts. A Payee would
receive only one Annuity Payout if the Annuitant dies after the first payout,
two Annuity Payouts if the Annuitant dies after the second payout, and so forth.

OPTION 2 -- LIFE ANNUITY WITH A CASH REFUND -- We will make Annuity Payouts as
long as the Annuitant is living. When the Annuitant dies, if the Annuity Payouts
already made are less than the Contract Value minus any Premium Tax, the
remaining value will be paid to the Beneficiary. The remaining value is equal to
the Contract Value minus any Premium Tax minus the Annuity Payouts already made.
This option is only available for Annuity Payouts using the 5% Assumed
Investment Return.

OPTION 3 -- LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN -- We will make
Annuity Payouts as long as the Annuitant is living, but we at least guarantee to
make Annuity Payouts for a time period you select, between 5 years and 100 years
minus the Annuitant's age. If the Annuitant dies before the guaranteed number of
years have passed, then the Beneficiary may elect to (a) continue Annuity
Payouts for the remainder of the guaranteed number of years or (b) receive the
Commuted Value in one sum.

For Qualified Contracts, the guaranteed number of years must be less than the
life expectancy of the Annuitant at the time the Annuity Payouts begin. We
compute life expectancy using the IRS mortality tables.

OPTION 4 -- JOINT AND LAST SURVIVOR LIFE ANNUITY -- We will make Annuity Payouts
as long as the Annuitant and Joint Annuitant are living. When one Annuitant
dies, we continue to make Annuity Payouts to the other Annuitant until that
second Annuitant dies. When choosing this option, you must decide what will
happen to the Annuity Payout after the first Annuitant dies. You must select
Annuity Payouts that:

- - Remain the same at 100%, or

- - Decrease to 66.67%, or

- - Decrease to 50%.

For variable-dollar amount Annuity Payouts, these percentages represent Annuity
Units. For fixed-dollar amount Annuity Payouts, the percentages represent actual
dollar amounts. The percentage will also impact the Annuity Payout amount we pay
while both Annuitants are living. If you pick a lower percentage, your original
Annuity Payouts will be higher while both Annuitants are alive.

OPTION 5 -- JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD
CERTAIN -- We will make Annuity Payouts as long as either the Annuitant or Joint
Annuitant are living, but we at least guarantee to make Annuity Payouts for a
time period you select, between 5 years and 100 years minus the Annuitant's age.
If the Annuitant and the Joint Annuitant both die before the guaranteed number
of years have passed, then the Beneficiary has two options, (a) continue Annuity
Payouts for the remainder of the guaranteed number of years or (b) receive the
Commuted Value in one sum.
<PAGE>
24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

When choosing this option, you must decide what will happen to the Annuity
Payouts after the first Annuitant dies. You must select Annuity Payouts that:

- - Remain the same at 100%, or

- - Decrease to 66.67%, or

- - Decrease to 50%.

For variable dollar amount Annuity Payouts, these percentages represent Annuity
Units. For fixed-dollar amount Annuity Payouts, these percentages represent
actual dollar amounts. The percentage will also impact the Annuity Payout amount
we pay while both Annuitants are living. If you pick a lower percentage, your
original Annuity Payouts will be higher while both Annuitants are alive.

OPTION 6 -- PAYMENTS FOR A PERIOD CERTAIN -- We will make Annuity Payouts for
the number of years that you select. You can select between 5 years and 30
years.

IMPORTANT INFORMATION:

- - YOU CANNOT SURRENDER YOUR CONTRACT ONCE ANNUITY PAYOUTS BEGIN, UNLESS YOU HAVE
SELECTED THE PAYMENTS FOR A PERIOD CERTAIN ANNUITY PAYOUT OPTION.

- - For Non-Qualified Contracts, if you do not elect an Annuity Payout Option,
fixed Annuity Payouts will automatically begin on the Annuity Commencement
Date under the Payments for a Period Certain Annuity Payout Option using a ten
year period certain.

- - For Qualified Contracts and Contracts issued in Texas, if you do not elect an
Annuity Payout Option, fixed Annuity Payouts will begin automatically on the
Annuity Commencement Date, under the Annuity Payout Option 1 -- Life Annuity.

3. HOW OFTEN DO YOU WANT THE PAYEE TO RECEIVE ANNUITY PAYOUTS?

In addition to selecting an Annuity Commencement Date and an Annuity Payout
Option, you must also decide how often you want the Payee to receive Annuity
Payouts. You may choose to receive Annuity Payouts:

- - monthly,

- - quarterly,

- - semi-annually, or

- - annually.

Once you select a frequency, it cannot be changed. If you do not make a
selection, the Payee will receive monthly Annuity Payouts. You must select a
frequency that results in an Annuity Payout of at least $50. If the amount falls
below $50, we have the right to change the frequency to bring the Annuity Payout
up to at least $50. For Contracts issued in New York, the minimum monthly
Annuity Payout is $20.

4. WHAT LEVEL OF ASSUMED INVESTMENT RETURN DO YOU PREFER?

The Assumed Investment Return ("AIR") is the investment return you select before
we start to make Annuity Payouts. It is a critical assumption for calculating
variable dollar amount Annuity Payouts. The first Annuity Payout will be based
upon the AIR. The remaining Annuity Payouts will fluctuate based on the
performance of the underlying Funds.

Subject to the approval of your State, you can select one of three AIRs: 3%, 5%
or 6%. The greater the AIR, the greater the initial Annuity Payout. A higher AIR
may result in smaller potential growth in the Annuity Payouts. On the other
hand, a lower AIR results in a lower initial Annuity Payout, but future Annuity
Payouts have the potential to be greater.

For example, if the second monthly Annuity Payout is the same as the first, the
sub-accounts earned exactly the same return as the AIR. If the second monthly
Annuity Payout is more than the first, the sub-accounts earned more than the
AIR. If the second Annuity Payout is less than the first, the sub-account earned
less than the AIR.

Level variable dollar amount Annuity Payouts would be produced if the investment
returns remained constant and equal to the AIR. In fact, Annuity Payouts will
vary up or down as the investment rate varies up or down from the AIR.

5. DO YOU WANT FIXED-DOLLAR AMOUNT OR VARIABLE DOLLAR AMOUNT ANNUITY PAYOUTS OR
A COMBINATION OF BOTH?

You may choose an Annuity Payout Option with fixed-dollar amounts,
variable-dollar amounts or a combination depending on your income needs.

FIXED-DOLLAR AMOUNT ANNUITY PAYOUTS -- Once a fixed-dollar amount Annuity Payout
begins, you cannot change your selection to receive variable-dollar amount
Annuity Payout. You will receive equal fixed-dollar amount Annuity Payouts
throughout the Annuity Payout period. Fixed-dollar amount Annuity Payout amounts
are determined by multiplying the Contract Value, minus any applicable Premium
Taxes, by an Annuity rate. The annuity rate is set by us and is not less than
the rate specified in the fixed-dollar amount Annuity Payout Option tables in
your Contract.

VARIABLE-DOLLAR AMOUNT ANNUITY PAYOUTS -- A variable-dollar amount Annuity
Payout is based on the investment performance of the Sub-Accounts. The
variable-dollar amount Annuity Payouts may fluctuate with the performance of the
underlying Funds. To begin making variable-dollar amount Annuity Payouts, we
convert the first Annuity Payout amount to a set number of Annuity Units and
then price those units to determine the Annuity Payout amount. The number of
Annuity Units that determines the Annuity Payout amount remains fixed unless you
transfer units between Sub-Accounts.

The dollar amount of the first variable Annuity Payout depends on:

- - the Annuity Payout Option chosen,
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
- --------------------------------------------------------------------------------

- - the Annuitant's attained age and gender (if applicable), and,

- - the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table

- - the Assumed Investment Return

The total amount of the first variable-dollar amount Annuity Payout is
determined by dividing the Contract Value minus any applicable Premium Taxes, by
$1,000 and multiplying the result by the payment factor defined in the Contract
for the selected Annuity Payout Option.

The dollar amount of each subsequent variable-dollar amount Annuity Payout is
equal to the total of:

Annuity Units for each Sub-Account multiplied by Annuity Unit Value for each
Sub-Account.

The Annuity Unit Value of each Sub-Account for any Valuation Period is equal to
the Accumulation Unit Value Net Investment Factor for the current Valuation
Period multiplied by the Annuity Unit factor, multiplied by the Annuity Unit
Value for the preceding Valuation Period.

COMBINATION ANNUITY PAYOUTS -- You may choose to receive a combination of
fixed-dollar amount and variable-dollar amount annuity payouts as long as they
total 100% of your Annuity Payout. For example, you may choose to receive 40%
fixed-dollar amount and 60% variable-dollar amount to meet your income needs.

TRANSFER OF ANNUITY UNITS -- After the Annuity Calculation Date, you may
transfer dollar amounts of Annuity Units from one Sub-Account to another. On the
day you make a transfer, the dollar amounts are equal for both Sub-Accounts and
the number of Annuity Units will be different. We will transfer the dollar
amount of your Annuity Units the day we receive your written request if received
before the close of the New York Stock Exchange. Otherwise, the transfer will be
made on the next Valuation Day.

OTHER PROGRAMS AVAILABLE
- --------------------------------------------------------------------------------

AUTOMATIC ADDITIONS -- Automatic Additions is an electronic transfer program
that allows you to have money automatically transferred from your checking or
savings account, and invested in your Contract. It is available for Premium
Payments made after your initial Premium Payment. The minimum amount for each
transfer is $50. You can elect to have transfers occur either monthly or
quarterly, and they can be made into any Account available in your Contract.

AUTOMATIC INCOME PROGRAM -- The Automatic Income Program allows you to Surrender
up to 10% of your total Premium Payments each Contract Year. We can Surrender
from the Accounts you select systematically on a monthly, quarterly, semiannual,
or annual basis. The Automatic Income Program may change based on your
instructions after your seventh Contract Year.

ASSET REBALANCER -- Asset Rebalancer is a program that allows you to choose a
customized allocation for your Sub-Accounts to help you reach your investment
goals. Over time, Sub-Account performance may cause your Contract's allocation
percentages to change, but under Asset Rebalancer, your Sub-Account allocations
are rebalanced to the percentages you have chosen. You can only participate in
one model at a time.

OTHER INFORMATION
- --------------------------------------------------------------------------------

ASSIGNMENT -- Ownership of this Contract is generally assignable. However, if
the Contract is issued to a tax qualified retirement plan, it is possible that
the ownership of the Contract may not be transferred or assigned. An assignment
of a Non-Qualified Contract may subject the Contract Values or Surrender Value
to income taxes and certain penalty taxes.

CONTRACT MODIFICATION -- The Annuitant may not be changed. However, if the
Annuitant is still living, the Contingent Annuitant may be changed at any time
prior to the Annuity Commencement Date by sending us written notice. We may
modify the Contract, but no modification will affect the amount or term of any
Contract unless a modification is required to conform the Contract to applicable
Federal or State law. No modification will effect the method by which Contract
Values are determined.

HOW CONTRACTS ARE SOLD -- Hartford Securities Distribution Company, Inc. ("HSD")
serves as Principal Underwriter for the securities issued with respect to the
Separate Account. HSD is registered with the Securities and Exchange Commission
under the Securities Exchange Act of 1934 as a Broker-Dealer and is a member of
the National Association of Securities Dealers, Inc. HSD is an affiliate of
ours. Both HSD and Hartford are ultimately controlled by The Hartford Financial
Services Group, Inc. The principal business address of HSD is the same as ours.
The securities will be sold by individuals who represent us as insurance agents
and who are registered representatives of Broker-Dealers that have entered into
distribution agreements with HSD.

Commissions will be paid by Hartford and will not be more than 6% of Premium
Payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.

Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or
<PAGE>
26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 affect the amounts paid by the policyholders or Contract
Owners to purchase, hold or Surrender variable insurance products.

YEAR 2000
- --------------------------------------------------------------------------------

IN GENERAL -- The Year 2000 issue relates to the ability or inability of
computer hardware, software and other information technology (IT) systems, as
well as non-IT systems, such as equipment and machinery with imbedded chips and
microprocessors, to properly process information and data containing or related
to dates beginning with the year 2000 and beyond. The Year 2000 issue exists
because, historically, many IT and non-IT systems that are in use today were
developed years ago when a year was identified using a two-digit date field
rather than a four-digit date field. As information and data containing or
related to the century date are introduced to date sensitive systems, these
systems may recognize the year 2000 as "1900", or not at all, which may result
in systems processing information incorrectly. This, in turn, may significantly
and adversely affect the integrity and reliability of information databases of
IT systems, may cause the malfunctioning of certain non-IT systems, and may
result in a wide variety of adverse consequences to a company. In addition, Year
2000 problems that occur with third parties with which a company does business,
such as suppliers, computer vendors, distributors and others, may also adversely
affect any given company.

The integrity and reliability of Hartford's IT systems, as well as the
reliability of its non-IT systems, are integral aspects of Hartford's business.
Hartford issues insurance policies, annuities, mutual funds and other financial
products to individual and business customers, nearly all of which contain date
sensitive data, such as policy expiration dates, birth dates and premium payment
dates. In addition, various IT systems support communications and other systems
that integrate Hartford's various business segments and field offices. Hartford
also has business relationships with numerous third parties that affect
virtually all aspects of Hartford's business, including, without limitation,
suppliers, computer hardware and software vendors, insurance agents and brokers,
securities broker-dealers and other distributors of financial products, many of
which 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 is
currently performing 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 substantially completed third party
initiatives (1) and (2). Hartford is currently 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 after-tax costs of Hartford's Year 2000 program that were
incurred prior to the year ended December 31, 1998 were not material to
Hartford's financial condition or results of operations. For the year ended
December 31, 1998, the after-tax costs were approximately $4 million.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
- --------------------------------------------------------------------------------
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 has substantially completed the development of 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. The contingency
planning process involved identifying reasonably likely business disruption
scenarios that, if they were to occur, could create significant problems in
critical functions of Hartford. Hartford has developed plans to respond to such
problems so that critical business functions may continue to operate with
minimal disruption. Contingency planning also included assessing the dependency
of business functions on critical third parties and their Year 2000 readiness.
These plans will then be reviewed and tested on an integrated basis for the
remainder of the year. Furthermore, in many contexts, Year 2000 issues are
dynamic, and ongoing assessments of business functions, vulnerabilities and
risks must be made. As such, new contingency plans may be needed in the future
and/or existing plans may need to be modified as circumstances warrant.

LEGAL MATTERS AND EXPERTS

There are no material legal proceedings pending to which the Separate Account is
a party.

Counsel with respect to federal laws and regulations applicable to the issue and
sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
Senior Vice President, General Counsel and Corporate Secretary, Hartford Life
Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.

The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance 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: (800) 862-6668 (Contract Owners)
(800) 862-4397 (Account Executives)

FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------

What are some of the federal tax consequences which affect these contracts?

A. GENERAL

Since federal tax law is complex, the tax consequences of purchasing this
contract will vary depending on your situation. You may need tax or legal advice
to help you determine whether purchasing this contract is right for you.

Our general discussion of the tax treatment of this contract is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed description of all federal income tax consequences regarding the
purchase of this contract cannot be made in the prospectus. We also do not
discuss state, municipal or other tax laws that may apply to this contract. For
detailed information, you should consult with a qualified tax adviser familiar
with your situation.

B. TAXATION OF HARTFORD AND THE SEPARATE ACCOUNT

The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under subchapter M of Chapter 1 of the Code.
Investment income and any realized capital gains on the assets of the Separate
Account are 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.
<PAGE>
28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

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 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
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
- --------------------------------------------------------------------------------
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 period that does not extend
beyond the life or life expectancy of the beneficiary. The election must
<PAGE>
30 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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.

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
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 31
- --------------------------------------------------------------------------------
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.
<PAGE>
32 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS

This summary does not attempt to provide more than general information about the
federal income tax rules associated with use of a Contract by a tax-qualified
retirement plan. Because of the complexity of the federal tax rules, owners,
participants and beneficiaries are encouraged to consult their own tax advisors
as to specific tax consequences.

The federal tax rules applicable to owners of Contracts under tax-qualified
retirement plans vary according to the type of plan as well as the terms and
conditions of the plan itself. Contract owners, plan participants and
beneficiaries are cautioned that the rights and benefits of any person may be
controlled by the terms and conditions of the tax-qualified retirement plan
itself, regardless of the terms and conditions of a Contract. We are not bound
by the terms and conditions of such plans to the extent such terms conflict with
a Contract, unless we specifically consent to be bound.

Some tax-qualified retirement plans are subject to distribution and other
requirements that are not incorporated into our administrative procedures.
Contract owners, participants and beneficiaries are responsible for determining
that contributions, distributions and other transactions comply with applicable
law. Tax penalties may apply to transactions with respect to tax-qualified
retirement plans if applicable federal income tax rules and restrictions are not
carefully observed.

We do not currently offer the Contracts in connection with all of the types of
tax-qualified retirement plans discussed below and may not offer the Contracts
for all types of tax-qualified retirement plans in the future.

1. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS -- Eligible employers can
establish certain tax-qualified pension and profit-sharing plans under section
401 of the Code. Rules under section 401(k) of the Code govern certain "cash or
deferred arrangements" under such plans. Rules under section 408(k) govern
"simplified employee pensions". Tax-qualified pension and profit-sharing plans
are subject to limitations on the amount that may be contributed, the persons
who may be eligible to participate and the time when distributions must
commence. Employers intending to use the Contracts in connection with
tax-qualified pension or profit-sharing plans should seek competent tax and
other legal advice.

2. TAX SHELTERED ANNUITIES UNDER SECTION 403(b) -- Public schools and certain
types of charitable, educational and scientific organizations, as specified in
section 501(c)(3) of the Code, can purchase tax-sheltered annuity contracts for
their employees. Tax-deferred contributions can be made to tax-sheltered annuity
contracts under section 403(b) of the Code, subject to certain limitations.
Generally, such contributions may not exceed the lesser of $10,000 (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 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-
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 33
- --------------------------------------------------------------------------------
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.

(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:
<PAGE>
34 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

- - 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.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 35
- --------------------------------------------------------------------------------

TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
------------------------------------------------------------------------------
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
------------------------------------------------------------------------------
SAFEKEEPING OF ASSETS
------------------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------------------------------------------------------
DISTRIBUTION OF CONTRACTS
------------------------------------------------------------------------------
CALCULATION OF YIELD AND RETURN
------------------------------------------------------------------------------
PERFORMANCE COMPARISONS
------------------------------------------------------------------------------
FINANCIAL STATEMENTS
------------------------------------------------------------------------------
</TABLE>

<PAGE>
This form must be completed for all tax-sheltered annuities.

SECTION 403(b)(11) ACKNOWLEDGMENT FORM

The Hartford Variable Annuity Contract that you have recently purchased is
subject to certain restrictions imposed by the Tax Reform Act of 1986.
Contributions to the Contract after December 31, 1988 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:

a. attained age 59 1/2,

b. separated from service,

c. died, or

d. become disabled.

Distributions of post December 31, 1988 contributions (excluding any income
thereon) may also be made if you have experienced a financial hardship.

Also, there may be a 10% penalty tax for distributions made prior to age 59 1/2
because of financial hardship or separation from service.

Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Hartford Variable Annuity. Please refer to your
Plan.

Please complete the following and return to:

Hartford Life 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:
- --------------------------------------------------------------------------------
<PAGE>
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 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
SELECT DIMENSIONS ASSETMANAGER

This Statement of Additional Information is not a prospectus. The information
contained herein should be read in conjunction with the Prospectus.

To obtain a Prospectus, send a written request to Hartford Life and Annuity
Insurance Company Attn: Individual Annuity Services, P.O. Box 5085, Hartford,
CT 06102-5085.

Date of Prospectus: October 1, 1999

Date of Statement of Additional Information: October 1, 1999

<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. . . . . . . . . . . . . . . . . . . . . . . . . . 8

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
-3-

DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY

Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut. Our offices
are located in Simsbury, Connecticut; however, our mailing address is P.O. Box
2999, Hartford, CT 06104-2999. We are ultimately controlled by The Hartford
Financial Services Group, Inc., one of the largest financial service providers
in the United States.

HARTFORD'S RATINGS

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Effective
Rating Agency Date of Rating Rating Basis of Rating
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 1/1/99 A+ Financial performance
- --------------------------------------------------------------------------------
Standard & Poor's 5/3/99 AA Insurer financial
strength
- --------------------------------------------------------------------------------
Duff & Phelps 12/21/98 AA+ Claims paying ability
- --------------------------------------------------------------------------------
</TABLE>

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 and
will offer the Contracts on a continuous basis.

<PAGE>
-4-

HSD is an affiliate of Hartford. Hartford's parent company indirectly owns 100%
of HSD. The principal business address of HSD is the same as that of Hartford.

The securities will be sold by salespersons of HSD, who represent Hartford as
insurance and Variable Annuity agents and who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.

HSD is registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as a Broker-Dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD").

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: 1998: $11,655,729;
1997: $17,944,107; 1996: $23,145,753. HSD has retained none of these
commissions.

CALCULATION OF YIELD AND RETURN

YIELD OF THE MONEY MARKET SUB-ACCOUNT. As summarized in the Prospectus under
the heading "Performance Related Information," the yield of the Money Market
Sub-Account for a seven day period (the "base period") will be computed by
determining the "net change in value" (calculated as set forth below) of a
hypothetical account having a balance of one accumulation unit of the
Sub-Account at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from Contract Owner accounts, and dividing the difference
by the value of the account at the beginning of the base period to obtain the
base period return, and then multiplying the base period return by (365/7) with
the resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include net investment income of
the account (accrued daily dividends as declared by the underlying funds, less
daily expense 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 divided by 7 and subtracting 1
from the result, according to the following formula:

365/7
Effective Yield = [(Base Period Return + 1) ] - 1

<PAGE>
-5-

The yield and effective yield for the seven day period ending June 30, 1999
for the Money Market Sub-Account is as follows:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------

SUB-ACCOUNT YIELD EFFECTIVE YIELD
- --------------------------------------------------------------------------------
<S> <C> <C>
Money Market * 2.78% 2.82%
- --------------------------------------------------------------------------------
</TABLE>

* Yield and effective yield for the seven day period ending December 31, 1998.

THE MONEY MARKET SUB-ACCOUNT'S YIELD AND EFFECTIVE YIELD WILL VARY IN RESPONSE
TO FLUCTUATIONS IN INTEREST RATES AND IN THE EXPENSES OF THE SUB-ACCOUNT. THE
CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES ON THE SEPARATE
ACCOUNT LEVEL, INCLUDING THE MAXIMUM ANNUAL MAINTENANCE FEE.

YIELDS OF NORTH AMERICAN GOVERNMENT SECURITIES AND DIVERSIFIED INCOME
SUB-ACCOUNTS. As summarized in the Prospectus under the heading "Performance
Related Information," yields of these Sub-Accounts will be computed by
annualizing a recent month's net investment income, divided by a Portfolio
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 Portfolio.

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 based charges
assessed under the Contract over the base period. Yield quotations based on a
30 day period are computed by dividing the dividends and interests 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.

<PAGE>
-6-

<TABLE>
<CAPTION>
Yield Quotation Based on a
30-Day Period Ended June 30,1999
- ------------------------------------------------------------------

SUB-ACCOUNT YIELD
- ------------------------------------------------------------------
<S> <C>
North American Government Securities 3.19%
- ------------------------------------------------------------------
Diversified Income 6.35%
- ------------------------------------------------------------------
High Yield 6.99%
- ------------------------------------------------------------------
</TABLE>

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.

CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the heading
"Performance Related Information," total return is a measure of the change in
value of an investment in a Sub-Account over the period covered. The formula
for total return used herein includes three steps: (1) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of units owned at the end of the period by the unit
value per unit on the last trading day of the period; (2) assuming redemption at
the end of the period and deducting any applicable contingent deferred sales
charge and (3) dividing this account value for the hypothetical investor by the
initial $1,000 investment and annualizing the result for periods of less than
one year. Total return will be calculated since inception of the Separate
Account for one year, five years and ten years or some other relevant periods
if a Sub-Account has not been in existence for at least ten years.

The following are the standardized average annual total return quotations for
the Sub-Accounts for 1, 5, and 10 year periods. (These returns assume a
mortality and risk expense charge of 1.50% and an Annual Maintenance Fee of
$30.)

STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED
JUNE 30, 1999

- -----------------------------------------------------------------------------------------------------
INCEPTION SINCE
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR INCEPTION
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Active International Allocation 9/7/99 N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
American Opportunities 11/8/94 19.61% N/A N/A 23.34%
- -----------------------------------------------------------------------------------------------------
Balanced 11/8/94 7.25% N/A N/A 12.25%
- -----------------------------------------------------------------------------------------------------
Developing Growth 11/8/94 15.68% N/A N/A 18.63%
- -----------------------------------------------------------------------------------------------------
Diversified Income 11/8/94 -4.25% N/A N/A 1.41%
- -----------------------------------------------------------------------------------------------------
Dividend Growth 11/8/94 13.59% N/A N/A 22.10%
- -----------------------------------------------------------------------------------------------------
Emerging Markets 11/8/94 16.79% N/A N/A -2.04%
- -----------------------------------------------------------------------------------------------------
Global Equity 11/8/94 5.85% N/A N/A 7.67%
- -----------------------------------------------------------------------------------------------------
Growth 11/8/94 12.84% N/A N/A 14.55%
- -----------------------------------------------------------------------------------------------------
Mid Cap 1/21/97 5.46% N/A N/A 9.41%
- -----------------------------------------------------------------------------------------------------
Money Market 11/8/94 0.11% N/A N/A 0.38%
- -----------------------------------------------------------------------------------------------------
North American Government 11/8/94 -1.11% N/A N/A 0.07%
- -----------------------------------------------------------------------------------------------------
Utilities 11/8/94 19.94% N/A N/A 16.93%
- -----------------------------------------------------------------------------------------------------
Value Added Market 11/8/94 10.54% N/A N/A 16.30%
- -----------------------------------------------------------------------------------------------------
Emerging Markets Debt 4/1/98 -20.26% N/A N/A -25.48%
- -----------------------------------------------------------------------------------------------------
Emerging Markets Equity 9/7/99 N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
Fixed Income 9/7/99 N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
High Yield 4/1/98 -0.34% N/A N/A -2.97%
- -----------------------------------------------------------------------------------------------------
Mid Cap 4/1/98 15.48% N/A N/A 5.54%
- -----------------------------------------------------------------------------------------------------
Enterprise 4/1/98 8.49% N/A N/A 5.11%
- -----------------------------------------------------------------------------------------------------
Strategic Stock 4/1/98 13.30% N/A N/A 5.71%
- -----------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED JUNE 30, 1999
WITH DEATH BENEFIT OPTION

<PAGE>
-7-

Diversified Income 11/8/94 -4.40% N/A N/A 1.25%
- -----------------------------------------------------------------------------------------------------
Dividend Growth 11/8/94 13.51% N/A N/A 21.93%
- -----------------------------------------------------------------------------------------------------
Emerging Markets 11/8/94 16.61% N/A N/A -2.20%
- -----------------------------------------------------------------------------------------------------
Global Equity 11/8/94 5.68% N/A N/A 7.50%
- -----------------------------------------------------------------------------------------------------
Growth 11/8/94 12.69% N/A N/A 14.38%
- -----------------------------------------------------------------------------------------------------
Mid Cap 1/21/97 5.15% N/A N/A 9.18%
- -----------------------------------------------------------------------------------------------------
Money Market 11/8/94 -0.05% N/A N/A 0.22%
- -----------------------------------------------------------------------------------------------------
North American Government 11/8/94 -1.27% N/A N/A -0.09%
- -----------------------------------------------------------------------------------------------------
Utilities 11/8/94 19.76% N/A N/A 16.75%
- -----------------------------------------------------------------------------------------------------
Value Added Market 11/8/94 10.37% N/A N/A 16.11%
- -----------------------------------------------------------------------------------------------------
Emerging Markets Debt 4/1/98 -20.38% N/A N/A -25.60%
- -----------------------------------------------------------------------------------------------------
Emerging Markets Equity 9/7/99 N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
Fixed Income 9/7/99 N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
High Yield 4/1/98 -0.74% N/A N/A -3.12%
- -----------------------------------------------------------------------------------------------------
Mid Cap 4/1/98 15.29% N/A N/A 5.36%
- -----------------------------------------------------------------------------------------------------
Enterprise 4/1/98 8.33% N/A N/A 4.95%
- -----------------------------------------------------------------------------------------------------
Strategic Stock 4/1/98 13.13% N/A N/A 5.54%
- -----------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
-8-

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 Annual Maintenance Fee is 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.

The following are the non-standardized annualized total return quotations for
the Sub-Accounts for 1, 5, and 10 year periods. (These returns assume a
mortality and risk expense charge of 1.50%.)

<TABLE>
<CAPTION>
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE INCEPTION
DATE OF THE SEPARATE ACCOUNT FOR YEAR ENDED JUNE 30, 1999

- -----------------------------------------------------------------------------------------------------
INCEPTION SINCE
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR INCEPTION
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Active International Allocation 9/7/99 N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
American Opportunities 11/8/94 22.61% N/A N/A 25.67%
- -----------------------------------------------------------------------------------------------------
Balanced 11/8/94 10.25% N/A N/A 14.86%
- -----------------------------------------------------------------------------------------------------
Developing Growth 11/8/94 18.68% N/A N/A 20.92%
- -----------------------------------------------------------------------------------------------------
Diversified Income 11/8/94 -1.25% N/A N/A 4.48%
- -----------------------------------------------------------------------------------------------------
Dividend Growth 11/8/94 16.59% N/A N/A 24.33%
- -----------------------------------------------------------------------------------------------------
Emerging Markets 11/8/94 19.79% N/A N/A 1.54%
- -----------------------------------------------------------------------------------------------------
Global Equity 11/8/94 8.85% N/A N/A 10.62%
- -----------------------------------------------------------------------------------------------------
Growth 11/8/94 15.84% N/A N/A 17.24%
- -----------------------------------------------------------------------------------------------------
Mid Cap 1/21/97 8.46% N/A N/A 12.85%
- -----------------------------------------------------------------------------------------------------
Money Market 11/8/94 3.11% N/A N/A 3.57%
- -----------------------------------------------------------------------------------------------------
North American Government 11/8/94 1.89% N/A N/A 3.26%
- -----------------------------------------------------------------------------------------------------
Utilities 11/8/94 22.94% N/A N/A 19.54%
- -----------------------------------------------------------------------------------------------------
Value Added Market 11/8/94 13.54% N/A N/A 18.82%
- -----------------------------------------------------------------------------------------------------
Emerging Markets Debt 4/1/98 -17.26% N/A N/A -20.18%
- -----------------------------------------------------------------------------------------------------
Emerging Markets Equity 9/7/99 N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
Fixed Income 9/7/99 N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
High Yield 4/1/98 2.66% N/A N/A 1.85%
- -----------------------------------------------------------------------------------------------------
Mid Cap 4/1/98 18.48% N/A N/A 10.67%
- -----------------------------------------------------------------------------------------------------
Enterprise 4/1/98 11.49% N/A N/A 9.89%
- -----------------------------------------------------------------------------------------------------
Strategic Stock 4/1/98 16.30% N/A N/A 10.70%
- -----------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE INCEPTION
DATE OF THE SEPARATE ACCOUNT FOR YEAR ENDED JUNE 30, 1999 WITH DEATH
BENEFIT OPTION

<PAGE>
-9-

Balanced 11/8/94 10.09% N/A N/A 14.69%
- -----------------------------------------------------------------------------------------------------
Developing Growth 11/8/94 18.50% N/A N/A 20.73%
- -----------------------------------------------------------------------------------------------------
Diversified Income 11/8/94 -1.40% N/A N/A 4.32%
- -----------------------------------------------------------------------------------------------------
Dividend Growth 11/8/94 16.51% N/A N/A 24.16%
- -----------------------------------------------------------------------------------------------------
Emerging Markets 11/8/94 19.61% N/A N/A 1.39%
- -----------------------------------------------------------------------------------------------------
Global Equity 11/8/94 8.68% N/A N/A 10.45%
- -----------------------------------------------------------------------------------------------------
Growth 11/8/94 15.69% N/A N/A 17.06%
- -----------------------------------------------------------------------------------------------------
Mid Cap 1/21/97 8.15% N/A N/A 12.62%
- -----------------------------------------------------------------------------------------------------
Money Market 11/8/94 2.95% N/A N/A 3.41%
- -----------------------------------------------------------------------------------------------------
North American Government 11/8/94 1.73% N/A N/A 3.11%
- -----------------------------------------------------------------------------------------------------
Utilities 11/8/94 22.76% N/A N/A 19.36%
- -----------------------------------------------------------------------------------------------------
Value Added Market 11/8/94 13.37% N/A N/A 18.64%
- -----------------------------------------------------------------------------------------------------
Emerging Markets Debt 4/1/98 -17.38% N/A N/A -20.30%
- -----------------------------------------------------------------------------------------------------
Emerging Markets Equity 9/7/99 N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
Fixed Income 9/7/99 N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------
High Yield 4/1/98 2.26% N/A N/A 1.70%
- -----------------------------------------------------------------------------------------------------
Mid Cap 4/1/98 18.29% N/A N/A 10.49%
- -----------------------------------------------------------------------------------------------------
Enterprise 4/1/98 11.33% N/A N/A 9.73%
- -----------------------------------------------------------------------------------------------------
Strategic Stock 4/1/98 16.13% N/A N/A 10.53%
- -----------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
-10-

PERFORMANCE COMPARISONS

YIELD AND TOTAL RETURN. Each Sub-Account may from time to time include its
total return in advertisements or in information furnished to present or
prospective shareholders. Each Sub-Account may from time to time include its
yield and total return in advertisements or information furnished to present or
prospective shareholders. Each Sub-Account may from time to time include in
advertisements its total return (and yield in the case of certain Sub-Accounts)
the ranking of those performance figures relative to such figures for groups of
other annuities analyzed by Lipper Analytical Services and Morningstar, Inc. as
having the same investment objectives.

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. The Standard & Poor's Composite Index of
500 Stocks (the "S&P 500") is a market value-weighted and unmanaged index
showing the 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 about 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.

The NASDAQ-OTC Composite Price Index (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.

The Morgan Stanley Capital International EAFE Index (the "EAFE Index") is an
unmanaged index, which includes over 1,000 companies representing the stock
markets of Europe, Australia, New Zealand, and the Far East. The EAFE Index is
weighted by market capitalization, and therefore, it has a heavy representation
in countries with large stock markets, such as Japan.

The Shearson Lehman 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

<PAGE>
-11-

securities, flower bonds and foreign targeted issues are not included in the SL
Government Index.

The Shearson Lehman 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 Composite Index for Hartford Advisers HLS Fund is comprised of the S&P 500
(55%), the Lehman Government/Corporate Bond Index (35%), both mentioned above,
and 90 Day U.S. Treasury Bills (10%).

<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
------------- ------------- ---------------- -------------- ------------- --------------
------------- ------------- ---------------- -------------- ------------- --------------

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
------------ ------------ ---------------- ------------- ------------ ------------
------------ ------------ ---------------- ------------- ------------ ------------

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
----------- ------------ ------------- ------------- ------------- --------
----------- ------------ ------------- ------------- ------------- --------

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
---------------- ---------------- ---------------- -------------- ------------- --------------
---------------- ---------------- ---------------- -------------- ------------- --------------

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
----------- ----------- ------------- ------------- ------------- ----------------
----------- ----------- ------------- ------------- ------------- ----------------

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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-1
- --------------------------------------------------------------------------------

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Hartford Life and Annuity Insurance Company:

We have audited the accompanying statutory balance sheets of Hartford Life and
Annuity Insurance Company (a Connecticut Corporation and wholly owned subsidiary
of Hartford Life Insurance Company) (the Company) as of December 31, 1998 and
1997, and the related statutory statements of operations, changes in capital and
surplus, and cash flows for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these statutory
financial statements based on our audits.

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.

ARTHUR ANDERSEN LLP

Hartford, Connecticut
January 26, 1999
<PAGE>
F-2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

BALANCE SHEETS
(STATUTORY BASIS)
($000)

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Assets
Bonds........................................... $ 1,453,792 $ 1,501,311
Common stocks................................... 40,650 64,408
Mortgage loans.................................. 59,548 85,103
Policy loans.................................... 47,212 36,533
Cash and short-term investments................. 469,955 309,432
Other invested assets........................... 2,188 20,942
----------- -----------
Total cash and invested assets................ 2,073,345 2,017,729
Investment income due and accrued............... 20,126 15,878
Premium balances receivable..................... 333 389
Receivables from affiliates..................... -- 1,269
Other assets.................................... 45,358 22,788
Separate account assets......................... 32,876,278 23,208,728
----------- -----------
Total Assets.................................. $35,015,440 $25,266,781
----------- -----------
----------- -----------
Liabilities
Aggregate reserves for future benefits.......... $ 579,140 $ 605,183
Policy and contract claims...................... 5,667 5,672
Liability for premium and other deposit funds... 2,011,672 1,795,149
Asset valuation reserve......................... 21,782 13,670
Payable to affiliates........................... 19,271 20,972
Other liabilities............................... (974,882) (754,393)
Separate account liabilities.................... 32,876,278 23,208,728
----------- -----------
Total liabilities............................. 34,538,928 24,894,981
----------- -----------
Capital and Surplus
Common stock.................................... 2,500 2,500
Gross paid-in and contributed surplus........... 226,043 226,043
Unassigned funds................................ 247,969 143,257
----------- -----------
Total capital and surplus..................... 476,512 371,800
----------- -----------
Total liabilities, capital and surplus............ $35,015,440 $25,266,781
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of
these statutory basis financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-3
- --------------------------------------------------------------------------------

STATEMENTS OF OPERATIONS
(STATUTORY BASIS)
($000)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Premiums and annuity considerations............. $ 469,343 $ 296,645 $ 250,244
Annuity and other fund deposits................. 2,051,251 1,981,246 1,897,347
Net investment income........................... 129,982 102,285 98,441
Commissions and expense allowances on
reinsurance ceded.............................. 444,241 396,921 370,637
Reserve adjustment on reinsurance ceded......... 3,185,590 3,672,076 3,864,395
Other revenues.................................. 458,190 288,632 161,906
----------- ----------- -----------
Total revenues................................ 6,738,597 6,737,805 6,642,970
----------- ----------- -----------
Benefits and expenses
Death and annuity benefits...................... 43,390 66,176 60,194
Disability and other benefit payments........... 6,114 7,316 6,555
Surrenders...................................... 739,663 454,417 270,165
Commissions and other expenses.................. 666,515 564,077 491,637
Increase (Decrease) in aggregate reserves for
future benefits................................ (26,043) 33,213 27,351
Increase in liability for premium and other
deposit funds.................................. 216,523 640,006 207,156
Net transfers to separate accounts.............. 4,956,007 4,914,980 5,492,964
----------- ----------- -----------
Total benefits and expenses................... 6,602,169 6,680,185 6,556,022
----------- ----------- -----------
Net gain from operations
Before federal income tax (benefit) expense..... 136,428 57,620 86,948
Federal income tax (benefit) expense............ 35,887 (14,878) 19,360
----------- ----------- -----------
Net gain from operations.......................... 100,541 72,498 67,588
Net realized capital gains, after tax........... 2,085 1,544 407
----------- ----------- -----------
Net income........................................ $ 102,626 $ 74,042 $ 67,995
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of
these statutory basis financial statements.
<PAGE>
F-4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
(STATUTORY BASIS)
($000)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Common stock,
Beginning and end of year....................... $ 2,500 $ 2,500 $ 2,500
----------- ----------- -----------
Gross paid-in and contributed surplus,
Beginning and end of year....................... $ 226,043 $ 226,043 $ 226,043
----------- ----------- -----------
Unassigned funds
Balance, beginning of year...................... $ 143,257 $ 74,570 $ 9,791
Net income...................................... 102,626 74,042 67,995
Change in net unrealized capital gains (losses)
on common stocks and other invested assets..... 1,688 2,186 (5,171)
Change in asset valuation reserve............... (8,112) (6,228) 568
Change in non-admitted assets................... (1,277) (1,313) 1,387
Credit on reinsurance ceded..................... 9,787 -- --
----------- ----------- -----------
Balance, end of year............................ $ 247,969 $ 143,257 $ 74,570
----------- ----------- -----------
Capital and surplus,
End of year..................................... $ 476,512 $ 371,800 $ 303,113
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of
these statutory basis financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-5
- --------------------------------------------------------------------------------

STATEMENTS OF CASH FLOWS
(STATUTORY BASIS)
($000)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Operations
Premiums and annuity considerations............. $ 2,520,655 $ 2,277,874 $ 2,147,627
Investment income............................... 127,425 101,991 106,178
Other income.................................... 4,092,964 4,381,718 4,396,892
----------- ----------- -----------
Total income.................................. 6,741,044 6,761,583 6,650,697
----------- ----------- -----------
Benefits paid................................... 790,051 529,733 338,998
Federal income taxes (received) paid on
operations..................................... 25,780 (14,499) 28,857
Other expenses.................................. 5,859,063 5,754,725 6,254,139
----------- ----------- -----------
Total benefits and expenses................... 6,674,894 6,269,959 6,621,994
----------- ----------- -----------
Net cash from operations...................... 66,150 491,624 28,703
----------- ----------- -----------
Proceeds from investments
Bonds........................................... 633,926 614,413 871,019
Common stocks................................... 34,010 11,481 72,100
Mortgage loans.................................. 85,275 -- --
Other........................................... 127 152 10
----------- ----------- -----------
Net investment proceeds....................... 753,338 626,046 943,129
----------- ----------- -----------
Taxes paid on capital gains..................... -- -- 936
Other cash provided............................. 1,269 -- 41,998
----------- ----------- -----------
Total proceeds................................ 820,757 1,117,670 1,012,894
----------- ----------- -----------
Cost of investments acquired
Bonds........................................... 586,913 848,267 914,523
Common stocks................................... 7,012 28,302 82,495
Mortgage loans.................................. 59,702 85,103 --
Other........................................... 1,168 18,548 130
----------- ----------- -----------
Total investments acquired.................... 654,795 980,220 997,148
----------- ----------- -----------
Other cash applied
Other........................................... 5,439 4,848 12,220
----------- ----------- -----------
Total other cash applied...................... 5,439 4,848 12,220
----------- ----------- -----------
Total applications............................ 660,234 985,068 1,009,368
----------- ----------- -----------
Net change in cash and short-term investments..... 160,523 132,602 3,526
Cash and short-term investments, beginning of
year............................................. 309,432 176,830 173,304
----------- ----------- -----------
Cash and short-term investments, end of year...... $ 469,955 $ 309,432 $ 176,830
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of
these statutory basis financial statements.
<PAGE>
F-6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS
(STATUTORY BASIS)
DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

ORGANIZATION

Hartford Life and Annuity Insurance Company ("ILA" or "the Company"),
formerly known as ITT Hartford Life and Annuity Insurance Company, is a wholly
owned subsidiary of Hartford Life Insurance Company ("HLIC"), which is an
indirect subsidiary of Hartford Life, Inc. ("HLI"), which is majority owned by
The Hartford Financial Services Group, Inc. ("The Hartford"), formerly a wholly
owned subsidiary of ITT Corporation ("ITT"). On February 10, 1997, HLI filed a
registration statement, as amended, with the Securities and Exchange Commission
relating to the initial public offering of HLI Class A Common Stock (the
"Offering"). Pursuant to the Offering on May 22, 1997, HLI sold to the public 26
million shares, representing 18.6% of the equity ownership of HLI. On December
19, 1995, ITT Corporation distributed all the outstanding shares of The Hartford
to ITT shareholders of record in an action known herein as the "Distribution".
As a result of the Distribution, The Hartford became an independent, publicly
traded company. During 1996, ILA re-domesticated from the State of Wisconsin to
the State of Connecticut.

ILA offers a complete line of ordinary and universal life insurance,
individual annuities and certain supplemental accident and health benefit
coverages.

BASIS OF PRESENTATION

The accompanying ILA statutory basis financial statements were prepared in
conformity with statutory accounting practices prescribed or permitted by the
National Association of Insurance Commissioners ("NAIC"), the State of
Connecticut Department of Insurance and the State of Wisconsin for the 1996
period, as applicable. Certain prior year amounts and balances have been
reclassified to conform with current year presentation.

Current prescribed statutory accounting practices include accounting
publications of the National Association of Insurance Commissioners ("NAIC"), as
well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass accounting practices approved by State
Insurance Departments. The Company does not follow any permitted statutory
accounting practices that have a material effect on statutory surplus, statutory
net income or risk-based capital.

Final approval of the NAIC's proposed "Comprehensive Guide" on statutory
accounting principles was distributed in 1998. The requirements are effective
January 1, 2001, and are not expected to have a material impact on statutory
surplus of the Company.

The preparation of financial statements in conformity with statutory
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates. The most significant estimates
include those used in determining the liability for aggregate reserves for
future benefits and the liability for premium and other deposit funds. Although
some variability is inherent in these estimates, management believes the amounts
provided are adequate.

Statutory accounting practices and generally accepted accounting principles
("GAAP") differ in certain significant respects. These differences principally
involve:

(1) treatment of policy acquisition costs (commissions, underwriting and selling
expenses, premium taxes, etc.) which are charged to expense when incurred
for statutory purposes rather than on a pro-rata basis over the expected
life of the policy for GAAP purposes;

(2) recognition of premium revenues, which for statutory purposes are generally
recorded as collected or when due during the premium paying period of the
contract and which for GAAP purposes, for universal life policies and
investment products, generally, are only recorded for policy charges for the
cost of insurance, policy administration and surrender charges assessed to
policy account balances. Also, for GAAP purposes, premiums for traditional
life insurance policies are recognized as revenues when they are due from
policyholders and the retrospective deposit method is used in accounting for
universal life and other types of contracts where the payment pattern is
irregular or surrender charges are a significant source of profit. The
prospective deposit method is used for GAAP purposes where investment
margins are the primary source of profit;

(3) development of liabilities for future policy benefits, which for statutory
purposes predominantly use interest rate and mortality assumptions
prescribed by the NAIC which may vary considerably from interest and
mortality assumptions used for GAAP financial reporting;
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-7
- --------------------------------------------------------------------------------

(4) providing for income taxes based on current taxable income (tax return) only
for statutory purposes, rather than establishing additional assets or
liabilities for deferred Federal income taxes to recognize the tax effect
related to reporting revenues and expenses in different periods for
financial reporting and tax return purposes;

(5) excluding certain GAAP assets designated as non-admitted assets (e.g.,
negative Interest Maintenance Reserve, past due agents' balances and
furniture and equipment) from the balance sheet for statutory purposes by
directly charging surplus;

(6) establishing accruals for post-retirement and post-employment health care
benefits currently, or using a twenty year phase-in approach, whereas GAAP
liabilities are recorded upon adoption of the applicable standard;

(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve); as well as the deferral and amortization of realized
gains and losses, motivated by changes in interest rates during the period
the asset is held, into income over the remaining life to maturity of the
asset sold (Interest Maintenance Reserve); whereas on a GAAP basis, no such
formula reserve is required and realized gains and losses are recognized in
the period the asset is sold;
(8) the reporting of reserves and benefits net of reinsurance ceded, where risk
transfer has taken place, whereas on a GAAP basis, reserves are reported
gross of reinsurance with reserve credits presented as recoverable assets;
as well as, the accounting for retroactive reinsurance which is immediately
charged to surplus for statutory accounting purposes whereas GAAP precludes
immediate gain recognition unless the ceding enterprise's liability to its
policyholders is extinguished; as well as reinsurance ceded that fails to
meet GAAP risk transfer guidelines would result in deposit accounting for
GAAP where as for statutory, reserves ceded and assumed would be reflected
in the statutory basis statements of operations;

(9) the reporting of fixed maturities at amortized cost, whereas GAAP requires
that fixed maturities be classified as "held-to-maturity",
"available-for-sale" or "trading", based on the Company's intentions with
respect to the ultimate disposition of the security and its ability to
affect those intentions. The Company's bonds were classified on a GAAP basis
as "available-for-sale" and accordingly, those investments and common stocks
were reflected at fair value with the corresponding impact included as a
component of Stockholder's Equity designated as "Net unrealized capital
gains (losses) on securities net of tax". For statutory reporting purposes,
Change in Net Unrealized Capital Gains (Losses) on Common Stocks and Other
Invested Assets includes the change in unrealized gains (losses) on common
stock reported at fair value; and

(10) separate account liabilities are valued on the Commissioner's Annuity
Reserve Valuation Method ("CARVM"), with the surplus generated recorded as a
liability to the general account (and a contra liability on the balance
sheet of the general account), whereas GAAP liabilities are valued at
account value.

As of and for the years ended December 31, the significant differences
between Statutory and GAAP basis net income and capital and surplus for the
Company are as follows:

<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
GAAP Net Income.................... $ 74,525 $ 58,050 $ 41,202
Amortization and deferral of policy
acquisition costs, net............ (331,882) (345,657) (341,571)
Change in unearned revenue
reserve........................... 22,131 4,641 55,504
Deferred taxes..................... 2,476 47,092 2,090
Separate accounts.................. 259,287 282,818 306,978
Asset impairments and
write-downs....................... 17,250 -- --
Benefit reserve adjustment......... 32,759 24,666 (1,013)
Deposit accounting for Lyndon
reinsurance (Note 3).............. 24,627 -- --
Other, net......................... 1,453 2,432 4,805
------------ ------------ ------------
Statutory Net Income............... $ 102,626 $ 74,042 $ 67,995
------------ ------------ ------------
------------ ------------ ------------
GAAP Capital and Surplus........... $ 648,097 $ 570,469 $ 503,887
Deferred policy acquisition
costs............................. (1,615,653) (1,283,771) (938,114)
Unearned revenue reserve........... 156,920 134,789 130,148
Deferred taxes..................... 68,936 64,522 12,823
Separate accounts.................. 1,183,642 924,355 640,101
Asset impairments and
write-downs....................... 17,250 -- --
Unrealized gains on bonds.......... (26,119) (21,451) (7,978)
Benefit reserve adjustment......... 65,029 16,378 7,035
Asset valuation reserve............ (21,782) (13,670) (7,442)
Adjustment relating to Lyndon
contribution (Note 3)............. -- (23,671) (36,126)
Other, net......................... 192 3,850 (1,221)
------------ ------------ ------------
Statutory Capital and Surplus...... $ 476,512 $ 371,800 $ 303,113
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

As more fully described in Note 3, Lyndon Insurance Company (Lyndon) was
contributed to the Company on June 30, 1995. The GAAP net assets contributed
exceeded the statutory basis net assets by $41,277 as of December 31, 1995,
relating primarily to statutory reserves for future
<PAGE>
F-8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

benefits, GAAP deposit accounting receivables and deferred tax liabilities. In
1998, the majority of the former Lyndon's assumed business was recaptured by the
unaffiliated direct writer.

AGGREGATE RESERVES FOR FUTURE BENEFITS AND LIABILITY FOR PREMIUM AND OTHER
DEPOSIT FUNDS

Aggregate reserves for payment of future life, health and annuity benefits
were computed in accordance with actuarial standards. Reserves for life
insurance policies are generally based on the 1958 and 1980 Commissioner's
Standard Ordinary Mortality Tables and various valuation rates ranging from 2.5%
to 6%. Accumulation and on-benefit annuity reserves are based principally on
individual annuity tables at various rates ranging from 2.5% to 8.75% and using
CARVM. Accident and health reserves are established using a two year preliminary
term method and morbidity tables based on Company experience.

ILA has established separate accounts to segregate the assets and
liabilities of certain annuity contracts that must be segregated from the
Company's general assets under the terms of the contracts. The assets consist
primarily of marketable securities reported at market value. Premiums, benefits
and expenses of these contracts are reported in the statutory basis statements
of operations.

INVESTMENTS

Investments in bonds are carried at amortized cost. Bonds that are deemed
ineligible to be held at amortized cost by the NAIC Securities Valuation Office
("SVO") are carried at the appropriate SVO published value. When a permanent
reduction in the value of publicly traded securities occurs, the decrease is
reported as a realized loss and the carrying value is adjusted accordingly.
Short-term investments consist of money market funds and are stated at cost,
which approximates fair value. Common stocks are carried at fair value with the
current year change in the difference from cost reflected in surplus. Other
invested assets are generally recorded at fair value.

The Company uses a variety of derivative financial instruments as part of an
overall risk management strategy. These instruments, including interest rate and
foreign currency swaps, caps, and floors are used as a means of hedging exposure
to price, foreign currency and/or interest rate risk on planned investment
purchases or existing assets and liabilities. The Company does not hold or issue
derivative financial instruments for trading purposes. Derivatives must be
designated at inception as a hedge measured for effectiveness both at inception
and on an ongoing basis. The Company's correlation threshold for hedge
designation is 80% to 120%. If correlation, which is assessed monthly and
measured based on a rolling three month average, falls outside the 80% to 120%
range, hedge accounting will be terminated.

Interest rate swaps involve the periodic exchange of payments without the
exchange of underlying principal or notional amounts. Net receipts or payments
are accrued and recognized over the life of the swap agreement as an adjustment
to net investment income. Should the swap be terminated the gains or losses are
adjusted into the basis of the asset or liability and amortized over the
remaining life. Should the hedged asset be sold or liability terminated without
terminating the swap position, any swap gains or losses are immediately
recognized in net investment income. Interest rate swaps purchased in
anticipation of an asset purchase ("anticipatory transaction") are recognized
consistent with the underlying asset components such that the settlement
component is recognized in the statutory basis statements of operations while
the change in market value is recognized as an unrealized gain or loss. Foreign
currency swaps are similar to interest rate swaps except there is an initial
exchange of principal in two currencies and an agreement to re-exchange the
currencies at a future date, at an agreed upon exchange rate.

Premiums paid on purchased floor or cap agreements and the premium received
on issued cap or floor agreements (used for risk management) are adjusted into
the basis of the applicable asset and amortized over the asset life. Gains or
losses on termination of such positions are adjusted into the basis of the asset
or liability and amortized over the remaining asset life. Net payments are
recognized as an adjustment to income or basis adjusted and amortized depending
on the specific hedge strategy.

Derivatives used to create a synthetic asset must meet synthetic accounting
criteria, including designation at inception and consistency of terms between
the synthetic and the instrument being replicated. Consistent with industry
practice, synthetic instruments are accounted for like the financial instrument
they are intended to replicate. Derivatives which fail to meet risk management
criteria subsequent to acquisition, are accounted for at fair market value with
the impact reflected in the statutory basis statements of operations.

Open forward commitment contracts are marked to market through surplus. Such
contracts are accounted for at settlement by recording the purchase of specified
securities at the previously committed price. Gains or losses resulting from
termination of the forward commitment contracts before the delivery of the
securities are recognized immediately in the statutory basis statements of
operations as a component of Net Realized Capital Gains, after tax.

The Asset Valuation Reserve ("AVR") is designed to provide a standardized
reserving process for realized and unrealized losses due to default and equity
risks associated with invested assets. The reserve increased $8,112 and $6,228
in 1998 and 1997, respectively and decreased $(568) in 1996. Additionally, the
Interest Maintenance Reserve ("IMR") captures net realized capital gains and
losses, net
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-9
- --------------------------------------------------------------------------------

of applicable income taxes, resulting from changes in interest rates and
amortizes these gains or losses into income over the life of the mortgage loan
or bond sold. The IMR balance as of December 31, 1998 and December 31, 1997 was
$452 and $(193), respectively and is reflected in Other Liabilities and as a
component of non-admitted assets in Unassigned Funds for each of the years then
ended. For the years ended December 31, 1998, 1997 and 1996, amortization of IMR
is included in Other Revenues and was $(207), $(85) and $(392), respectively.
Realized capital gains and losses, net of taxes not included in IMR are reported
in the statutory basis statements of operations. Realized investment gains and
losses are determined on a specific identification basis.

OTHER LIABILITIES

The amount reflected in other liabilities includes a receivable from the
separate accounts of $1,187 million and $923 million as of December 31, 1998 and
1997, respectively. The balances are classified in accordance with NAIC
prescribed practices.
MORTGAGE LOANS

Mortgage loans, which are carried at cost and approximate fair value,
include investments in assets backed by mortgage loan pools.
2. INVESTMENTS:

(a) COMPONENTS OF NET INVESTMENT INCOME

<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
Interest income from bonds and
short-term investments.......... $ 123,370 $ 100,475 $ 89,940
Interest income from policy
loans........................... 3,133 1,958 1,846
Interest and dividends from other
investments..................... 4,482 1,005 7,864
---------- ---------- ---------
Gross investment income.......... 130,985 103,438 99,650
Less: investment expenses........ 1,003 1,153 1,209
---------- ---------- ---------
Net investment income............ $ 129,982 $ 102,285 $ 98,441
---------- ---------- ---------
---------- ---------- ---------
</TABLE>

(b) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON COMMON STOCKS

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Gross unrealized capital gains.. $ 2,204 $ 537 $ 713
Gross unrealized capital
losses......................... (1,871) (1,820) (4,160)
--------- --------- ---------
Net unrealized capital
(losses)/gains................. 333 (1,283) (3,447)
Balance, beginning of year...... (1,283) (3,447) 1,724
--------- --------- ---------
Change in net unrealized capital
gains (losses) on Common
stocks......................... $ 1,616 $ 2,164 $ (5,171)
--------- --------- ---------
--------- --------- ---------
</TABLE>

<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ----------
<S> <C> <C> <C>
Gross unrealized capital
gains........................ $ 10,905 $ 23,357 $ 11,821
Gross unrealized capital
losses....................... (833) (1,906) (3,842)
---------- --------- ----------
Net unrealized capital
gains........................ 10,072 21,451 7,979
Balance, beginning of year.... 21,451 7,979 20,877
---------- --------- ----------
Change in net unrealized
capital gains on bonds and
short-term investments....... $ (11,379) $ 13,472 $ (12,898)
---------- --------- ----------
---------- --------- ----------
</TABLE>

(d) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Bonds and short-term investments.... $ 1,314 $ (120) $ 2,756
Common stocks....................... 1,624 -- --
Real estate and other............... (1) 114 --
--------- --------- ---------
Realized capital (losses) gains..... 2,937 (6) 2,756
Capital gains (benefit) tax......... -- (831) 936
--------- --------- ---------
Net realized capital gains.......... 2,937 825 1,820
Amounts transferred to IMR.......... 852 (719) 1,413
--------- --------- ---------
Net realized capital gains.......... $ 2,085 $ 1,544 $ 407
--------- --------- ---------
--------- --------- ---------
</TABLE>

(e) OFF-BALANCE SHEET INVESTMENTS

The Company had no significant financial instruments with off-balance sheet
risk as of December 31, 1998.

(f) CONCENTRATION OF CREDIT RISK

The Company has invested in securities of a single issuer, Bankers Trust
Corporation, in an amount greater than 10% of the Company's statutory capital
and surplus. The statement value of this investment was $105,221 as of December
31, 1998. The NAIC ratings on these holdings were 1z and 2. Excluding this and
U.S. government and government agency investments, the Company had no other
significant concentrations of credit risk as of December 31, 1998.

<PAGE>
F-10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

(g) BONDS, SHORT-TERM INVESTMENTS AND COMMON STOCKS

<TABLE>
<CAPTION>
1998
------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored.................................... $ 4,982 $ 35 $ (2) $ 5,015
-- Guaranteed and sponsored -- asset-backed.................... 75,615 -- -- 75,615
States, municipalities and political subdivisions................ 10,402 415 -- 10,817
International governments........................................ 7,466 568 -- 8,034
Public utilities................................................. 94,475 1,330 (39) 95,766
All other corporate.............................................. 607,679 8,473 (792) 615,360
All other corporate -- asset-backed.............................. 505,900 -- -- 505,900
Short-term investments........................................... 343,783 -- -- 343,783
Certificates of deposit.......................................... 130,216 84 -- 130,300
Parents, subsidiaries and affiliates............................. 117,057 -- -- 117,057
---------- ---------- ---------- ----------
Total bonds and short-term investments........................... $1,897,575 $10,905 $(833) $1,907,647
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Common stock -- unaffiliated................................. $ 4,933 $ 290 $ (50) $ 5,173
Common stock -- affiliated................................... 35,384 1,914 (1,821) 35,477
--------- ---------- ---------- ----------
Total common stocks.......................................... $40,317 $2,204 $(1,871) $40,650
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
</TABLE>

<TABLE>
<CAPTION>
1997
------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored.................................... $ 11,114 $ 55 $ (51) $ 11,118
-- Guaranteed and sponsored -- asset-backed.................... 55,506 1,056 (269) 56,293
States, municipalities and political subdivisions................ 26,404 329 -- 26,733
International governments........................................ 7,609 500 -- 8,109
Public utilities................................................. 73,024 754 (132) 73,646
All other corporate.............................................. 517,715 14,110 (704) 531,121
All other corporate -- asset-backed.............................. 630,069 5,005 (739) 634,335
Short-term investments........................................... 277,330 33 (8) 277,355
Certificates of deposit.......................................... 93,770 1,515 (3) 95,282
Parents, subsidiaries and affiliates............................. 86,100 -- -- 86,100
---------- ---------- ---------- ----------
Total bonds and short-term investments........................... $1,778,641 $23,357 $(1,906) $1,800,092
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Common stock -- unaffiliated................................. $30,307 $537 $ -- $30,844
Common stock -- affiliated................................... 35,384 -- (1,820) 33,564
--------- ----- ---------- ----------
Total common stocks.......................................... $65,691 $537 $(1,820) $64,408
--------- ----- ---------- ----------
--------- ----- ---------- ----------
</TABLE>

The amortized cost and estimated fair value of bonds and short-term
investments as of December 31, 1998 by estimated maturity year are shown below.
Asset-backed securities, including mortgage backed securities and
collaterialized mortgage obligations, are distributed to maturity year based on
ILA's estimates of the rate of future prepayments of principal over the
remaining lives of the securities. Expected maturities differ from contractual
maturities due to call or repayment provisions.

<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
MATURITY COST FAIR VALUE
- ----------------------------------- ------------ ------------
<S> <C> <C>
One year or less................... $ 788,845 $ 792,826
Over one year through five years... 689,025 692,811
Over five years through ten
years............................. 308,661 310,357
Over ten years..................... 111,044 111,653
------------ ------------
Total.............................. $ 1,897,575 $ 1,907,647
------------ ------------
------------ ------------
</TABLE>

<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-11
- --------------------------------------------------------------------------------

Proceeds from sales and maturities of investments in bonds and short-term
investments during 1998, 1997 and 1996 were $1,354,563, $1,435,820 and
$1,139,073, respectively, resulting in gross realized gains of $1,705, $964 and
$3,675, respectively, and gross realized losses of $391, $1,084 and $919,
respectively, before transfers to IMR.

(h) FAIR VALUE OF FINANCIAL INSTRUMENTS BALANCE SHEET ITEMS (IN MILLIONS):

<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Bonds and short-term
investments..................... $ 1,898 $ 1,908 $ 1,779 $ 1,800
Common stocks.................... 41 41 64 64
Policy loans..................... 47 47 37 37
Mortgage loans................... 60 60 85 85
Other invested assets............ 2 2 21 21
LIABILITIES
Liabilities on investment
contracts....................... $ 2,053 $ 2,129 $ 1,911 $ 1,835
</TABLE>

The estimated fair value of bonds and short-term investments was determined
by the Company primarily using NAIC market values. The carrying amounts for
policy loans approximates fair value. The fair value of mortgage loans was
determined by discounting future expected cash flows using interest rates
currently being offered for similar loans. The fair value of liabilities on
investment contracts is determined by forecasting future cash flows and
discounting the forecasted cash flows at current market interest rates.

3. AGGREGATE RESERVES FOR FUTURE BENEFITS

The Company's existing reserves consist of life, health, annuity and
supplementary contracts. The Company cedes and assumes insurance to and from
non-affiliated insurers in order to limit its maximum loss. Such transfers do
not relieve the Company or the unaffiliated reinsured of their primary
liabilities. The Company cedes to RGA Reinsurance Company and its affiliate
Employers Reassurance Corporation, on a modified coinsurance basis, 80% of the
variable annuity business written since 1994 and 100% of the variable life and
variable universal life excess sales load refund obligation effective 1998.
There were no material reinsurance recoverables from reinsurers outstanding as
of, and for the years ended, December 31, 1998 and 1997.

A summary of reinsurance information as of and for the years ended December
31, follows:
<TABLE>
<CAPTION>
1998 DIRECT ASSUMED CEDED NET
- ----------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Premium and Annuity
Considerations.................... $ 483,328 $ 24,954 $ (38,939) $ 469,343
Death, Annuity, Disability and
Other Benefits.................... $ 64,331 $ 1,574 $ (16,401) $ 49,504
Surrenders......................... $ 739,663 $ -- $ -- $ 739,663
Aggregate Reserves for Future
Benefits.......................... $ 713,425 $ -- $ (134,285) $ 579,140
Policy and Contract Claims......... $ 5,895 $ 85 $ (313) $ 5,667

1997 DIRECT ASSUMED CEDED NET
- ----------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Premium and Annuity
Considerations.................... $ 266,427 $ 51,630 $ (21,412) $ 296,645
Death, Annuity, Disability and
Other Benefits.................... $ 79,779 $ 839 $ (7,126) $ 73,492
Surrenders......................... $ 454,417 $ -- $ -- $ 454,417
Aggregate Reserves for Future
Benefits.......................... $ 651,820 $ -- $ (46,637) $ 605,183
Policy and Contract Claims......... $ 5,861 $ 157 $ (346) $ 5,672
<CAPTION>

1996 DIRECT ASSUMED CEDED NET
- ----------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Premium and Annuity
Considerations.................... $ 226,612 $ 33,817 $ (10,185) $ 250,244
Death, Annuity, Disability and
Other Benefits.................... $ 34,950 $ 35,138 $ (3,339) $ 66,749
Surrenders......................... $ 270,165 $ -- $ -- $ 270,165
</TABLE>

In connection with the distribution described in Note 1, on June 30, 1995,
the assets of Lyndon were contributed to the Company. The statutory basis assets
in excess of statutory basis liabilities was approximately $112 million and was
reflected as an increase in Gross Paid-In and Contributed Surplus at December
31, 1995. In 1998, the majority of former Lyndon's assumed business was
recaptured by the unaffiliated direct writer. A ceding commission of $25,622 and
change in reserve of $26,404 for the year ended December 31, 1998, is reflected
in Other Revenue and Increase/(Decrease) in Aggregate Reserves for Future
Benefits in the statutory basis statements of operations, respectively.
<PAGE>
F-12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

Analysis of Annuity Actuarial Reserves and Deposit Liabilities by Withdrawal
Characteristics as of December 31, 1998 (including general and separate account
liabilities) are as follows:

<TABLE>
<CAPTION>
% OF
SUBJECT TO DISCRETIONARY WITHDRAWAL: AMOUNT TOTAL
- --------------------------------------- ------------- ---------
<S> <C> <C>
With market value adjustment........... $ 4,563 0.0%
At book value less current surrender
charge of 5% or more.................. 1,378,056 4.1%
At market value........................ 31,087,511 93.8%
------------- ---------
Total with adjustment or at market
value................................. 32,470,130 97.9%
At book value without adjustment
(minimal or no charge or
adjustment)........................... 665,159 2.0%
Not subject to discretionary
withdrawal............................ 19,739 0.1%
------------- ---------
Reinsurance ceded...................... 33,155,028
Total, net......................... $ 33,155,028
-------------
-------------
</TABLE>

4. RELATED PARTY TRANSACTIONS:

Transactions between the Company and its affiliates within The Hartford
relate principally to tax settlements, reinsurance, rental and service fees,
capital contributions and payments of dividends. The Company has also invested
in bonds of its affiliates, Hartford Financial Services Corporation and HL
Investment Advisors, Inc., and common stock of its subsidiary, ITT Hartford
Life, LTD.

5. FEDERAL INCOME TAXES:

The Company and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. Federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were filing separate Federal, state and local
income tax returns.

As long as The Hartford continues to own at least 80% of the combined voting
power and 80% of the value of the outstanding capital stock of HLI, the Company
will be included for Federal income tax purposes in the consolidated group of
which The Hartford is the common parent. It is the intention of The Hartford and
its non-life subsidiaries to file a single consolidated Federal income tax
return. The life insurance companies will file a separate consolidated Federal
income tax return. Federal income taxes (received) paid by the Company for
operations and capital gains were $25,780, $(14,499) and $29,793 in 1998, 1997
and 1996, respectively. The effective tax rate was 26%, (26)% and 22% in 1998,
1997 and 1996, respectively.

The Company is currently under audit by the Internal Revenue Service (IRS)
for the three year tax period ending 1995. The audit is not yet complete. As of
December 31, 1998, the Company does not currently expect any material
adjustments to arise from this audit.

The following schedule provides a reconciliation of the tax provision at the
U.S. Federal Statutory rate to Federal income tax (benefit) expense (in
millions):

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Tax provision at U.S. Federal statutory
rate..................................... $ 48 $ 20 $ 30
Tax deferred acquisition costs............ 25 25 27
Statutory to tax reserve differences...... 8 1 --
Unrealized gain on separate accounts...... (41) (44) (21)
Investments and other..................... (4) (17) (17)
--------- --------- ---------
Federal income tax (benefit) expense...... $ 36 $ (15) $ 19
--------- --------- ---------
--------- --------- ---------
</TABLE>

6.CAPITAL AND SURPLUS AND SHAREHOLDER DIVIDEND RESTRICTIONS:

The maximum amount of dividends which can be paid, without prior approval,
by State of Connecticut insurance companies to shareholders is generally
restricted to the greater of 10% of surplus as of the preceding December 31st or
the net gain from operations for the previous year. Dividends are paid as
determined by the Board of Directors and are not cumulative. No dividends were
paid in 1998, 1997 and 1996. The amount available for dividend in 1999 is
$100,541.

7. PENSION PLANS AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:

HLI's employees are included in The Hartford's non-contributory defined
benefit pension plans. These plans provide pension benefits that are based on
years of service and the employee's compensation during the last ten years of
employment. HLI's funding policy is to contribute annually an amount between the
minimum funding requirements set forth in the Employee Retirement Income
Security Act of 1974, as amended, and the maximum amount that can be deducted
for U.S. Federal income tax purposes. Generally, pension costs are funded
through the purchase of affiliated group pension contracts. The cost to HLI was
approximately $9,000 in 1998 and $7,000 in both 1997 and 1996.

HLI also provides, through The Hartford, certain health care and life
insurance benefits for eligible retired employees. A substantial portion of
HLI's employees may become eligible for these benefits upon retirement. HLI's
contribution for health care benefits will depend on the retiree's date of
retirement and years of service. In addition, the plan has a defined dollar cap
which limits average company contributions. HLI has prefunded a portion of the
health care and life insurance obligations through trust funds where such
prefunding can be accomplished on a tax effective basis. Postretirement health
care and life insurance
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-13
- --------------------------------------------------------------------------------

benefits expense, allocated by The Hartford, was immaterial to the results of
operations for 1998, 1997 and 1996.

The assumed rate in the per capita cost of health care (the health care
trend rate) was 7.8% for 1998, decreasing ratably to 5.0% in the year 2003.
Increasing the health care trend rates by one percent per year would have an
immaterial impact on the accumulated postretirement benefit obligation and the
annual expense. To the extent that the actual experience differs from the
inherent assumptions, the effect will be amortized over the average future
service of covered employees.

8. SEPARATE ACCOUNTS:

The Company maintains separate account assets and liabilities totaling $32.9
billion and $23.2 billion as of December 31, 1998 and 1997, respectively.
Separate account assets are reported at fair value and separate account
liabilities are determined in accordance with CARVM, which approximates the
market value less applicable surrender charges. Separate account assets are
segregated from other investments, the policyholder assumes the investment risk,
and the investment income and gains and losses accrue directly to the
policyholder. Separate account management fees, net of minimum guarantees, were
$360 million, $252 million and $144 million in 1998, 1997 and 1996,
respectively, and are recorded as a component of other revenues on the statutory
basis statements of operations.

9. COMMITMENTS AND CONTINGENCIES:

As of December 31, 1998, the Company had no material contingent liabilities,
nor had the Company committed any surplus funds for any contingent liabilities
or arrangements. The Company is involved in pending and threatened litigation in
the normal course of its business in which claims for monetary and punitive
damages have been asserted. Although there can be no assurances, at the present
time the Company does not anticipate that the ultimate liability arising from
such pending or threatened litigation, after consideration of provisions made
for potential losses and costs of defense, will have a material adverse effect
on the statutory capital and surplus of the Company.

As discussed in Note 5, issues may potentially be raised by the IRS in
future audits of open years. Management does not believe that possible audit
adjustments will have a material effect on the statutory capital and surplus of
the Company.

Under insurance guaranty fund laws in each state, insurers licensed to do
business can be assessed up to prescribed limits for policyholder losses
incurred by insolvent companies. The amount of any future assessments on ILA
under these laws cannot be reasonably estimated. Most of the laws do provide,
however, that an assessment may be excused or deferred if it would threaten an
insurer's own financial strength. Additionally, guaranty fund assessments are
used to reduce state premium taxes paid by the Company in certain states. ILA
paid guaranty fund assessments of $1,043, $1,544 and $1,262 in 1998, 1997 and
1996, respectively. ILA incurred guaranteed fund expense of $548 in 1998, 1997
and 1996.