<PAGE>
As filed with the Securities and Exchange Commission on December 29, 2000.
File No. 333-69491
811-08580
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
------
Post-Effective Amendment No. 3 [X]
------
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 27 [X]
------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT THREE
(Exact Name of Registrant)
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Name of Depositor)
P.O. Box 2999
Hartford, CT 06104-2999
(Address of Depositor's Principal Offices)
(860) 843-6733
(Depositor's Telephone Number, Including Area Code)
Marianne O'Doherty
Hartford Life and Annuity Insurance Company
P.O. Box 2999
Hartford, CT 06104-2999
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on January 26, 2001 pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on _____________, 2001 pursuant to paragraph (a)(1) of Rule 485
_____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Pursuant to Rule 24F-2(a) under the Investment Company Act of 1940, the
registrant has registered an indefinite amount of securities.
<PAGE>
SELECT DIMENSIONS VARIABLE ANNUITY
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 EXECUTIVE) [Hartford Life Logo]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
This prospectus describes information you should know before you purchase Series
II of Select Dimensions Variable Annuity. Please read it carefully.
Select Dimensions Variable Annuity is a contract between you and Hartford Life
and Annuity Life Insurance Company where you agree to make at least one Premium
Payment to us and we agree to make a series of Annuity Payouts at a later date.
This Contract 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 Contract will fluctuate with the
performance of the underlying funds.
At the time you purchase your Contract, you allocate your Premium Payment to
"Sub-Accounts". These are subdivisions of our Separate Account, an account that
keeps your Contract assets separate from our company assets. The Sub-Accounts
then purchase shares of mutual funds set up exclusively for variable annuity or
variable life insurance products. These are not the same mutual funds that you
buy through your stockbroker or through a retail mutual fund. They may have
similar investment strategies and the same portfolio managers as retail mutual
funds. This Contract offers you portfolios with investment strategies ranging
from conservative to aggressive and you may pick those portfolios that meet your
investment goals and risk tolerance. The Sub-Accounts and the portfolios are
listed below:
- MONEY MARKET SUB-ACCOUNT which purchases shares of Money Market Portfolio of
the Morgan Stanley Dean Witter Select Dimensions Investment Series
- NORTH AMERICAN GOVERNMENT SECURITIES SUB-ACCOUNT which purchases shares of
North American Government Securities Portfolio of the Morgan Stanley Dean
Witter Select Dimensions Investment Series (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 American Value Sub-Account)
which purchases shares of American Opportunities Portfolio (formerly known 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
- 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
Universal Institutional Funds, Inc.
- MID CAP VALUE SUB-ACCOUNT which purchases shares of Mid Cap Value Portfolio of
The Universal Institutional Funds, Inc.
- EMERGING MARKETS DEBT SUB-ACCOUNT which purchases shares of Emerging Markets
Debt Portfolio of The Universal Institutional Funds, Inc.
- EMERGING MARKETS EQUITY SUB-ACCOUNT which purchases shares of Emerging Markets
Equity Portfolio of The Universal Institutional Funds, Inc.
- FIXED INCOME SUB-ACCOUNT which purchases shares of Fixed Income Portfolio of
The Universal Institutional Funds, Inc.
- ACTIVE INTERNATIONAL ALLOCATION SUB-ACCOUNT which purchases shares of Active
International Allocation Portfolio of The Universal Institutional Funds, Inc.
- STRATEGIC STOCK SUB-ACCOUNT which purchases shares of Strategic Stock
Portfolio of the Van Kampen Life Investment Trust
- ENTERPRISE SUB-ACCOUNT which purchases shares of Enterprise Portfolio of the
Van Kampen Life Investment Trust.
You may also allocate some or all of your Premium Payment to the Fixed Account,
which pays an interest rate guaranteed for a certain time period from the time
the Premium Payment is made. Premium Payments allocated to the Fixed Account are
not segregated from our company assets like the assets of the Separate Account.
If you decide to buy this Contract, 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 Contract 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 Contract IS NOT:
- A bank deposit or obligation
- Federally insured
- Endorsed by any bank or governmental agency
This Contract may not be available for sale in all states.
--------------------------------------------------------------------------------
PROSPECTUS DATED: JANUARY 26, 2001
STATEMENT OF ADDITIONAL INFORMATION DATED: JANUARY 26, 2001
<PAGE>
3
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------------------------------------------------------------------------
<S> <C>
DEFINITIONS 4
------------------------------------------------------------------------
FEE TABLE 6
------------------------------------------------------------------------
HIGHLIGHTS 15
------------------------------------------------------------------------
GENERAL CONTRACT INFORMATION 17
------------------------------------------------------------------------
Hartford Life and Annuity Insurance Company 17
------------------------------------------------------------------------
The Separate Account 17
------------------------------------------------------------------------
The Funds 17
------------------------------------------------------------------------
PERFORMANCE RELATED INFORMATION 20
------------------------------------------------------------------------
FIXED ACCOUNT 21
------------------------------------------------------------------------
THE CONTRACT 22
------------------------------------------------------------------------
Purchases and Contract Value 22
------------------------------------------------------------------------
Charges and Fees 24
------------------------------------------------------------------------
Death Benefit 26
------------------------------------------------------------------------
Surrenders 29
------------------------------------------------------------------------
ANNUITY PAYOUTS 31
------------------------------------------------------------------------
OTHER PROGRAMS AVAILABLE 33
------------------------------------------------------------------------
OTHER INFORMATION 33
------------------------------------------------------------------------
Legal Matters and Experts 34
------------------------------------------------------------------------
More Information 34
------------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS 34
------------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION 39
------------------------------------------------------------------------
APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT
PLANS 40
------------------------------------------------------------------------
APPENDIX II -- OPTIONAL DEATH BENEFITS -- EXAMPLES 43
------------------------------------------------------------------------
</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 or Fixed Account.
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, Connecticut
06102-5085.
ANNIVERSARY VALUE: The value equal to the Contract Value as of a Contract
Anniversary, increased by the dollar amount of any Premium Payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary.
ANNUAL MAINTENANCE FEE: An annual $30 charge deducted on a Contract Anniversary
or upon full Surrender if the Contract Value at either of those times is less
than $50,000. The charge is deducted proportionately from each Account in which
you are invested.
ANNUAL WITHDRAWAL AMOUNT:This is the amount you can Surrender per Contract Year
without paying a Contingent Deferred Sales Charge. This amount is
non-cumulative, meaning that it cannot be carried over from one year to the
next.
ANNUITANT: The person on whose life the Contract is based. The Annuitant may not
be changed after your Contract is issued.
ANNUITY 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.
This amount is calculated using the Assumed Investment Return for variable
dollar amount Annuity Payouts or the underlying rate of return for fixed dollar
amount Annuity Payouts.
CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before the Annuity Commencement Date. You must name
a Contingent Annuitant before the original Annuitant's death.
CONTINGENT DEFERRED SALES CHARGE: The deferred sales charge that may apply when
you make a full or partial Surrender.
CONTRACT: The individual Annuity Contract and any endorsements or riders. Group
participants and some individuals will receive a certificate rather than a
Contract.
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 VALUE: The total value of the Accounts on any Valuation Day.
CONTRACT YEAR: Any 12 month period between Contract Anniversaries, beginning
with the date the Contract was issued.
DEATH BENEFIT: The amount payable after the Contract Owner or the Annuitant
dies.
DOLLAR COST AVERAGING: A program that allows you to systematically make
transfers between Accounts available in your Contract.
FIXED ACCOUNT: Part of our General Account, where you may allocate all or a
portion of your Contract Value.
GENERAL ACCOUNT: The General Account includes our company assets and any money
you have invested in the Fixed Account.
HARTFORD, WE OR OUR: Hartford Life and Annuity Life Insurance Company. Only
Hartford is a capitalized term in the prospectus.
JOINT ANNUITANT: The person on whose life Annuity Payouts are based if the
Annuitant dies after Annuitization. You may name a Joint Annuitant only if your
Annuity Payout Option provides for a survivor. The Joint Annuitant may not be
changed.
MAXIMUM ANNIVERSARY VALUE: This is the highest Anniversary Value prior to the
deceased's 81st birthday or the date of death, if earlier.
<PAGE>
5
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
NET INVESTMENT FACTOR: This is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next, and is also used to calculate
your Annuity Payout amount.
NON-VALUATION DAY: Any day the New York Stock Exchange is not open for trading.
PAYEE: The person or party you designate to receive Annuity Payouts.
PREMIUM PAYMENT: Money sent to us to be invested in your Annuity.
PREMIUM TAX: A tax charged by a state or municipality on Premium Payments.
REQUIRED MINIMUM DISTRIBUTION: A federal requirement that individuals age 70 1/2
and older must take a distribution from their tax-qualified retirement account
by December 31, each year. For employer sponsored Qualified Contracts, the
individual must begin taking distributions at the age of 70 1/2 or upon
retirement, whichever comes later.
SUB-ACCOUNT VALUE: The value on or before the Annuity Calculation Date, which is
determined on any day by multiplying the number of Accumulation Units by the
Accumulation Unit Value for that Sub-Account.
SURRENDER: A complete or partial withdrawal from your Contract.
SURRENDER VALUE: The amount we pay you if you terminate your Contract before the
Annuity Commencement Date. The Surrender Value is equal to the Contract Value
minus any applicable charges.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. Values
of the Separate Account are determined as of the close of the New York Stock
Exchange, generally 4:00 p.m. Eastern Time.
VALUATION PERIOD: The time span between the close of trading on the New York
Stock Exchange from one Valuation Day to the next.
<PAGE>
6
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
FEE TABLE
<TABLE>
<S> <C>
CONTRACT OWNER TRANSACTION EXPENSES
Sales Charge Imposed on Purchases (as a percentage of
Premium Payments) None
---------------------------------------------------------------------
Contingent Deferred Sales Charge (as a percentage of Premium
Payments) (1)
First Year (2) 7%
---------------------------------------------------------------------
Second Year 6%
---------------------------------------------------------------------
Third Year 6%
---------------------------------------------------------------------
Fourth Year 5%
---------------------------------------------------------------------
Fifth Year 4%
---------------------------------------------------------------------
Sixth Year 3%
---------------------------------------------------------------------
Seventh Year 2%
---------------------------------------------------------------------
Eighth Year 0%
---------------------------------------------------------------------
ANNUAL MAINTENANCE FEE (3) $30
---------------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average
daily Sub-Account Value)
Mortality and Expense Risk Charge 1.25%
---------------------------------------------------------------------
Administrative Fees 0.15%
---------------------------------------------------------------------
Total Separate Account Annual Expenses 1.40%
---------------------------------------------------------------------
OPTIONAL CHARGES (as a percentage of average daily
Sub-Account Value)
Optional Death Benefit Charge 0.15%
---------------------------------------------------------------------
Earnings Protection Benefit Charge 0.20%
---------------------------------------------------------------------
Total Separate Account Annual Expenses with all optional
charges 1.75%
---------------------------------------------------------------------
</TABLE>
(1) Each Premium Payment has its own Contingent Deferred Sales Charge schedule.
The Contingent Deferred Sales Charge is not assessed on partial Surrenders
which do not exceed the Annual Withdrawal Amount.
(2) Length of time from each Premium Payment.
(3) An annual $30 charge deducted on a Contract Anniversary or upon Surrender if
the Contract Value at either of those times is less than $50,000. It is
deducted proportionately from the Accounts in which you are invested at the
time of the charge.
The purpose of the Fee Table and Examples is to assist you in understanding
various costs and expenses that you will pay directly or indirectly. The Fee
Table and Examples reflect expenses of the Separate Account and underlying
portfolios. We will deduct any Premium Taxes that apply. The Examples assume
that any fee waivers or expense reimbursements for the underlying portfolios
will continue for the period shown in the Examples.
The Examples should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. The Annual
Maintenance Fee has been reflected in the Examples by a method intended to show
the "average" impact of the Annual Maintenance Fee on an investment in the
Separate Account. We do this by approximating an "average" 0.06% annual charge.
<PAGE>
7
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
Annual Fund Operating Expenses
As of the Fund's Year End
(As a percentage of average net assets)
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING EXPENSES
MANAGEMENT FEES OTHER EXPENSES (INCLUDING
(INCLUDING (INCLUDING ANY ANY WAIVERS OR ANY
ANY WAIVERS) REIMBURSEMENTS) REIMBURSEMENTS)
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT
SERIES:
Money Market Portfolio 0.50% 0.04% 0.54%
------------------------------------------------------------------------------------------------------------------------
North American Government Securities Portfolio (1) 0.65% 0.36% 1.01%
------------------------------------------------------------------------------------------------------------------------
Diversified Income Portfolio 0.40% 0.08% 0.48%
------------------------------------------------------------------------------------------------------------------------
Balanced Growth Portfolio 0.60% 0.04% 0.64%
------------------------------------------------------------------------------------------------------------------------
Utilities Portfolio 0.65% 0.05% 0.70%
------------------------------------------------------------------------------------------------------------------------
Dividend Growth Portfolio 0.58% 0.02% 0.60%
------------------------------------------------------------------------------------------------------------------------
Value-Added Market Portfolio 0.50% 0.05% 0.55%
------------------------------------------------------------------------------------------------------------------------
Growth Portfolio 0.80% 0.10% 0.90%
------------------------------------------------------------------------------------------------------------------------
American Opportunities Portfolio 0.62% 0.04% 0.66%
------------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity Portfolio (formerly Mid-Cap Growth) (2) 0.75% 0.17% 0.92%
------------------------------------------------------------------------------------------------------------------------
Global Equity Portfolio 1.00% 0.08% 1.08%
------------------------------------------------------------------------------------------------------------------------
Developing Growth Portfolio 0.50% 0.08% 0.58%
------------------------------------------------------------------------------------------------------------------------
Emerging Markets Portfolio (1) 1.25% 0.59% 1.84%
------------------------------------------------------------------------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.:
High Yield Portfolio (3) 0.50% 0.61% 1.11%
------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Portfolio (3) 0.75% 0.62% 1.37%
------------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt Portfolio (3) 0.80% 0.98% 1.78%
------------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity Portfolio (3) 1.25% 1.37% 2.62%
------------------------------------------------------------------------------------------------------------------------
Fixed Income Portfolio (3) 0.40% 0.56% 0.96%
------------------------------------------------------------------------------------------------------------------------
Active International Allocation Portfolio (3) 0.80% 1.83% 2.63%
------------------------------------------------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST:
Strategic Stock Portfolio (4) 0.50% 0.41% 0.91%
------------------------------------------------------------------------------------------------------------------------
Enterprise Portfolio (4) 0.50% 0.12% 0.62%
------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Closed to new investments or transfers of existing Contract Values.
(2) With respect to the Mid-Cap Equity Portfolio, the expense information shown
in the table above has been restated to reflect the current fees. Prior to
December 31, 1999, the investment adviser, Morgan Stanley Dean Witter
Advisors Inc., assumed all expenses of the Portfolio and waived the
compensation provided for the Portfolio in its management agreement with the
Fund.
(3) 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 are annualized estimates. Including these
<PAGE>
8
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
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 0.19% 0.61% 0.80%
---------------------------------------------------------------------------------------------------------
Mid-Cap Value 0.43% 0.62% 1.05%
---------------------------------------------------------------------------------------------------------
Emerging Markets Debt 0.45% 0.98% 1.43%
---------------------------------------------------------------------------------------------------------
Emerging Markets Equity 0.42% 1.37% 1.79%
---------------------------------------------------------------------------------------------------------
Fixed Income 0.14% 0.56% 0.70%
---------------------------------------------------------------------------------------------------------
Active International Allocation 0.00% 1.15% 1.15%
---------------------------------------------------------------------------------------------------------
</TABLE>
(4) 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:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
PORTFOLIO MANAGEMENT FEES EXPENSES EXPENSES
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
Strategic Stock 0.24% 0.41% 0.65%
---------------------------------------------------------------------------------------------------------
Enterprise 0.47% 0.13% 0.60%
---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
9
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
EXAMPLE
YOU WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 INVESTMENT AT THE END OF THE
APPLICABLE TIME PERIOD ASSUMING A 5% ANNUAL RETURN ON ASSETS.
<TABLE>
<CAPTION>
If you Surrender your Contract: If you annuitize your Contract:
SUB-ACCOUNT 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>
-----------------------------------------------------------------------------------------------------------------------------
MONEY MARKET
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 81 $119 $149 $234 $20 $ 63 $108 $234
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 83 $124 $156 $250 $21 $ 67 $116 $249
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 83 $125 $159 $255 $22 $ 69 $118 $255
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 85 $130 $166 $271 $23 $ 74 $126 $270
-----------------------------------------------------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT SECURITIES
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 86 $133 $172 $283 $25 $ 77 $132 $282
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 88 $138 $179 $298 $26 $ 82 $140 $298
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 88 $139 $182 $303 $27 $ 83 $143 $303
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 90 $143 $189 $318 $28 $ 88 $150 $317
-----------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED INCOME
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 81 $118 $146 $228 $19 $ 61 $105 $227
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 82 $122 $153 $244 $21 $ 65 $113 $243
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 83 $123 $156 $249 $21 $ 67 $115 $248
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 84 $128 $163 $265 $23 $ 72 $123 $264
-----------------------------------------------------------------------------------------------------------------------------
BALANCED GROWTH
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 82 $122 $154 $245 $21 $ 66 $113 $244
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 84 $127 $161 $261 $22 $ 70 $121 $260
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 84 $128 $164 $266 $23 $ 72 $124 $265
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 86 $133 $171 $281 $24 $ 77 $131 $280
-----------------------------------------------------------------------------------------------------------------------------
UTILITIES
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 83 $124 $157 $251 $22 $ 68 $116 $251
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 85 $128 $164 $267 $23 $ 72 $124 $266
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 85 $130 $167 $272 $24 $ 74 $127 $271
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 87 $134 $174 $287 $25 $ 78 $134 $287
-----------------------------------------------------------------------------------------------------------------------------
DIVIDEND GROWTH
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 82 $121 $152 $241 $21 $ 65 $111 $240
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 84 $126 $159 $257 $22 $ 69 $119 $256
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 84 $127 $162 $262 $23 $ 71 $122 $261
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 86 $131 $169 $277 $24 $ 75 $129 $276
-----------------------------------------------------------------------------------------------------------------------------
VALUE-ADDED MARKET
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 82 $120 $149 $236 $20 $ 63 $109 $235
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 83 $124 $157 $251 $22 $ 68 $116 $251
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 84 $126 $159 $257 $22 $ 69 $119 $256
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 85 $130 $167 $272 $24 $ 74 $127 $271
-----------------------------------------------------------------------------------------------------------------------------
GROWTH
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 85 $130 $167 $272 $24 $ 74 $127 $271
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 87 $134 $174 $287 $25 $ 78 $134 $287
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 87 $136 $177 $292 $26 $ 80 $137 $292
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 89 $140 $184 $307 $27 $ 85 $145 $307
-----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
If you do not Surrender your Contract:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
--------------------------------------
MONEY MARKET
--------------------------------------
Without any optional benefits $21 $ 63 $109 $234
--------------------------------------
With Optional Death Benefit $22 $ 68 $117 $250
--------------------------------------
With Earnings Protection Benefit $23 $ 70 $119 $255
--------------------------------------
With both optional benefits $24 $ 74 $127 $271
--------------------------------------
NORTH AMERICAN GOVERNMENT SECURITIES
--------------------------------------
Without any optional benefits $25 $ 78 $133 $283
--------------------------------------
With Optional Death Benefit $27 $ 82 $141 $298
--------------------------------------
With Earnings Protection Benefit $27 $ 84 $143 $303
--------------------------------------
With both optional benefits $29 $ 89 $151 $318
--------------------------------------
DIVERSIFIED INCOME
--------------------------------------
Without any optional benefits $20 $ 61 $106 $228
--------------------------------------
With Optional Death Benefit $21 $ 66 $113 $244
--------------------------------------
With Earnings Protection Benefit $22 $ 68 $116 $249
--------------------------------------
With both optional benefits $23 $ 72 $124 $265
--------------------------------------
BALANCED GROWTH
--------------------------------------
Without any optional benefits $22 $ 66 $114 $245
--------------------------------------
With Optional Death Benefit $23 $ 71 $122 $261
--------------------------------------
With Earnings Protection Benefit $24 $ 73 $124 $266
--------------------------------------
With both optional benefits $25 $ 77 $132 $281
--------------------------------------
UTILITIES
--------------------------------------
Without any optional benefits $22 $ 68 $117 $251
--------------------------------------
With Optional Death Benefit $24 $ 73 $125 $267
--------------------------------------
With Earnings Protection Benefit $24 $ 74 $127 $272
--------------------------------------
With both optional benefits $26 $ 79 $135 $287
--------------------------------------
DIVIDEND GROWTH
--------------------------------------
Without any optional benefits $21 $ 65 $112 $241
--------------------------------------
With Optional Death Benefit $23 $ 70 $120 $257
--------------------------------------
With Earnings Protection Benefit $23 $ 71 $122 $262
--------------------------------------
With both optional benefits $25 $ 76 $130 $277
--------------------------------------
VALUE-ADDED MARKET
--------------------------------------
Without any optional benefits $21 $ 64 $109 $236
--------------------------------------
With Optional Death Benefit $22 $ 68 $117 $251
--------------------------------------
With Earnings Protection Benefit $23 $ 70 $120 $257
--------------------------------------
With both optional benefits $24 $ 74 $127 $272
--------------------------------------
GROWTH
--------------------------------------
Without any optional benefits $24 $ 74 $127 $272
--------------------------------------
With Optional Death Benefit $26 $ 79 $135 $287
--------------------------------------
With Earnings Protection Benefit $26 $ 81 $138 $292
--------------------------------------
With both optional benefits $28 $ 85 $145 $307
------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
10
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
If you Surrender your Contract: If you annuitize your Contract:
SUB-ACCOUNT 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>
-----------------------------------------------------------------------------------------------------------------------------
AMERICAN OPPORTUNITIES
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 83 $123 $155 $247 $21 $ 66 $114 $246
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 84 $127 $162 $263 $23 $ 71 $122 $262
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 85 $129 $165 $268 $23 $ 73 $125 $267
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 86 $133 $172 $283 $25 $ 77 $132 $282
-----------------------------------------------------------------------------------------------------------------------------
MID-CAP EQUITY
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 85 $131 $168 $274 $24 $ 74 $128 $273
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 87 $135 $175 $289 $25 $ 79 $135 $289
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 87 $136 $178 $294 $26 $ 81 $138 $294
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 89 $141 $185 $309 $27 $ 85 $146 $308
-----------------------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 87 $135 $176 $290 $25 $ 79 $136 $290
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 88 $140 $183 $305 $27 $ 84 $144 $305
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 89 $141 $185 $310 $27 $ 85 $146 $309
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 91 $145 $193 $325 $29 $ 90 $154 $324
-----------------------------------------------------------------------------------------------------------------------------
DEVELOPING GROWTH
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 82 $120 $151 $239 $20 $ 64 $110 $238
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 83 $125 $158 $254 $22 $ 69 $118 $254
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 84 $126 $161 $260 $22 $ 70 $120 $259
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 85 $131 $168 $275 $24 $ 75 $128 $274
-----------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 95 $157 $212 $364 $33 $102 $174 $363
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 96 $162 $219 $378 $35 $107 $181 $377
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 97 $163 $222 $382 $35 $109 $184 $382
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 98 $167 $229 $396 $37 $113 $191 $395
-----------------------------------------------------------------------------------------------------------------------------
HIGH YIELD
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 87 $136 $177 $293 $26 $ 80 $137 $293
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 89 $141 $184 $308 $27 $ 85 $145 $308
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 89 $142 $187 $313 $28 $ 86 $148 $312
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 91 $146 $194 $328 $29 $ 91 $155 $327
-----------------------------------------------------------------------------------------------------------------------------
MID-CAP VALUE
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 90 $144 $190 $319 $28 $ 88 $151 $318
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 91 $148 $197 $334 $30 $ 93 $158 $333
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 92 $150 $199 $338 $30 $ 94 $161 $338
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 93 $154 $207 $353 $32 $ 99 $168 $352
-----------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS DEBT
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 94 $156 $209 $358 $33 $101 $171 $358
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 96 $160 $217 $372 $34 $105 $178 $372
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 96 $161 $219 $377 $35 $107 $181 $376
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 98 $166 $226 $391 $36 $111 $188 $390
-----------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS EQUITY
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $103 $180 $249 $434 $41 $126 $212 $433
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $104 $184 $256 $447 $43 $130 $219 $446
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $105 $185 $258 $451 $43 $132 $221 $450
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $106 $190 $265 $464 $45 $136 $229 $463
-----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
If you do not Surrender your Contract:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
--------------------------------------
AMERICAN OPPORTUNITIES
--------------------------------------
Without any optional benefits $22 $ 67 $115 $247
--------------------------------------
With Optional Death Benefit $23 $ 72 $123 $263
--------------------------------------
With Earnings Protection Benefit $24 $ 73 $125 $268
--------------------------------------
With both optional benefits $25 $ 78 $133 $283
--------------------------------------
MID-CAP EQUITY
--------------------------------------
Without any optional benefits $24 $ 75 $128 $274
--------------------------------------
With Optional Death Benefit $26 $ 80 $136 $289
--------------------------------------
With Earnings Protection Benefit $26 $ 81 $139 $294
--------------------------------------
With both optional benefits $28 $ 86 $146 $309
--------------------------------------
GLOBAL EQUITY
--------------------------------------
Without any optional benefits $26 $ 80 $137 $290
--------------------------------------
With Optional Death Benefit $28 $ 85 $144 $305
--------------------------------------
With Earnings Protection Benefit $28 $ 86 $147 $310
--------------------------------------
With both optional benefits $30 $ 91 $154 $325
--------------------------------------
DEVELOPING GROWTH
--------------------------------------
Without any optional benefits $21 $ 65 $111 $239
--------------------------------------
With Optional Death Benefit $22 $ 69 $119 $254
--------------------------------------
With Earnings Protection Benefit $23 $ 71 $121 $260
--------------------------------------
With both optional benefits $24 $ 75 $129 $275
--------------------------------------
EMERGING MARKETS
--------------------------------------
Without any optional benefits $34 $103 $175 $364
--------------------------------------
With Optional Death Benefit $35 $108 $182 $378
--------------------------------------
With Earnings Protection Benefit $36 $109 $185 $382
--------------------------------------
With both optional benefits $37 $114 $192 $396
--------------------------------------
HIGH YIELD
--------------------------------------
Without any optional benefits $26 $ 81 $138 $293
--------------------------------------
With Optional Death Benefit $28 $ 86 $146 $308
--------------------------------------
With Earnings Protection Benefit $28 $ 87 $148 $313
--------------------------------------
With both optional benefits $30 $ 92 $156 $328
--------------------------------------
MID-CAP VALUE
--------------------------------------
Without any optional benefits $29 $ 89 $151 $319
--------------------------------------
With Optional Death Benefit $31 $ 93 $159 $334
--------------------------------------
With Earnings Protection Benefit $31 $ 95 $161 $338
--------------------------------------
With both optional benefits $33 $ 99 $169 $353
--------------------------------------
EMERGING MARKETS DEBT
--------------------------------------
Without any optional benefits $33 $101 $172 $358
--------------------------------------
With Optional Death Benefit $35 $106 $179 $372
--------------------------------------
With Earnings Protection Benefit $35 $107 $182 $377
--------------------------------------
With both optional benefits $37 $112 $189 $391
--------------------------------------
EMERGING MARKETS EQUITY
--------------------------------------
Without any optional benefits $42 $126 $213 $434
--------------------------------------
With Optional Death Benefit $43 $131 $220 $447
--------------------------------------
With Earnings Protection Benefit $44 $132 $222 $451
--------------------------------------
With both optional benefits $45 $137 $229 $464
----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
11
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
If you Surrender your Contract: If you annuitize your Contract:
SUB-ACCOUNT 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>
-----------------------------------------------------------------------------------------------------------------------------
FIXED INCOME
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 86 $132 $170 $278 $24 $ 76 $130 $277
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 87 $136 $177 $293 $26 $ 80 $137 $293
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 88 $138 $179 $298 $26 $ 82 $140 $298
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 89 $142 $187 $313 $28 $ 86 $148 $312
-----------------------------------------------------------------------------------------------------------------------------
ACTIVE INTERNATIONAL ALLOCATION
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $103 $180 $N/A $N/A $41 $126 $N/A $N/A
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $104 $184 $N/A $N/A $43 $131 $N/A $N/A
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $105 $186 $N/A $N/A $43 $132 $N/A $N/A
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $106 $190 $N/A $N/A $45 $137 $N/A $N/A
-----------------------------------------------------------------------------------------------------------------------------
STRATEGIC STOCK
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 85 $130 $167 $273 $24 $ 74 $127 $272
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 87 $135 $175 $288 $25 $ 79 $135 $288
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 87 $136 $177 $293 $26 $ 80 $137 $293
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 89 $141 $184 $308 $27 $ 85 $145 $308
-----------------------------------------------------------------------------------------------------------------------------
ENTERPRISE
-----------------------------------------------------------------------------------------------------------------------------
Without any optional benefits $ 82 $122 $153 $243 $21 $ 65 $112 $242
-----------------------------------------------------------------------------------------------------------------------------
With Optional Death Benefit $ 84 $126 $160 $259 $22 $ 70 $120 $258
-----------------------------------------------------------------------------------------------------------------------------
With Earnings Protection Benefit $ 84 $128 $163 $264 $23 $ 71 $123 $263
-----------------------------------------------------------------------------------------------------------------------------
With both optional benefits $ 86 $132 $170 $279 $24 $ 76 $130 $278
-----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
If you do not Surrender your Contract:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
--------------------------------------
FIXED INCOME
--------------------------------------
Without any optional benefits $25 $ 76 $130 $278
--------------------------------------
With Optional Death Benefit $26 $ 81 $138 $293
--------------------------------------
With Earnings Protection Benefit $27 $ 82 $141 $298
--------------------------------------
With both optional benefits $28 $ 87 $148 $313
--------------------------------------
ACTIVE INTERNATIONAL ALLOCATION
--------------------------------------
Without any optional benefits $42 $127 $N/A $N/A
--------------------------------------
With Optional Death Benefit $43 $131 $N/A $N/A
--------------------------------------
With Earnings Protection Benefit $44 $133 $N/A $N/A
--------------------------------------
With both optional benefits $46 $137 $N/A $N/A
--------------------------------------
STRATEGIC STOCK
--------------------------------------
Without any optional benefits $24 $ 75 $128 $273
--------------------------------------
With Optional Death Benefit $26 $ 79 $136 $288
--------------------------------------
With Earnings Protection Benefit $26 $ 81 $138 $293
--------------------------------------
With both optional benefits $28 $ 86 $146 $308
--------------------------------------
ENTERPRISE
--------------------------------------
Without any optional benefits $21 $ 66 $113 $243
--------------------------------------
With Optional Death Benefit $23 $ 70 $121 $259
--------------------------------------
With Earnings Protection Benefit $23 $ 72 $123 $264
--------------------------------------
With both optional benefits $25 $ 77 $131 $279
--------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
12
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES
(For an Accumulation Unit outstanding throughout the period)
The following audited information from the financial statements of the Separate
Account for the year ended December 31, 1999, has 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 unaudited information, which reflects the
deductions for the Optional Death Benefit, has been derived from the audited
financial statements of the Separate Account. No information is shown for the
Earnings Protection Benefit because as of December 31, 1999, the Earnings
Protection Benefit was not available.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
WITH THE
WITHOUT THE OPTIONAL
OPTIONAL DEATH DEATH BENEFIT
BENEFIT (UNAUDITED)
<S> <C> <C>
------------------------------------------------------------------------------------------------
MONEY MARKET SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14, 1994)
Accumulation Unit Value at beginning of period $11.728 $11.850
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.117 $12.105
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 9,489 179
------------------------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT SECURITIES SUB-ACCOUNT (INCEPTION
DATE SEPTEMBER 14, 1994)
Accumulation Unit Value at beginning of period $11.642 $11.763
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.870 $11.858
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 684 6
------------------------------------------------------------------------------------------------
DIVERSIFIED INCOME SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14,
1994)
Accumulation Unit Value at beginning of period $12.577 $12.511
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.175 $12.163
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 6,139 55
------------------------------------------------------------------------------------------------
BALANCED GROWTH SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14,
1994)
Accumulation Unit Value at beginning of period $17.859 $19.514
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $18.230 $18.212
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 5,961 122
------------------------------------------------------------------------------------------------
UTILITIES SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14, 1994)
Accumulation Unit Value at beginning of period $20.391 $22.516
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $28.898 $28.870
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 5,030 126
------------------------------------------------------------------------------------------------
DIVIDEND GROWTH SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14,
1994)
Accumulation Unit Value at beginning of period $24.847 $28.283
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $24.631 $24.606
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 26,039 414
------------------------------------------------------------------------------------------------
VALUE-ADDED MARKET SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14,
1994)
Accumulation Unit Value at beginning of period $19.843 $22.283
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $21.945 $21.923
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 7,133 123
------------------------------------------------------------------------------------------------
GROWTH SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14, 1994)
Accumulation Unit Value at beginning of period $18.530 $20.335
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $25.416 $25.391
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 3,012 97
------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
13
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
WITH THE
WITHOUT THE OPTIONAL
OPTIONAL DEATH DEATH BENEFIT
BENEFIT (UNAUDITED)
<S> <C> <C>
------------------------------------------------------------------------------------------------
AMERICAN OPPORTUNITIES SUB-ACCOUNT (INCEPTION DATE SEPTEMBER
14, 1994)
Accumulation Unit Value at beginning of period $25.729 $29.294
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $39.532 $39.493
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 16,616 392
------------------------------------------------------------------------------------------------
MID-CAP EQUITY SUB-ACCOUNT (INCEPTION DATE JANUARY 2, 1997)
Accumulation Unit Value at beginning of period $11.913 $13.393
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $22.568 $22.545
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 2,887 108
------------------------------------------------------------------------------------------------
GLOBAL EQUITY SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14,
1994)
Accumulation Unit Value at beginning of period $14.918 $16.178
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $19.733 $19.713
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 7,432 132
------------------------------------------------------------------------------------------------
DEVELOPING GROWTH SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14,
1994)
Accumulation Unit Value at beginning of period $20.318 $22.022
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $38.574 $38.535
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 3,699 62
------------------------------------------------------------------------------------------------
EMERGING MARKETS SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14,
1994)
Accumulation Unit Value at beginning of period $ 7.981 $ 9.750
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $14.444 $14.430
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 1,421 16
------------------------------------------------------------------------------------------------
HIGH YIELD SUB-ACCOUNT (INCEPTION DATE APRIL 1, 1998)
Accumulation Unit Value at beginning of period $10.000 $10.513
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.554 $10.544
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 1,926 71
------------------------------------------------------------------------------------------------
MID-CAP VALUE SUB-ACCOUNT (INCEPTION DATE APRIL 1, 1998)
Accumulation Unit Value at beginning of period $10.000 $10.692
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.977 $11.965
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 1,323 129
------------------------------------------------------------------------------------------------
EMERGING MARKETS DEBT SUB-ACCOUNT (INCEPTION DATE APRIL 1,
1998)
Accumulation Unit Value at beginning of period $10.000 $ 7.668
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 8.615 $ 8.607
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 78 15
------------------------------------------------------------------------------------------------
EMERGING MARKETS EQUITY SUB-ACCOUNT (INCEPTION DATE
SEPTEMBER 7, 1999)
Accumulation Unit Value at beginning of period $10.000 $10.000
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $14.353 $14.347
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 170 33
------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
14
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
WITH THE
WITHOUT THE OPTIONAL
OPTIONAL DEATH DEATH BENEFIT
BENEFIT (UNAUDITED)
<S> <C> <C>
------------------------------------------------------------------------------------------------
FIXED INCOME SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 7, 1999)
Accumulation Unit Value at beginning of period $10.000 $10.000
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.065 $10.061
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 109 32
------------------------------------------------------------------------------------------------
ACTIVE INTERNATIONAL ALLOCATION SUB-ACCOUNT (INCEPTION DATE
SEPTEMBER 20, 1999)
Accumulation Unit Value at beginning of period $10.000 $10.000
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.718 $11.713
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 36 9
------------------------------------------------------------------------------------------------
STRATEGIC STOCK SUB-ACCOUNT (INCEPTION DATE APRIL 1, 1998)
Accumulation Unit Value at beginning of period $10.000 $11.812
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.093 $10.083
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 1,047 48
------------------------------------------------------------------------------------------------
ENTERPRISE SUB-ACCOUNT (INCEPTION DATE APRIL 1, 1998)
Accumulation Unit Value at beginning of period $10.000 $11.283
------------------------------------------------------------------------------------------------
Accumulation Unit Value at end of period $13.219 $13.206
------------------------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 1,421 149
------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
15
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 $1,000 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 Contract without paying a Contingent Deferred Sales
Charge. You may bear the investment risk for your Premium Payment prior to
our receipt of your request for cancellation.
WHAT TYPE OF SALES CHARGE WILL I PAY?
You don't pay a sales charge when you purchase your Contract. We may charge you
a Contingent Deferred Sales Charge when you partially or fully Surrender your
Contract. The Contingent Deferred Sales Charge will depend on the amount you
choose to Surrender and the length of time the Premium Payment you made has been
in your Contract.
The percentage used to calculate the Contingent Deferred Sales Charge is equal
to:
<TABLE>
<CAPTION>
NUMBER OF YEARS FROM CONTINGENT DEFERRED
PREMIUM PAYMENT SALES CHARGE
<S> <C>
-----------------------------------------
1 7%
-----------------------------------------
2 6%
-----------------------------------------
3 6%
-----------------------------------------
4 5%
-----------------------------------------
5 4%
-----------------------------------------
6 3%
-----------------------------------------
7 2%
-----------------------------------------
8 or more 0%
-----------------------------------------
</TABLE>
You won't be charged a Contingent Deferred Sales Charge on:
X The Annual Withdrawal Amount
X Premium Payments or earnings that have been in your Contract for more than
seven years.
X Distributions made due to death
X Most payments we made to you as part of your Contract Payout
IS THERE AN ANNUAL MAINTENANCE FEE?
We deduct this $30.00 fee each year on your Contract Anniversary or when you
fully Surrender your Contract, if, on either of those dates, the value of your
Contract is less than $50,000.
WHAT CHARGES WILL I PAY ON AN ANNUAL BASIS?
In addition to the Annual Maintenance Fee, you pay the following charges each
year:
- MORTALITY AND EXPENSE RISK CHARGE This charge is for insurance. It is
subtracted daily and is equal to an annual charge of 1.25% of your Contract
Value invested in the Portfolios.
- ADMINISTRATIVE CHARGE This charge is for administration. It is subtracted
daily and is equal to an annual charge of 0.15% of your Contract Value
invested in the Funds.
- ANNUAL FUND OPERATING EXPENSES These are charges for the Portfolios. See the
Annual Fund Operating Expenses table for more complete information and the
Portfolios' 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 that is equal to an annual
charge of 0.15% of your Contract Value invested in the Portfolios.
- EARNINGS PROTECTION BENEFIT CHARGE If you elect the Earnings Protection
Benefit, we will subtract an additional charge on a daily basis until we begin
to make Annuity Payouts that is equal to an annual charge of 0.20% of your
Contract Value invested in the Portfolios.
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. Once Annuity Payouts begin, you may take
full or partial Surrenders under the Payments for a Period Certain, Life Annuity
with Payments for a Period Certain or the Joint and Last Survivor Life Annuity
with Payments for a Period Certain Annuity Options, but only if you selected the
variable dollar amount Annuity Payouts.
- You may have to pay income tax on the money you take out and, if you
Surrender before you are age 59 1/2, you may have to pay an income tax
penalty.
- You may have to pay a Contingent Deferred Sales Charge on the money you
Surrender.
WILL HARTFORD PAY A DEATH BENEFIT?
There is a Death Benefit if the Contract Owner, joint owner or the Annuitant die
before we begin to make Annuity Payouts. The Death Benefit will be calculated as
of the date we receive a certified death certificate or other legal document
acceptable to us. The Death Benefit amount will remain invested in the Sub-
Accounts according to your last instructions and will fluctuate with the
performance of the underlying Portfolios.
The Death Benefit is the greater of:
- The total Premium Payments you have made to us minus the dollar amount of any
partial Surrenders, or
- The Contract Value of your Contract, or
<PAGE>
16
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
- 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.
You may also elect the Optional Death Benefit at an additional charge. The
Optional Death Benefit adds the Interest Accumulation Value to the calculation.
The Interest Accumulation Value will be:
- Your Contract Value on the date we add the Optional Death Benefit to your
Contract;
- Plus any Premium Payments made after the Optional Death Benefit is added;
- Minus any partial Surrenders after the Optional Death Benefit is added;
- Compounded daily at an annual interest rate of 5%.
The Optional Death Benefit may not be available if the Contract Owner or
Annuitant is age 76 or older. For Contracts issued in the state of Washington,
the Optional Death Benefit is not available. Once you elect the Optional Death
Benefit, you cannot cancel it.
You may also elect the Earnings Protection Benefit at an additional charge. The
Earnings Protection Benefit may not currently be available in your state and is
not available in Washington. The Earnings Protection Benefit will not be
available if you or your Annuitant is age 76 or older on the date the Earnings
Protection Benefit is added to your Contract. Once you elect the Earnings
Protection Benefit, you cannot cancel it.
If you and your Annuitant are age 69 or under on the date the Earnings
Protection Benefit is added to your Contract, the death benefit calculation is
the greater of:
- The total Premium Payments you have made to us minus the dollar amount of any
partial Surrenders, or
- The Maximum Anniversary Value, or
- Your Contract Value on the date we receive a death certificate or other legal
document acceptable to us plus 40% of the Contract gain since the date the
Earnings Protection Benefit was added to your Contract.
If you or your Annuitant are age 70 through 75 on the date the Earnings
Protection Benefit is added to your Contract, the percentage of Contract gain
added to your Contract Value is reduced to 25%.
Your Contract gain is limited to or "capped" at a maximum of 200% of Contract
Value on the date the Earnings Protection Benefit was added to your Contract
plus Premium Payments not previously withdrawn made after the Earnings
Protection Benefit was added to your Contract, excluding any Premium Payments
made in the 12 months before the date of death. We subtract any adjustments for
partial Surrenders.
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: Life Annuity, Life Annuity with Cash Refund, Life
Annuity with Payments for a Period Certain, Joint and Last Survivor Life
Annuity, Joint and Last Survivor Life Annuity with Payments for a Period Certain
and Payments for a Period Certain. We may make other Annuity Payout Options
available at any time.
You must begin to take payments before the Annuitant's 90th birthday or the end
of the 10th Contract Year, whichever comes later, unless you elect a later date
to begin receiving payments subject to the laws and regulations then in effect
and our approval. If you do not tell us what Annuity Payout Option you want
before that time, we will make Automatic Annuity Payouts under the Life Annuity
with Payments for a Period Certain Payout Option with a ten-year period certain
payment option. Automatic Annuity Payouts will be fixed-dollar amount Annuity
Payouts, variable-dollar amount Annuity Payouts, or a combination of fixed or
variable-dollar amount Annuity Payouts, depending on the investment allocation
of your Account in effect on the Annuity Commencement Date.
<PAGE>
17
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
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. 4/1/00 A+ Financial performance
--------------------------------------------------------------------------
Insurer financial
Standard & Poor's 8/1/00 AA strength
--------------------------------------------------------------------------
Fitch 5/1/00 AA+ Financial strength
--------------------------------------------------------------------------
</TABLE>
These ratings apply to Hartford's ability to meet its obligations under the
Contract. The ratings do not apply to the Separate Account or the underlying
Funds.
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 22, 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 Contract 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, The Universal
Institutional 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 accompanying Funds' prospectuses and the Statements of
Additional Information. The Funds' prospectuses should be read in conjunction
with this Prospectus before investing.
The investment goals of each of the portfolios are as follows:
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), repurchase agreements 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
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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 25% 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 both capital appreciation and current
income.
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 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 medium
sized companies (that is, companies whose equity market capitalization falls
within the range of companies comprising the S&P 400 Index).
GLOBAL EQUITY PORTFOLIO -- Seeks to obtain 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.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.:
HIGH YIELD PORTFOLIO -- Seeks above-average total return over a market cycle of
three to five years by investing primarily in high yield securities (commonly
referred to as "junk bonds"). The Portfolio also may invest in investment grade
fixed income securities, including U.S. Government securities, corporate bonds
and mortgage securities. The Portfolio may invest to a limited extent in foreign
fixed income securities, including emerging market securities. The Investment
Adviser ay use futures, swaps and other types of derivatives in managing the
Portfolio.
MID CAP VALUE PORTFOLIO -- Seeks above-average total return over a market cycle
of three to five years by investing in common stocks of companies with
capitalizations in the range of companies included in the S&P MidCap 400 Index
(currently $500 million to $6 billion). The Portfolio purchases stocks that
typically do not pay dividends. The Investment Adviser analyzes securities to
identify stocks that are undervalued, and measures the relative attractiveness
of the Portfolio's current holdings against potential purchases.
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. The Investment Adviser seeks high total return by investing in a
portfolio of emerging market debt that offers low correlation to many other
asset classes. Using macroeconomic and fundamental analysis, the Investment
Adviser seeks to identify developing countries that are undervalued and have
attractive or improving fundamentals. After the country allocation is
determined, the sector and security selection is made within each county.
EMERGING MARKETS EQUITY PORTFOLIO -- Seeks long-term capital appreciation by
investing primarily in equity securities of issuers in emerging market
countries. The Investment Adviser seeks to maximize returns by investing in
growth-oriented equity securities in emerging markets. The Investment Adviser's
investment approach combines top-down country allocation with bottom-up stock
selection. Investment selection criteria include attractive growth
characteristics, reasonable valuations and managements with a strong shareholder
value orientation.
FIXED INCOME PORTFOLIO -- Seeks above-average total return over a market cycle
of three to five years by investing primarily in a diversified mix of dollar
denominated investment grade fixed income securities, particularly U.S.
Government, corporate and mortgage securities. The Portfolio ordinarily will
maintain an average weighted maturity in excess of five years. The Portfolio may
invest opportunistically in non-dollar denominated securities and below
investment grade securities; and it may use futures, swaps and other types of
derivatives in managing the Portfolio.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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. The Investment
Adviser seeks to maintain a diversified portfolio of international equity
securities based on a top-down approach that emphasizes country and sector
selection and weighting rather than individual stock selection. The Investment
Adviser capitalizes on the significance of country and sector selection in
international equity portfolio returns by over and underweighting countries
based on three factors: (i) valuation; (ii) fundamental change; and
(iii) short-term market momentum/technicals.
VAN KAMPEN LIFE INVESTMENT TRUST:
STRATEGIC STOCK PORTFOLIO -- Seeks an above average total return through a
combination of potential capital appreciation and dividend income, consistent
with the preservation of invested capital. Under normal market conditions, the
Portfolio's investment adviser seeks to achieve the investment objectives by
investing in a portfolio of high dividend yielding equity securities of
companies 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 Portfolio's investment adviser 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 Morgan Stanley 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, the Mid-Cap
Equity Portfolio and the Emerging Markets Portfolio, TCW Investment Management
Company ("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 Advisors, 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
Universal Institutional 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
Management, provides investment advice and portfolio management services for the
Emerging Markets Debt, Emerging Markets Equity and Active International
Allocation Portfolios, subject to the supervision of The Universal Institutional
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 $90 billion under management or supervision as of December 31, 1999. Van
Kampen Investments Inc.'s more than 50 open-end and 39 closed-end funds and more
than 2,700 unit investment trusts are professionally distributed by leading
authorized dealers nationwide.
MIXED AND SHARED FUNDING -- Shares of the Portfolios may be sold to our other
separate accounts and our insurance company
* On December 1, 1998, Morgan Stanley Asset Management Inc. changed its name to
Morgan Stanley Dean Witter Investment Management Inc. but continues to do
business in certain instances using the name Morgan Stanley Asset Management.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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affiliates or other unaffiliated insurance companies to serve as the underlying
investment for both variable annuity contracts and variable life insurance
policies, a practice known as "mixed and shared funding." As a result, there is
a possibility that a material conflict may arise between the interests of
Contract Owners, and of owners of other contracts whose contract values are
allocated to one or more of these other separate accounts investing in any one
of the Portfolios. In the event of any such material conflicts, we will consider
what action may be appropriate, including removing the Portfolio from the
Separate Account or replacing the Portfolio with another Portfolio. There are
certain risks associated with mixed and shared funding, as disclosed in the
Portfolios' prospectus.
VOTING RIGHTS -- We are the legal owners of all Portfolio shares held in the
Separate Account and we have the right to vote at the Portfolio's shareholder
meetings. To the extent required by federal securities laws or regulations, we
will:
- Notify you of any Portfolio shareholders' meeting if the shares held for your
Contract may be voted.
- Send proxy materials and a form of instructions that you can use to tell us
how to vote the Portfolio shares held for your Contract.
- Arrange for the handling and tallying of proxies received from Contract
Owners.
- Vote all Portfolio shares attributable to your Contract according to
instructions received from you, and
- Vote all Portfolio shares for which no voting instructions are received in the
same proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present interpretation,
change to permit us to vote Portfolio shares on our own, we may decide to do so.
You may attend any Shareholder Meeting at which shares held for your Contract
may be voted. After we begin to make Annuity Payouts to you, the number of votes
you have will decrease.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF PORTFOLIOS -- We reserve the right,
subject to any applicable law, to make certain changes to the Portfolios offered
under your contract. We may, in our sole discretion, establish new Portfolios.
New Portfolios will be made available to existing Contract Owners as we
determine appropriate. We may also close one or more Portfolios to additional
Payments or transfers from existing Sub-Accounts.
We reserve the right to eliminate the shares of any of the Portfolios for any
reason and to substitute shares of another registered investment company for the
shares of any Portfolio already purchased or to be purchased in the future by
the Separate Account. To the extent required by the Investment Company Act of
1940 (the "1940 Act"), substitutions of shares attributable to your interest in
a Portfolio will not be made until we have the approval of the Commission and we
have notified you of the change.
In the event of any substitution or change, we may, by appropriate endorsement,
make 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 the
Contract Owners, the Separate Account may be operated as a management company
under the 1940 Act or any other form permitted by law, may be de-registered
under the 1940 Act in the event such registration is no longer required, or may
be combined with one or more other Separate Accounts.
ADMINISTRATIVE SERVICES -- Hartford has entered into agreements with the
investment advisers or distributors of many of the Portfolios. Under the terms
of these agreements, Hartford provides administrative services and the
Portfolios pay a fee to Hartford that is usually based on an annual percentage
of the average daily net assets of the Portfolios. These agreements may be
different for each Portfolio or each Portfolio family.
PERFORMANCE RELATED INFORMATION
--------------------------------------------------------------------------------
The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
When a Sub-Account advertises its STANDARDIZED TOTAL RETURN, it will usually be
calculated since the date of the Sub-Account's inception for one year, five
years, and ten years or some other relevant periods if the Sub-Account has not
been in existence for at least ten years. Total return is measured by comparing
the value of an investment in the Sub-Account at the beginning of the relevant
period to the value of the investment at the end of the period.
The Separate Account may also advertise NON-STANDARD TOTAL RETURNS THAT PRE-DATE
THE INCEPTION DATE OF THE SEPARATE ACCOUNT. These non-standardized total returns
are calculated by assuming that the Sub-Accounts have been in existence for the
same periods as the underlying Portfolios and by taking deductions for charges
equal to those currently assessed against the Sub-Accounts. These
non-standardized returns must be accompanied by standardized total returns.
If applicable, the Sub-Accounts may advertise YIELD IN ADDITION TO TOTAL RETURN.
The yield will be computed in the following manner: The net investment income
per unit earned during a recent one month period 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.
A money market Sub-Account may advertise YIELD AND EFFECTIVE YIELD. The yield of
a Sub-Account is based upon the income earned by the Sub-Account over a
seven-day period and then annualized, i.e. the income earned in the period is
assumed to be
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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earned every seven days over a 52-week period and stated as a percentage of the
investment. Effective yield is calculated similarly but when annualized, the
income earned by the investment is assumed to be reinvested in Sub-Account units
and thus compounded in the course of a 52-week period. Yield and effective yield
include the recurring charges at the Separate Account level including the Annual
Maintenance Fee.
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.
FIXED ACCOUNT
--------------------------------------------------------------------------------
IMPORTANT INFORMATION YOU SHOULD KNOW: THIS PORTION OF THE PROSPECTUS RELATING
TO THE FIXED ACCOUNT IS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 ("1933
ACT") AND THE FIXED ACCOUNT IS NOT REGISTERED AS AN INVESTMENT COMPANY UNDER THE
1940 ACT. THE FIXED ACCOUNT OR ANY OF ITS INTERESTS ARE NOT SUBJECT TO THE
PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT, AND THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURE REGARDING THE
FIXED ACCOUNT. THE FOLLOWING DISCLOSURE ABOUT THE FIXED ACCOUNT MAY BE SUBJECT
TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS
REGARDING THE ACCURACY AND COMPLETENESS OF DISCLOSURE.
Premium Payments and Contract Values allocated to the Fixed Account become a
part of our General Account assets. We invest the assets of the General Account
according to the laws governing the investments of insurance company General
Accounts.
Currently, we guarantee that we will credit interest at a rate of not less than
3% per year, compounded annually, to amounts you allocate to the Fixed Account.
We reserve the right to change the rate subject only to applicable state
insurance law. We may credit interest at a rate in excess of 3% per year. We
will periodically publish the Fixed Account interest rates currently in effect.
There is no specific formula for determining interest rates. Some of the factors
that we may consider in determining whether to credit excess interest are;
general economic trends, rates of return currently available and anticipated on
our investments, regulatory and tax requirements and competitive factors. We
will account for any deductions, Surrenders or transfers from the Fixed Account
on a "first-in first-out" basis.
IMPORTANT: ANY INTEREST CREDITED TO AMOUNTS YOU ALLOCATE TO THE FIXED ACCOUNT IN
EXCESS OF 3% PER YEAR WILL BE DETERMINED AT OUR SOLE DISCRETION. YOU ASSUME THE
RISK THAT INTEREST CREDITED TO THE FIXED ACCOUNT MAY NOT EXCEED THE MINIMUM
GUARANTEE OF 3% FOR ANY GIVEN YEAR.
From time to time, we may credit increased interest rates under certain programs
established in our sole discretion.
DOLLAR COST AVERAGING PLUS ("DCA") PROGRAMS -- Currently, you may enroll in a
special pre-authorized transfer program known as our DCA Plus Program (the
"Program"). Under this Program, Contract Owners who enroll may allocate a
minimum of $5,000 of their Premium Payment into the Program (we may allow a
lower minimum Premium Payment for qualified plan transfers or rollovers,
including IRAs) and pre-authorize transfers to any of the Sub-Accounts under
either the 6-Month Transfer Program or 12-Month Transfer Program. The 6-Month
Transfer Program and the 12-Month Transfer Program will generally have different
credited interest rates. Under the 6-Month Transfer Program, the interest rate
can accrue up to 6-months and all Premium Payments and accrued interest must be
transferred from the Program to the selected Sub-Accounts in 3 to 6 months.
Under the 12-Month Transfer Program, the interest rate can accrue up to 12
months and all Premium Payments and accrued interest must be transferred to the
selected Sub-Accounts in 7 to 12-months. This will be accomplished by monthly
transfers for the period selected and a final transfer of the entire amount
remaining in the Program.
The pre-authorized transfers will begin within 15 days of receipt of the Program
payment provided we receive complete enrollment instructions. If we do not
receive complete Program enrollment instructions within 15 days of receipt of
the initial Program payment, the Program will be voided and the entire balance
in the Program will be transferred to the Accounts designated by you. If you do
not designate an Account, you will receive the Fixed Account's current effective
interest rate. Any subsequent payments we receive within the Program period
selected will be allocated to the Sub-Accounts over the remainder of that
Program transfer period.
You may elect to terminate the pre-authorized transfers by calling or writing us
of your intent to cancel enrollment in the Program. Upon cancellation, you will
no longer receive the Program interest rate and unless we receive instructions
to the contrary, the amounts remaining in the Program may accrue the interest
rate currently in effect for the Fixed Account.
We reserve the right to discontinue, modify or amend the Program or any other
interest rate program we establish. Any change to the Program will not affect
Contract Owners currently enrolled in the Program.
You may only have one DCA program in place at one time.
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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.
If you are purchasing the Contract for use in an IRA or other qualified
retirement plan, you should consider other features of the Contract besides tax
deferral, since any investment vehicle used within an IRA or other qualified
plan receives tax deferred treatment under the Code.
We have filed the Contract with the Earnings Protection Benefit with the
Internal Revenue Service for approval for use in an IRA. For more information,
please see Appendix I -- Information Regarding Tax-Qualified Retirement Plans,
Individual Retirement Annuities ("IRAs") Under Section 408. Please consult your
qualified tax adviser if you are considering adding the Earnings Protection
Benefit to your Contract if it is an IRA.
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 $1,000. 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 85 on the date that your
Contract is issued. You must be of legal age in the state where the Contract is
being purchased or a guardian must act on your behalf.
For Contracts issued in Oregon, premium payments will only be accepted prior to
the third Contract Anniversary. For Contracts issued in Massachusetts,
subsequent premium payments will only be accepted until the Annuitant's 63rd
birthday or the third Contract Anniversary, whichever is later.
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 invested on the same Valuation Day. If we
receive your Premium Payment after the close of the New York Stock Exchange, it
will be invested on the next Valuation Day. If we receive your subsequent
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 you 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 will not deduct any Contingent Deferred Sales Charges during this
time. We may require additional information, including a signature guarantee,
before we can cancel your Contract.
You bear the investment risk from the time the Contract is issued until we
receive your complete cancellation request.
The amount we pay you upon cancellation depends on the requirements of the state
where you purchased your Contract, the method of purchase, the type of Contract
you purchased and your age.
HOW IS THE VALUE OF MY CONTRACT CALCULATED BEFORE THE ANNUITY COMMENCEMENT DATE?
The Contract Value is the sum of all Accounts. There are two things that affect
your Sub-Account value: (1) the number of Accumulation Units and (2) the
Accumulation Unit Value. The Sub-Account value is determined by multiplying the
number of
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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 Portfolios.
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 Portfolio held in the Sub-Account at the
end of the current Valuation Day divided by
- The net asset value per share of each Portfolio held in the Sub-Account at the
end of the prior Valuation Day; minus
- The daily mortality and expense risk charge and any other applicable charge
such as any Optional Death Benefit charge adjusted for the number of days in
the period.
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 Florida, Maryland, or 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
Owners' Accounts add up to more than $2 million, we will not accept transfer
instructions from the power of attorney unless the power of attorney has entered
into a Third Party Transfer Services Agreement with us.
Some states may have different restrictions.
FIXED ACCOUNT TRANSFERS -- During each Contract Year, you may make transfers out
of the Fixed Account to Sub-Accounts. All transfer allocations must be in whole
numbers (e.g., 1%). You may transfer either:
- 30% of your total amount in the Fixed Account, or
- An amount equal to the largest previous transfer.
These transfer limits do not include transfers done through Dollar Cost
Averaging or the DCA Plus Program.
If your interest rate renews at a rate at least 1% lower than your prior
interest rate, you may transfer an amount equal to up to 100% of the amount to
be invested at the renewal rate. You must make this transfer request within 60
days of being notified of the renewal rate.
FIXED ACCOUNT TRANSFER RESTRICTIONS -- We reserve the right to defer transfers
from the Fixed Account for up to 6 months from the date of your request. After
any transfer, you must wait six months before moving Sub-Account Values back to
the Fixed Account.
TELEPHONE AND INTERNET TRANSFERS -- In most states, you can make transfers:
- By calling us at 1-800-862-6668
- Electronically, when available, by the Internet through our website at
http://online.hartfordlife.com
Transfer instructions received by telephone on any Valuation Day before the
close of the New York Stock Exchange will be carried out that day. Otherwise,
the instructions will be carried out at the close of the New York Stock Exchange
on the next Valuation Day.
Transfer instructions you send electronically are considered to be received by
Hartford at the time and date stated on the electronic acknowledgement Hartford
returns to you. If the time and date indicated on the acknowledgement is before
the close of the New York Stock Exchange on a Valuation Day, the instructions
will be carried out that day. Otherwise, the instructions will be carried out at
the close of the New York Stock Exchange the next Valuation Day. If you do not
receive an electronic acknowledgement, you should telephone us as soon as
possible.
We will send you a confirmation when we process your transfer. You are
responsible for verifying transfer confirmations and promptly advising us of any
errors within 30 days of receiving the confirmation.
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Telephone or Internet transfer requests may currently only be cancelled by
calling us before the close of the New York Stock Exchange.
Hartford, our agents or our affiliates are NOT responsible for losses resulting
from telephone or electronic requests that we believe are genuine. We will use
reasonable procedures to confirm that instructions received by telephone or
through our website are genuine, including a requirement that contract owners
provide certain identification information, including a personal identification
number. We record all telephone transfer instructions. We reserve the right to
suspend, modify, or terminate telephone or electronic transfer privileges at any
time.
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, subject to our
transfer restrictions, from your designated third party 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
The following charges and fees are associated with the Contract:
1. THE CONTINGENT DEFERRED SALES CHARGE
The Contingent Deferred Sales Charge covers some of the expenses relating to the
sale and distribution of the Contract, including commissions paid to registered
representatives and the cost of preparing sales literature and other promotional
activities.
We may assess a Contingent Deferred Sales Charge when you request a full or
partial Surrender. The Contingent Deferred Sales Charge is based on the amount
you choose to Surrender and how long your Premium Payments have been in the
Contract. Each Premium Payment has its own Contingent Deferred Sales Charge
schedule. Premium Payments are Surrendered in the order in which they were
received. The longer you leave your Premium Payments in the Contract, the lower
the Contingent Deferred Sales Charge will be when you Surrender. The amount
assessed a Contingent Deferred Sales Charge will not exceed your total Premium
Payments.
The percentage used to calculate the Contingent Deferred Sales Charge is equal
to:
<TABLE>
<CAPTION>
NUMBER OF YEARS FROM CONTINGENT DEFERRED
PREMIUM PAYMENT SALES CHARGE
<S> <C>
-----------------------------------------
1 7%
-----------------------------------------
2 6%
-----------------------------------------
3 6%
-----------------------------------------
4 5%
-----------------------------------------
5 4%
-----------------------------------------
6 3%
-----------------------------------------
7 2%
-----------------------------------------
8 or more 0%
-----------------------------------------
</TABLE>
For example, you made an initial Premium Payment of $10,000 five years ago and
an additional Premium Payment of $20,000 one year ago. If you request a partial
withdrawal of $15,000 and you have not taken your Annual Withdrawal Amount for
the year, we will deduct a Contingent Deferred Sales Charge as follows:
- Hartford will Surrender the Annual Withdrawal Amount which is equal to 15% of
your total Premium Payments or $4,500 without charging a Contingent Deferred
Sales Charge.
- We will then Surrender the Premium Payments that have been in the Contract the
longest.
- That means we would Surrender the entire $10,000 initial Premium Payment and
deduct a Contingent Deferred Sales Charge of 4% on that amount or $400.00
- The remaining $500 will come from the additional Premium Payment made one year
ago and we will deduct a Contingent Deferred Sales Charge of 7% of the $500 or
$35.00.
- Your Contingent Deferred Sales Charge is $435.00.
If you have any questions about these charges, please contact your financial
adviser or Hartford.
THE FOLLOWING SURRENDERS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE:
- ANNUAL WITHDRAWAL AMOUNT -- During the first seven years from each Premium
Payment, you may, each Contract Year, take partial Surrenders up to 15% of the
total Premium Payments. If you do not take 15% one year, you may not take more
than 15% the next year. These amounts are different for group unallocated
Contracts and Contracts issued to a Charitable Remainder Trust.
UNDER THE FOLLOWING SITUATIONS, THE CONTINGENT DEFERRED SALES CHARGE IS WAIVED:
- Upon eligible confinement as described in the Waiver of Sales Charge Rider. We
will waive any Contingent Deferred Sales Charge applicable to a partial or
full Surrender if you, the joint owner or the Annuitant, is confined for at
least 180 calendar
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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days to a: (a) facility recognized as a general hospital by the proper
authority of the state in which it is located; or (b) facility recognized as a
general hospital by the Joint Commission on the Accreditation of Hospitals; or
(c) facility certified as a hospital or long-term care facility; or (d)
nursing home licensed by the state in which it is located and offers the
services of a registered nurse 24 hours a day. If you, the joint owner or the
Annuitant is confined when you purchase the Contract, this waiver is not
available. For it to apply, you must: (a) have owned the Contract continuously
since it was issued, (b) provide written proof of confinement satisfactory to
us, and (c) request the Surrender within 90 calendar days of the last day of
confinement. This waiver may not be available in all states. Please contact
your Registered Representative or us to determine if it is available for you.
- For Required Minimum Distributions. This allows Annuitants who are age 70 1/2
or older, with a Contract held under an Individual Retirement Account or
403(b) plan, to Surrender an amount equal to the Required Minimum Distribution
for the Contract without a Contingent Deferred Sales Charge. All requests for
Required Minimum Distributions must be in writing.
- On or after the Annuitant's 90th birthday.
THE FOLLOWING SITUATIONS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE:
- Upon death of the Annuitant or Contract Owner. No Contingent Deferred Sales
Charge will be deducted if the Annuitant or Contract Owner dies, unless the
Contract Owner is not a natural person (e.g. a trust).
- Upon Annuitization. The Contingent Deferred Sales Charge is not deducted when
you annuitize the Contract. We will charge a Contingent Deferred Sales Charge
if the Contract is fully Surrendered during the Contingent Deferred Sales
Charge period under an Annuity Payout Option which allows Surrenders.
- Upon cancellation during the Right to Cancel Period.
SURRENDER ORDER -- During the first seven Contract Years all Surrenders in
excess of the Annual Withdrawal Amount will be taken first from Premium
Payments, then from earnings. Surrenders from Premium Payments in excess of the
Annual Withdrawal Amount will be subject to a Contingent Deferred Sales Charge.
After the Seventh Contract Year, all Surrenders in excess of the Annual
Withdrawal Amount will be taken first from earnings, then from Premium Payments
held in your Contract for more than seven years and then from Premium Payments
invested for less than seven years. Only Premium Payments invested for less than
seven years are subject to a Contingent Deferred Sales Charge.
2. MORTALITY AND EXPENSE RISK CHARGE
For assuming mortality and expense risks under the Contract, we deduct a daily
charge at an annual rate of 1.25% of
Sub-Account Value. The mortality and expense risk charge is broken into charges
for mortality risks and for an expense risk:
- MORTALITY RISK --There are two types of mortality risks that we assume, those
made while your Premium Payments are accumulating and those made once Annuity
Payouts have begun.
During the period your Premium Payments are accumulating, we are required to
cover any difference between the Death Benefit paid and the Surrender Value.
These differences may occur during periods of declining value or in periods
where the Contingent Deferred Sales Charges would have been applicable. The risk
that we bear during this period is that actual mortality rates, in aggregate,
may exceed expected mortality rates.
Once Annuity Payouts have begun, we may be required to make Annuity Payouts as
long as the Annuitant is living, regardless of how long the Annuitant lives. We
would be required to make these payments if the Payout Option chosen is the Life
Annuity, Life Annuity With Payments for a Period Certain or Joint and Last
Survivor Life Annuity Payout Option. The risk that we bear during this period is
that the actual mortality rates, in aggregate, may be lower than the expected
mortality rates.
- EXPENSE RISK -- We also bear an expense risk that the Contingent Deferred
Sales Charges and the Annual Maintenance Fee collected before the Annuity
Commencement Date may not be enough to cover the actual cost of selling,
distributing and administering the Contract.
Although variable Annuity Payouts will fluctuate with the performance of the
underlying Portfolio 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. ADMINISTRATIVE CHARGE
For administration, we apply a daily charge at the rate of .15% per year against
all Contract Values held in the Separate Account during both the accumulation
and annuity phases of the Contract. There is not necessarily a relationship
between the amount of administrative charge imposed on a given Contract and the
amount of expenses that may be attributable to that Contract; expenses may be
more or less than the charge.
You should refer to the Fund's prospectus for a description of deductions and
expenses paid out of the assets of the Funds.
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
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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either of those times is less than $50,000. 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 $50,000 or
more on your Contract Anniversary or when you fully Surrender your Contract. In
addition, we will waive one Annual Maintenance Fee for Contract Owners who own
more than one Contract with a combined Contract Value between $50,000 and
$100,000. If you have multiple Contracts with a combined Contract Value of
$100,000 or greater, we will waive the Annual Maintenance Fee on all Contracts.
However, we reserve the right to limit the number of waivers to a total of six
Contracts. We also reserve the right to waive the Annual Maintenance Fee under
certain other 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 Portfolios at net asset value. The
net asset value of the Portfolio reflects investment advisory fees and
administrative expenses already deducted from the assets of the Portfolios.
These changes are described in the Portfolios' 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 that is equal to an annual
charge of .15% of your Contract Value invested in the Portfolios.
EARNINGS PROTECTION BENEFIT CHARGE -- If you elect the Earnings Protection
Benefit, we will subtract an additional charge on a daily basis until we begin
to make Annuity Payouts that is equal to an annual charge of 0.20% of your
Contract Value invested in the Portfolios.
WE MAY OFFER, IN OUR DISCRETION, REDUCED FEES AND CHARGES INCLUDING, BUT NOT
LIMITED TO CONTINGENT DEFERRED SALES CHARGES, THE MORTALITY AND EXPENSE RISK
CHARGE, AND THE ANNUAL MAINTENANCE FEE, FOR CERTAIN CONTRACTS (INCLUDING
EMPLOYER SPONSORED SAVINGS PLANS) WHICH MAY RESULT IN DECREASED COSTS AND
EXPENSES. REDUCTIONS IN THESE FEES AND CHARGES WILL NOT BE UNFAIRLY
DISCRIMINATORY AGAINST ANY CONTRACT OWNER.
DEATH BENEFIT
WHAT IS THE DEATH BENEFIT AND HOW IS IT CALCULATED?
The Death Benefit is the amount we will pay upon the death of the Contract Owner
or the Annuitant. The Death Benefit is calculated when we receive a certified
death certificate or other legal document acceptable to us.
The calculated Death Benefit will remain invested in the same Accounts,
according to the Contract Owner's last instructions until we receive complete
written settlement instructions from the Beneficiary. Therefore, the Death
Benefit amount will fluctuate with the performance of the underlying Portfolios.
When there is more than one Beneficiary, we will calculate the Accumulation
Units for each Sub-account and the dollar amount for the Fixed Accumulation
Feature for each Beneficiary's portion of the proceeds.
If death occurs before the Annuity Commencement Date, the Death Benefit is the
greatest of:
- The total Premium Payments you have made to us minus the dollar amount of any
partial Surrenders; or
- The Contract Value of your Contract; or
- The Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, Premium Payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death, whichever is earlier. The Anniversary
Value is equal to the Contract Value as of a Contract Anniversary, increased by
the dollar amount of any Premium Payments made since that anniversary and
reduced by the dollar amount of any partial Surrenders since that anniversary.
The Maximum Anniversary Value is equal to the greatest Anniversary Value
attained from this series of calculations.
You may also elect the Optional Death Benefit for an additional charge. The
Optional Death Benefit adds the Interest Accumulation Value to the Death Benefit
calculation.
The Interest Accumulation Value will be:
- Your Contract Value on the date we add the Optional Death Benefit to your
Contract;
- Plus any Premium Payments made after the Optional Death Benefit is added;
- Minus any partial Surrenders after the Optional Death Benefit is added;
- Compounded daily at an annual interest rate of 5%.
If you have taken any partial Surrenders, the Interest Accumulation Value will
be adjusted to reduced the Optional Death Benefit proportionally for any partial
Surrenders.
On or after the deceased's 81st birthday or date of death, the Interest
Accumulation Value will not continue to compound, but will be adjusted to add
any Premium Payments or subtract any partial Surrenders.
The Optional Death Benefit is limited to a maximum of 200% of any Premium
Payments made less proportional adjustments for
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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any partial Surrenders. For examples on how the Optional Death Benefit is
calculated see "Appendix II".
If you elect the Optional Death Benefit, we will subtract an additional charge
on a daily basis that is equal to an annual charge of .15% of your Contract
Value invested in the Portfolios. The Optional Death Benefit may not be
available if the Contract Owner or Annuitant is age 76 or older. The Optional
Death Benefit is not available in the state of Washington. Once you elect the
Optional Death Benefit, you cannot cancel it.
You may also elect the Earnings Protection Benefit at an additional charge. The
Earnings Protection Benefit may not currently be available in your state and is
not available in Washington. You cannot elect the Earnings Protection Benefit if
you or your Annuitant is age 76 or older. Once you elect the Earnings Protection
Benefit, you cannot cancel it.
If you and your Annuitant are age 69 or under on the date the Earnings
Protection Benefit is added to your Contract, the Earnings Protection Benefit is
the greater of:
- The total Premium Payments you have made to us minus the dollar amount of any
partial Surrenders; or
- The Maximum Anniversary Value; or
- Your Contract Value on the date we receive a death certificate or other legal
document acceptable to us, plus 40% of the Contract gain since the date the
Earnings Protection Benefit was added to your Contract.
We determine any Contract gain by comparing your Contract Value on the date you
added the Earnings Protection Benefit to your Contract to your Contract Value on
the date we calculate the Death Benefit. We deduct any Premium Payments and add
adjustments for any partial Surrenders made during that time.
We make an adjustment for partial Surrenders if the amount of a Surrender is
greater than the Contract gain in the Contract immediately prior to the
Surrender.
Your Contract gain is limited to or "capped" at a maximum of 200% of Contract
Value on the date the Earnings Protection Benefit was added to your Contract
plus Premium Payments not previously withdrawn made after the Earnings
Protection Benefit was added to your Contract, excluding any Premium Payments
made in the 12 months before the date of death. We subtract any adjustments for
partial Surrenders.
Hartford takes 40% of either the Contract gain or the capped amount and adds it
back to your Contract Value to complete the Death Benefit calculation. If you or
your Annuitant are age 70 through 75, we add 25% of the Contract gain or capped
amount back to Contract Value to complete the Death Benefit calculation. The
percentage used for the Death Benefit calculation is determined by the oldest
age of you and your Annuitant at the time the Earnings Protection Benefit is
added to your Contract.
FOR EXAMPLE: Assuming that:
- The Contract Value on the date we received proof of death plus 40% of the
Contract gain was the greatest of the three death benefit calculations,
- You elected the Earnings Protection Benefit when you purchased your Contract,
- You made a single Premium Payment of $100,000,
- You took no partial Surrenders.
- The Contract Value on the date we receive proof of death was $400,000.
Hartford would calculate the Contract gain as follows:
- Contract Value on the date we receive proof of death equals $400,000,
- minus the Contract Value on the date the Earnings Protection Benefit was added
to your Contract or $100,000 = $300,000.
To determine if the cap applies:
- Hartford calculates the Contract Value on the date the Earnings Protection
Benefit was added to your Contract ($100,000),
- plus Premium Payments made since that date ($0),
- minus Premium Payments made in the 12 months prior to death ($0),
Which equals $100,000. The cap is 200% of $100,000 which is $200,000.
In this situation the cap applies, so Hartford takes 40% of $200,000 or $80,000
and adds that to the Contract Value on the date we receive proof of death and
the total Death Benefit with the Earnings Protection Benefit is $480,000.
Before you purchase the Earnings Protection Benefit, you should also consider
the following.
- If your Contract has no gain when Hartford calculates the Death Benefit,
Hartford will not pay an Earnings Protection Benefit.
- Partial Surrenders can reduce or eliminate your Contract gain. So if you plan
to make partial Surrenders, there may be no Earnings Protection Benefit.
- If you transfer ownership of your Contract to someone other than your spouse
who would have been ineligible for the Earnings Protection Benefit when it was
added to your Contract, the Earnings Protection Benefit charge will continue
to be deducted even though no Earnings Protection Benefit will be payable.
For more information on how these optional benefits may affect your taxes,
please see the section entitled, "Federal Tax Considerations," under sub-section
entitled "Taxation of Annuities --
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General Provisions Affecting Purchasers Other Than Qualified Retirement Plans."
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 "Death
Benefit Remaining with the Company" to leave proceeds from the Death Benefit
with us for up to five years from the date of the Contract Owner's death if the
Contract Owner died before the Annuity Commencement Date. Once we receive a
certified death certificate or other legal documents acceptable to us, the
Beneficiary can: (a) make Sub-Account transfers and (b) take Surrenders without
paying Contingent Deferred Sales Charges.
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.
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 a Beneficiary is the Contract Owner's
spouse, that portion of the Contract for which the spouse is considered the
Beneficiary will continue with the spouse as Contract Owner, unless the spouse
elects to receive the Death Benefit as a lump sum payment or as an annuity
payment option. If the Contract continues with the spouse as Contract Owner, we
will adjust the Contract Value to the amount that we would have paid as the
Death Benefit payment, had the spouse elected to receive the Death Benefit as a
lump sum payment. Spousal Contract continuation will only apply one time for
each Contract.
If your spouse continues any portion of the Contract as Contract Owner and
elects the Earnings Protection Benefit, Hartford will use the date the Contract
is continued with your spouse as Contract Owner as the date the Earnings
Protection Benefit was added to the Contract. The percentage used for the
Earnings Protection Benefit will be determined by the oldest age of any
remaining joint owner or Annuitant at the time the Contract is continued.
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.
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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 The Contract Owner becomes
living Contingent Annuitant the Contingent Annuitant
and the Contract
continues.
----------------------------------------------------------------------------------------------------------------------
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.
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</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.
SURRENDERS
WHAT KINDS OF SURRENDERS ARE AVAILABLE?
FULL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE -- When you Surrender your
Contract before the Annuity Commencement Date, the Surrender Value of the
Contract will be made in a lump sum payment. The Surrender Value is the Contract
Value minus any applicable Premium Taxes, Contingent Deferred Sales Charges and
the Annual Maintenance Fee. The Surrender Value may be more or less than the
amount of the Premium Payments made to a Contract.
PARTIAL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE -- You may request a
partial Surrender of Contract Values at any time before the Annuity Commencement
Date. There are two restrictions:
- The partial Surrender amount must be at least equal to $100, our current
minimum for partial Surrenders, and
- The Contract must have a minimum Contract Value of $500 after the Surrender.
We reserve the right to close your Contract and pay the full Surrender Value
if the Contract Value is under the minimum after the Surrender. If your
Contract was issued in Texas, a remaining value of $500 is not required to
continue the Contract if Premium Payments were made in the last two Contract
Years.
FULL SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- You may Surrender your
Contract on or after the Annuity Commencement Date only if you selected the
Payment For a Period Certain Annuity Payout Option. Under this option, we pay
you the Commuted Value of your Contract minus any applicable Contingent Deferred
Sales Charges. The Commuted Value is determined on the day we receive your
written request for Surrender.
PARTIAL SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- Partial Surrenders are
permitted after the Annuity Commencement Date if you select the Life Annuity
With Payments for a Period Certain, Joint and Last Survivor Life Annuity With
Payments for a Period Certain or the Payment for a Period Certain Annuity Payout
Options. You may take partial Surrenders of amounts equal to the Commuted Value
of the payments that we would have made during the "Period Certain" or the
number of years you select under the Annuity Payout Option that we guarantee to
make Annuity Payouts.
To qualify for partial Surrenders under these Annuity Payout Options you must
elect a variable dollar amount Annuity Payout
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and you must make the Surrender request during the Period Certain.
Hartford will deduct any applicable Contingent Deferred Sales Charges.
If you elect to take the entire Commuted Value of the Annuity Payouts we would
have made during the Period Certain, Hartford will not make any Annuity Payouts
during the remaining Period Certain. If you elect to take only some of the
Commuted Value of the Annuity Payouts we would have made during the Period
Certain, Hartford will reduce the remaining Annuity Payouts during the remaining
Period Certain. Annuity Payouts that are to be made after the Period Certain is
over will not change.
Please check with your qualified tax adviser because there could be adverse tax
consequences for partial Surrenders after the Annuity Commencement Date.
HOW DO I REQUEST A SURRENDER?
Requests for full Surrenders must be in writing. Requests for partial Surrenders
can be made in writing or by telephone. We will send your money within seven
days of receiving complete instructions. However, we may postpone payment of
Surrenders whenever: (a) the New York Stock Exchange is closed, (b) trading on
the New York Stock Exchange is restricted by the SEC, (b) the SEC permits and
orders postponement or (c) the SEC determines that an emergency exists to
restrict valuation.
WRITTEN REQUESTS -- To request a full or partial Surrender, complete a Surrender
Form or send us a letter, signed by you, stating:
- the dollar amount that you want to receive, either before or after we withhold
taxes and deduct for any applicable charges,
- your tax withholding amount or percentage, if any, and
- your mailing address.
If there are joint Contract Owners, both must authorize all Surrenders. For a
partial Surrender, specify the Accounts that you want your Surrender to come
from, otherwise, the Surrender will be taken in proportion to the value in each
Account.
TELEPHONE REQUESTS -- To request a partial Surrender by telephone, we must have
received your completed Telephone Redemption Program Enrollment Form. If there
are joint Contract Owners, both must sign this form. By signing the form, you
authorize us to accept telephone instructions for partial Surrenders from either
Contract Owner. Telephone authorization will remain in effect until we receive a
written cancellation notice from you or your joint Contract Owner, we
discontinue the program, or you are no longer the owner of the Contract. There
are some restrictions on telephone surrenders, please call us with any
questions.
We may record telephone calls and use other procedures to verify information and
confirm that instructions are genuine. We will not be liable for losses or
expenses arising from telephone instructions reasonably believed to be genuine.
WE MAY MODIFY THE REQUIREMENTS FOR TELEPHONE REDEMPTIONS AT ANY TIME.
Telephone Surrender instructions received before the close of the New York Stock
Exchange will be processed on that Valuation Day. Otherwise, your request will
be processed on the next Valuation Day.
COMPLETING A POWER OF ATTORNEY FORM FOR ANOTHER PERSON TO ACT ON YOUR BEHALF MAY
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 QUALIFIED TAX ADVISER BEFORE MAKING ANY
SURRENDERS. PLEASE SEE THE "FEDERAL TAX CONSIDERATIONS" SECTION FOR MORE
INFORMATION.
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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:
- When do you want Annuity Payouts to begin?
- Which Annuity Payout Option do you want to use?
- How often do you want to receive Annuity Payouts?
- What is the Assumed Investment Return?
- Do you want fixed dollar amount or variable dollar amount Annuity Payouts?
Please check with your financial adviser 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 receiving 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. Once we begin to
make Annuity Payouts, the Annuity Payout Option cannot be changed.
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.
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.
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
continue Annuity Payouts for the remainder of the guaranteed number of years or
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.
JOINT AND LAST SURVIVOR LIFE ANNUITY
We will make Annuity Payouts as long as the Annuitant and Joint Annuitant are
living. When one Annuitant dies, we continue to make Annuity Payouts to the
other Annuitant until that second Annuitant dies. When choosing this option, you
must decide what will happen to the Annuity Payouts; either fixed or variable,
after the first Annuitant dies. You must select Annuity Payouts that:
- Remain the same at 100%, or
- Decrease to 66.67%, or
- Decrease to 50%.
For variable Annuity Payouts, these percentages represent Annuity Units; for
Annuity Payouts, they represent actual dollar amounts. The percentage will also
impact the Annuity Payout amount we pay while both Annuitants are living. If you
pick a lower percentage, your original Annuity Payouts will be higher while both
Annuitants are alive.
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 may continue Annuity Payouts for the remainder
of the guaranteed number of years or receive the Commuted Value in one sum.
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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.
PAYMENTS FOR A PERIOD CERTAIN
We agree to make payments for a specified time. The minimum period that you can
select is 10 years during the first two Contract Years and 5 years after the
second Contract Anniversary. The maximum period that you can select is 100 years
minus your Annuitant's age. If, at the death of the Annuitant, Annuity Payouts
have been made for less than the time period selected, then the Beneficiary may
elect to continue the remaining Annuity Payouts or receive the Commuted Value in
one sum.
For Contracts issued in the State of Oregon, the minimum period that you can
select under the Payments for a Period Certain Annuity Payout Option is as
follows: For fixed annuity payouts, the minimum period that you can select is 10
years during the first two Contract Years and 5 years after the second Contract
Anniversary. For variable annuity payouts, the minimum period that you can
select is 5 years on or after the tenth Contract Anniversary.
IMPORTANT INFORMATION:
- YOU CANNOT SURRENDER YOUR CONTRACT ONCE ANNUITY PAYOUTS BEGIN, UNLESS YOU HAVE
SELECTED LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN, JOINT AND LAST
SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN, AND PAYMENTS FOR A
PERIOD CERTAIN VARIABLE-DOLLAR AMOUNT ANNUITY PAYOUT OPTION. A CONTINGENT
DEFERRED SALES CHARGE MAY BE DEDUCTED.
- AUTOMATIC ANNUITY PAYOUTS FOR NON-QUALIFIED CONTRACTS -- If you do not elect
an Annuity Payout Option, Annuity Payouts will automatically begin on the
Annuity Commencement Date under the Life Annuity with Payments for a Period
Certain Annuity Payout Option with a ten-year period certain. Automatic
Annuity Payouts will be fixed-dollar amount Annuity Payouts, variable-dollar
amount Annuity Payouts, or a combination of fixed or variable dollar amount
Annuity Payouts, depending on the investment allocation of your Account in
effect on the Annuity Commencement Date.
- AUTOMATIC ANNUITY PAYOUTS FOR QUALIFIED CONTRACTS AND CONTRACTS ISSUED IN
TEXAS -- If you do not elect an Annuity Payout Option, Annuity Payouts will
automatically begin on the Annuity Commencement Date under the Life Annuity
Payout Option. Automatic Annuity Payouts will be fixed-dollar amount Annuity
Payouts, variable-dollar amount Annuity Payouts, or a combination of fixed or
variable dollar amount Annuity Payouts, depending on the investment allocation
of your Account in effect on the Annuity Commencement Date.
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.
4. WHAT IS THE ASSUMED INVESTMENT RETURN?
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 Portfolios.
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 Sub-Accounts earned exactly the same as the AIR, then the
second monthly Annuity Payout Option is the same as the first. If the
Sub-Accounts earned more than the AIR, then the second monthly Annuity Payout
Option is higher than the first. If the Sub-Accounts earned less than the AIR,
then the second monthly Annuity Payout Option is lower than the first.
Level variable-dollar 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 ANNUITY PAYOUTS TO BE FIXED-DOLLAR AMOUNT OR VARIABLE-DOLLAR
AMOUNT?
You may choose an Annuity Payout Option with fixed-dollar amounts or
variable-dollar amounts, depending on your income needs.
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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 Payment Annuity 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 Portfolios. To begin making variable-dollar amount Annuity Payouts,
we convert the first Annuity Payout amount to a set number of Annuity Units and
then price those units to determine the Annuity Payout amount. The number of
Annuity Units that determines the Annuity Payout amount remains fixed unless you
transfer units between Sub-Accounts.
The dollar amount of the first variable Annuity Payout depends on:
- the Annuity Payout Option chosen,
- the Annuitant's attained age and gender (if applicable), and,
- the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table
- the Assumed Investment Return
The total amount of the first variable-dollar amount Annuity Payout is
determined by dividing the Contract Value minus any applicable Premium Taxes, by
$1,000 and multiplying the result by the payment factor defined in the Contract
for the selected Annuity Payout Option.
The dollar amount of each subsequent variable-dollar amount Annuity Payout is
equal to the total of:
Annuity Units for each Sub-Account multiplied by Annuity Unit Value of each
Sub-Account.
The Annuity Unit Value of each Sub-Account for any Valuation Period is equal to
the Accumulation Unit Value Net Investment Factor for the current Valuation
Period multiplied by the Annuity Unit factor, multiplied by the Annuity Unit
Value for the preceding Valuation Period.
TRANSFER OF ANNUITY UNITS -- 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 15% of your total Premium Payments each Contract Year without a Contingent
Deferred Sales Charge. You 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
percentage to change, but under Asset Rebalancer, your Sub-Account allocations
are rebalanced to the percentages you have chosen. You can 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 effect the amount or term of any
Contract unless a modification is required to conform the Contract to applicable
Federal or State law. No modification will effect the method by which Contract
Values are determined.
HOW CONTRACTS ARE SOLD -- Hartford Securities Distribution Company, Inc. ("HSD")
serves as Principal Underwriter for the securities issued with respect to the
Separate Account. HSD is registered with the Securities and Exchange Commission
under the Securities Exchange Act of 1934 as a Broker-Dealer and is a member of
the National Association of Securities Dealers, Inc. HSD is an affiliate of
ours. Both HSD and Hartford are ultimately controlled by The Hartford Financial
Services Group, Inc. The
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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 7% of Premium
Payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on Premium Payments made by
policyholders or Contract Owners. This compensation is usually paid from the
sales charges described in this prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or Contract
Owners to purchase, hold or Surrender variable insurance products.
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the Contract with
an additional 5.0% of the Premium Payment. This additional percentage of Premium
Payment in no way affects present or future charges, rights, benefits or current
values of other Contract Owners. The following class of individuals are eligible
for this feature: (1) current or retired officers, directors, trustees and
employees (and their families) of the ultimate parent and affiliates of
Hartford; and (2) employees and registered representatives (and their families)
of registered broker-dealers (or their financial institutions) that have a sales
agreement with Hartford and its principal underwriter to sell the Contracts.
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 Christine Hayer
Repasy, Senior Vice President, General Counsel and Corporate Secretary, Hartford
Life and Annuity 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 Life Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: 1-800-862-6668 (Contract Owners)
1-800-862-4397 (Account Executive)
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.
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No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER THAN
QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC.
Code Section 72 contains provisions for contract owners which are not natural
persons. Non-natural persons include corporations, trusts, limited liability
companies, partnerships and other types of legal entities. The tax rules for
contracts owned by non-natural persons are different from the rules for
contracts owned by individuals. For example, the annual net increase in the
value of the contract is currently includible in the gross income of a
non-natural person, unless the non-natural person holds the contract as an agent
for a natural person. There are additional exceptions from current inclusion
for:
- certain annuities held by structured settlement companies,
- certain annuities held by an employer with respect to a terminated qualified
retirement plan and
- certain immediate annuities.
A non-natural person which is a tax-exempt entity for federal tax purposes will
not be subject to income tax as a result of this provision.
If the contract owner is a non-natural person, the primary annuitant is treated
as the contract owner in applying mandatory distribution rules. These rules
require that certain distributions be made upon the death of the contract owner.
A change in the primary annuitant is also treated as the death of the contract
owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract until an
amount is received or deemed received, e.g., in the form of a lump sum payment
(full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are summarized
briefly below. Also summarized are special rules affecting distributions from
Contracts obtained in a tax-free exchange for other annuity contracts or life
insurance contracts which were purchased prior to August 14, 1982.
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of the
Code.
ii. To the extent that the value of the Contract (ignoring any surrender
charges except on a full surrender) exceeds the "investment in the
contract," such excess constitutes the "income on the contract."
iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a partial surrender) is deemed to come first from any
such "income on the contract" and then from "investment in the contract,"
and for these purposes such "income on the contract" shall be computed by
reference to any aggregation rule in subparagraph 2.c. below. As a result,
any such amount received or deemed received (1) shall be includable in
gross income to the extent that such amount does not exceed any such
"income on the contract," and (2) shall not be includable in gross income
to the extent that such amount does exceed any such "income on the
contract." If at the time that any amount is received or deemed received
there is no "income on the contract" (e.g., because the gross value of the
Contract does not exceed the "investment in the contract" and no
aggregation rule applies), then such amount received or deemed received
will not be includable in gross income, and will simply reduce the
"investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not
apply, however, to certain transfers of property between spouses or incident
to divorce.
vi. In general, any amount actually received under the Contract as a Death
Benefit, including any Optional Death Benefit or Earnings Protection
Benefit, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. As a result, Hartford believes
that for federal tax purposes the Optional Death Benefit and the Earnings
Protection Benefit should be treated as an integral part of the Contract's
benefits (e.g., as investment protection benefit) and that any charges
under the contract for the Optional Death Benefit or the Earnings
Protection Benefit should not be treated as an amount received by the
Contract Owner for purposes of this subparagraph a. However, it is possible
that the IRS could take a contrary position that some or all of these
charges for the Optional Death Benefit or the Earnings Protection Benefit
should be treated for federal tax purposes as an amount received under the
Contract (e.g., as an amount distributed from the Contract to pay for an
additional benefit that should be treated as a benefit that is being
provided by a separate contract for tax purposes, i.e., by a separate
contract that is not part of the annuity Contract for tax purposes). If the
IRS takes such a contrary position, however, then any Beneficiary of an
Optional Death Benefit or an Earnings Protection Benefit may be entitled to
claim that some part of such Death
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Benefit is excludable from gross income for federal tax purposes (e.g., as a
death benefit that should be treated for tax purposes as if it were being
provided by a separate contract that qualifies as a life insurance contract
for tax purposes).
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the
Annuity Commencement Date, any additional payments (including surrenders)
will be entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the
contract as of the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and
shall be fully includable in gross income. However, upon a full surrender
after such date, only the excess of the amount received (after any
surrender charge) over the remaining "investment in the contract" shall be
includable in gross income (except to the extent that the aggregation rule
referred to in the next subparagraph c. may apply).
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same Contract Owner within the same calendar year (other than
certain contracts held in connection with a tax-qualified retirement
arrangement) will be treated as one annuity Contract for the purpose of
determining the taxation of distributions prior to the Annuity Commencement
Date. An annuity contract received in a tax-free exchange for another annuity
contract or life insurance contract may be treated as a new Contract for this
purpose. Hartford believes that for any annuity subject to such aggregation, the
values under the Contracts and the investment in the contracts will be added
together to determine the taxation under subparagraph 2.a., above, of amounts
received or deemed received prior to the Annuity Commencement Date. Withdrawals
will first be treated as withdrawals of income until all of the income from all
such Contracts is withdrawn. As of the date of this Prospectus, there are no
regulations interpreting this provision.
d. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract (before or
after the Annuity Commencement Date), the Code applies a penalty tax equal
to ten percent of the portion of the amount includable in gross income,
unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has attained the
age of 59 1/2.
2. Distributions made on or after the death of the holder or where the
holder is not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of substantially equal
periodic payments (not less frequently than annually) for the life (or
life expectancy) of the recipient (or the joint lives or life
expectancies of 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
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Subject to the alternative election or spouse beneficiary provisions in ii or
iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Contract has been distributed, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution being used as of the date of
such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract will be distributed within 5 years after
such death; and
3. If the Contract Owner is not an individual, then for purposes of 1. or 2.
above, the primary annuitant under the Contract shall be treated as the
Contract Owner, and any change in the primary annuitant shall be treated
as the death of the Contract Owner. The primary annuitant is the
individual, the events in the life of whom are of primary importance in
affecting the timing or amount of the payout under the Contract.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in i. above is
payable to or for the benefit of a designated beneficiary, such beneficiary may
elect to have the portion distributed over a period that does not extend beyond
the life or life expectancy of the beneficiary. Distributions must be made and
payments must begin within a year of the Contract Owner's death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for the
benefit of his or her spouse, and the Annuitant or Contingent Annuitant is
living, such spouse shall be treated as the Contract Owner of such portion for
purposes of section i. above. This spousal continuation shall apply only once
for this contract.
3. DIVERSIFICATION REQUIREMENTS.
The Code requires that investments supporting your contract be adequately
diversified. Code Section 817 provides that a variable annuity contract will not
be treated as an annuity contract for any period during which the investments
made by the separate account or underlying Portfolio 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.
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Due to the lack of specific guidance on investor control, there is some
uncertainty about when a contract owner is considered the owner of the assets
for tax purposes. We reserve the right to modify the contract, as necessary, to
prevent you from being considered the owner of assets in the separate account.
D. FEDERAL INCOME TAX WITHHOLDING
Any portion of a distribution that is (or is deemed to be) current taxable
income to the Contract Owner will be subject to federal income tax withholding
and reporting under the Code. Generally, however, a Contract Owner may elect not
to have income taxes withheld or to have income taxes withheld at a different
rate by filing a completed election form with us. Election forms will be
provided at the time distributions are requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I for information relative to the types of plans
for which it may be used and the general explanation of the tax features of such
plans.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to annuity purchasers that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal income tax and withholding on annuity distributions at a 30% rate,
unless a lower treaty rate applies. In addition, purchasers may be subject to
state premium tax, other state and/or municipal taxes, and taxes that may be
imposed by the purchaser's country of citizenship or residence. Prospective
purchasers are advised to consult with a qualified tax adviser regarding U.S.,
state, and foreign taxation with respect to an annuity purchase.
G. GENERATION-SKIPPING TRANSFERS
Under certain circumstances, the Internal Revenue Code may impose a "generation
skipping transfer tax" when all or part of an annuity is transferred to, or a
death benefit is paid to, an individual two or more generations younger than the
owner. Federal tax law may require us to deduct the tax from your contract, or
from any applicable payment, and pay it directly to the Internal Revenue
Service.
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TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION
<S> <C>
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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>
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APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS
This summary does not attempt to provide more than general information about the
federal income tax rules associated with use of a Contract by a tax-qualified
retirement plan. Because of the complexity of the federal tax rules, owners,
participants and beneficiaries are encouraged to consult their own tax advisors
as to specific tax consequences.
The federal tax rules applicable to owners of Contracts under tax-qualified
retirement plans vary according to the type of plan as well as the terms and
conditions of the plan itself. Contract owners, plan participants and
beneficiaries are cautioned that the rights and benefits of any person may be
controlled by the terms and conditions of the tax-qualified retirement plan
itself, regardless of the terms and conditions of a Contract. We are not bound
by the terms and conditions of such plans to the extent such terms conflict with
a Contract, unless we specifically consent to be bound.
Some tax-qualified retirement plans are subject to distribution and other
requirements that are not incorporated into our administrative procedures.
Contract owners, participants and beneficiaries are responsible for determining
that contributions, distributions and other transactions comply with applicable
law. Tax penalties may apply to transactions with respect to tax-qualified
retirement plans if applicable federal income tax rules and restrictions are not
carefully observed.
We do not currently offer the Contracts in connection with all of the types of
tax-qualified retirement plans discussed below and may not offer the Contracts
for all types of tax-qualified retirement plans in the future.
1. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS -- Eligible employers can
establish certain tax-qualified pension and profit-sharing plans under section
401 of the Code. Rules under section 401(k) of the Code govern certain "cash or
deferred arrangements" under such plans. Rules under section 408(k) govern
"simplified employee pensions". Tax-qualified pension and profit-sharing plans
are subject to limitations on the amount that may be contributed, the persons
who may be eligible to participate and the time when distributions must
commence. Employers intending to use the Contracts in connection with tax-
qualified pension or profit-sharing plans should seek competent tax and other
legal advice.
2. TAX SHELTERED ANNUITIES UNDER SECTION 403(b) -- Public schools and certain
types of charitable, educational and scientific organizations, as specified in
section 501(c)(3) of the Code, can purchase tax-sheltered annuity contracts for
their employees. Tax-deferred contributions can be made to tax-sheltered annuity
contracts under section 403(b) of the Code, subject to certain limitations.
Generally, such contributions may not exceed the lesser of $10,500 (indexed) or
20% of the employee's "includable compensation" for such employee's most recent
full year of employment, subject to other adjustments. Special provisions under
the Code may allow some employees to elect a different overall limitation.
Tax-sheltered annuity programs under section 403(b) are subject to A PROHIBITION
AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO CONTRIBUTIONS MADE
PURSUANT TO A SALARY REDUCTION AGREEMENT, unless such distribution is made:
- after the participating employee attains age 59 1/2;
- upon separation from service;
- upon death or disability; or
- in the case of hardship (and in the case of hardship, any income attributable
to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions attributable to
cash values or other amounts held under a section 403(b) contract as of December
31, 1988.
3. DEFERRED COMPENSATION PLANS UNDER SECTION 457 -- A governmental employer or a
tax-exempt employer other than a governmental unit can establish a Deferred
Compensation Plan under section 457 of the Code. For these purposes, a
"governmental employer" is a State, a political subdivision of a State, or an
agency or an instrumentality of a State or political subdivision of a State.
Employees and independent contractors performing services for a governmental or
tax-exempt employer can elect to have contributions made to a Deferred
Compensation Plan of their employer in accordance with the employer's plan and
section 457 of the Code.
Deferred Compensation Plans that meet the requirements of section 457(b) of the
Code are called "eligible" Deferred Compensation Plans. Section 457(b) limits
the amount of contributions that can be made to an eligible Deferred
Compensation Plan on behalf of a participant. Generally, the limitation on
contributions is 33 1/3% of a participant's includable compensation (typically
25% of gross compensation) or, for 2000, $8,000 (indexed), whichever is less.
The plan may provide for additional "catch-up" contributions during the three
taxable years ending before the year in which the participant attains normal
retirement age.
All of the assets and income of an eligible Deferred Compensation Plan of a
governmental employer must be held in trust for the exclusive benefit of
participants and their beneficiaries. For this purpose, custodial accounts and
certain annuity contracts are treated as trusts. The requirement of a trust does
not apply to amounts under a Deferred Compensation Plan of a tax-exempt
(non-governmental) employer. In addition, the requirement of a trust does not
apply to amounts under a Deferred Compensation Plan of a governmental employer
if the Deferred Compensation Plan is not an eligible plan within the meaning of
section 457(b) of the Code. In the absence of such a trust,
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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.
IRAs generally may not invest in life insurance contracts. However, an annuity
that is used as an IRA may provide for a death benefit that equals the greater
of the premiums paid and the annuity's cash value. The Contract offers an
Optional Death Benefit and an Earnings Protection Benefit. The Optional Death
Benefit and the Earnings Protection Benefit may exceed the greater of the
Contract Value and total Premium Payments less prior surrenders. WE HAVE FILED
THE CONTRACT WITH THE OPTIONAL DEATH BENEFIT AND THE EARNINGS PROTECTION BENEFIT
WITH THE INTERNAL REVENUE SERVICE FOR APPROVAL FOR USE AS AN IRA. NO ASSURANCE
IS GIVEN THAT THESE BENEFITS MEET THE QUALIFICATION REQUIREMENTS FOR AN IRA.
Although we regard the Optional Death Benefit and the Earnings Protection
Benefit as investment protection features that should not have an adverse tax
effect, it is possible that the IRS could take a contrary position regarding
tax-qualification or resulting in certain deemed distributions and penalty
taxes. You should consult a qualified tax adviser if you are considering adding
the Optional Death Benefit or the Earnings Protection Benefit to your Contract
if it is an IRA.
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.
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If you are a participant in a SIMPLE IRA plan, you should be aware that the 10%
penalty tax is increased to 25% with respect to non-exempt early distributions
made from your SIMPLE IRA during the first two years following the date you
first commenced participation in any SIMPLE IRA plan of your employer.
(b) MINIMUM DISTRIBUTION PENALTY TAX If the amount distributed is less than the
minimum required distribution for the year, the Participant is subject to a
50% penalty tax on the amount that was not properly distributed.
An individual's interest in a tax-qualified retirement plan generally must be
distributed, or begin to be distributed, not later than the Required Beginning
Date. Generally, the Required Beginning Date is April 1 of the calendar year
following the later of:
- the calendar year in which the individual attains age 70 1/2; or
- the calendar year in which the individual retires from service with the
employer sponsoring the plan.
The Required Beginning Date for an individual who is a five (5) percent owner
(as defined in the Code), or who is the owner of an IRA, is April 1 of the
calendar year following the calendar year in which the individual attains age
70 1/2.
The entire interest of the Participant must be distributed beginning no later
than the Required Beginning Date over:
- the life of the Participant or the lives of the Participant and the
Participant's designated beneficiary, or
- over a period not extending beyond the life expectancy of the Participant or
the joint life expectancy of the Participant and the Participant's designated
beneficiary.
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.
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APPENDIX II -- OPTIONAL DEATH BENEFITS -- EXAMPLES
OPTIONAL DEATH BENEFIT EXAMPLES
EXAMPLE 1
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $108,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
--------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$108,000 Contract Value prior to Surrender equals
.09259 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 9,722 to be deducted from the Interest Accumulation Value equals
$ 95,278 the new Interest Accumulation Value
</TABLE>
EXAMPLE 2
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $92,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
--------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$ 92,000 Contract Value prior to Surrender equals
.10870 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 11,413 to be deducted from the Interest Accumulation Value equals
$ 93,587 the New Interest Accumulation Value
</TABLE>
<PAGE>
44
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
EARNINGS PROTECTION BENEFIT EXAMPLES
EXAMPLE 1
Assume that:
- You elected the Earnings Protection Benefit when you purchased your Contract,
- You made a single Premium Payment of $100,000,
- On your fifth Contract anniversary, your Contract Value was $150,000,
- On the day after your fifth Contract Anniversary, you made a partial Surrender
of $40,000,
- On the day we calculate the Death Benefit, your Contract Value was $140,000,
- The Contract Value on the date we calculate the Death Benefit plus 40% of the
Contract gain was the greatest of the three death benefit calculations,
ADJUSTMENT FOR PARTIAL SURRENDERS
To calculate the Earnings Protection Benefit, we make an adjustment for partial
Surrenders if the amount of a Surrender is greater than the Contract gain in the
Contract immediately prior to the Surrender. To determine if the partial
Surrender is greater than the Contract gain:
- Add the amount of the partial Surrender ($40,000) to
- The Contract Value on the date the Earnings Protection Benefit is added to
your Contract ($100,000),
- Add Premium Payments made after the Earnings Protection Benefit is added to
your Contract before you make the partial Surrender ($0),
- Subtract the Contract Value on the Valuation Day immediately before you make
the partial Surrender ($150,000),
- Subtract the sum of any prior adjustments for all prior partial Surrenders
made after the Earnings Protection Benefit is added to your Contract ($0),
Which equals $-10,000 which is less than zero, so there is no adjustment for the
partial Surrender in this case.
CALCULATION OF CONTRACT GAIN
So Hartford would calculate the Contract gain as follows:
- Contract Value on the date we receive proof of death ($140,000),
- Subtract the Contract Value on the date the Earnings Protection Benefit was
added to your Contract ($100,000),
- Add any adjustments for partial Surrenders ($0).
So the Contract gain equals $40,000.
CALCULATION OF EARNINGS PROTECTION BENEFIT CAP
To determine if the cap applies:
- Hartford calculates the Contract Value on the date the Earnings Protection
Benefit was added to your Contract ($100,000),
- plus Premium Payments made since that date ($0),
- minus Premium Payments made in the 12 months prior to death ($0),
- minus any adjustments for partial Surrenders ($0),
Which equals $100,000. The cap is 200% of $100,000 which is $200,000.
DEATH BENEFIT WITH EARNINGS PROTECTION BENEFIT
In this situation the cap does not apply, so Hartford takes 40% of $40,000 or
$16,000 and adds that to the Contract Value on the date we receive proof of
death and the total Death Benefit with the Earnings Protection Benefit is
$156,000.
<PAGE>
45
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
EXAMPLE 2
Assume that:
- You elected the Earnings Protection Benefit when you purchased your Contract,
- You made a single Premium Payment of $100,000,
- On your fifth Contract anniversary, your Contract Value was $150,000,
- On the day after your fifth Contract Anniversary, you made a partial Surrender
of $60,000,
- On the day we calculate the Death Benefit, your Contract Value was $120,000,
- The Contract Value on the date we calculate the Death Benefit plus 40% of the
Contract gain was the greatest of the three death benefit calculations,
ADJUSTMENT FOR PARTIAL SURRENDERS
To calculate the Earnings Protection Benefit, we make an adjustment for partial
Surrenders if the amount of a Surrender is greater than the Contract gain in the
Contract immediately prior to the Surrender. To determine if the partial
Surrender is greater than the Contract gain:
- Add the amount of the partial Surrender ($60,000) to
- The Contract Value on the date the Earnings Protection Benefit is added to
your Contract ($100,000)
- Add Premium Payments made after the Earnings Protection Benefit is added to
your Contract before you make the partial Surrender ($0),
- Subtract the Contract Value on the Valuation Day immediately before you make
the partial Surrender ($150,000),
- Subtract the sum of any prior adjustments for all prior partial Surrenders
made after the Earnings Protection Benefit is added to your Contract ($0),
Which equals $+10,000 which is greater than zero, so there is a $10,000
adjustment for the partial Surrender in this case.
CALCULATION OF CONTRACT GAIN
So Hartford would calculate the Contract gain as follows:
- Contract Value on the date we receive proof of death ($120,000),
- Subtract the Contract Value on the date the Earnings Protection Benefit was
added to your Contract ($100,000),
- Add any adjustments for partial Surrenders ($10,000),
So the Contract gain equal $30,000.
CALCULATION OF EARNINGS PROTECTION BENEFIT CAP
To determine if the cap applies:
- Hartford calculates the Contract Value on the date the Earnings Protection
Benefit was added to your Contract ($100,000),
- plus Premium Payments made since that date ($0),
- minus Premium Payments made in the 12 months prior to death ($0),
- minus any adjustments for partial Surrenders ($10,000)
Which equals $90,000. The cap is 200% of $90,000 which is $180,000.
DEATH BENEFIT WITH EARNINGS PROTECTION BENEFIT
In this situation the cap does not apply, so Hartford takes 40% of $30,000 or
$12,000 and adds that to the Contract Value on the date we receive proof of
death and the total Death Benefit with the Earnings Protection Benefit is
$132,000.
<PAGE>
This form must be completed for all tax-sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The 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:
- Attained age 59 1/2,
- Separated from service,
- Died, or
- Become disabled.
Distributions of post December 31, 1988 contributions (excluding any income
thereon) may also be made if you have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made prior to age 59 1/2
because of financial hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than your annuity. Please refer to your Plan.
Please complete the following and return to:
Hartford Life and Annuity Insurance Company
Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Name of Contract Owner/Participant: __________________________________________
Address: _____________________________________________________________________
City or Plan/School District: ________________________________________________
Date: ________________________________________________________________________
Contract No.: ________________________________________________________________
Signature: ____________________________________________________________________
<PAGE>
To obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Please send a Statement of Additional Information for Select Dimensions Variable
Annuity to me at the following address:
--------------------------------------------------------------------------------
Name
--------------------------------------------------------------------------------
Address
--------------------------------------------------------------------------------
City/State Zip Code
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT THREE
SERIES II OF SELECT DIMENSIONS VARIABLE ANNUITY
This Statement of Additional Information is not a prospectus. The information
contained herein should be read in conjunction with the prospectus.
To obtain a prospectus, send a written request to Hartford Life and Annuity
Insurance Company, Attn: Investment Products Services, P.O. Box 5085, Hartford,
Connecticut 06102-5085.
Date of Prospectus: January 26, 2001
Date of Statement of Additional Information: January 26, 2001
333-69491
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
DESCRIPTION OF HARTFORD LIFE AND
ANNUITY INSURANCE COMPANY...................................................3
SAFEKEEPING OF ASSETS..........................................................3
INDEPENDENT PUBLIC ACCOUNTANTS.................................................3
DISTRIBUTION OF CONTRACTS......................................................4
CALCULATION OF YIELD AND RETURN................................................5
PERFORMANCE COMPARISONS........................................................9
FINANCIAL STATEMENTS..........................................................12
2
<PAGE>
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut. Our offices are
located in Simsbury, Connecticut; however, our mailing address is P.O. Box 2999,
Hartford, CT 06104-2999. We are ultimately controlled by The Hartford Financial
Services Group, Inc., one of the largest financial service providers in the
United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 4/1/00 A+ Financial performance
-------------------------------------------------------------------------------------------------
Standard & Poor's 8/1/00 AA Insurer financial strength
-------------------------------------------------------------------------------------------------
Fitch 5/1/00 AA+ Financial Strength
-------------------------------------------------------------------------------------------------
</TABLE>
These ratings apply to Hartford's ability to meet its obligations under the
Contract. The ratings do not apply to the Separate Account or the underlying
Funds.
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. The assets are
kept physically segregated and are held separate and apart from Hartford's
general corporate assets. Records are maintained of all purchases and
redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal
3
<PAGE>
business address of Arthur Andersen LLP is One Financial Plaza, Hartford,
Connecticut 06103.
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is an affiliate of Hartford. Both HSD and Hartford are ultimately controlled by
The Hartford Financial Services Group, Inc. The principal business address of
HSD is the same as that of Hartford.
The securities will be sold by insurance and variable annuity agents of Hartford
who are registered representatives of Dean Witter Reynolds Inc. ("Dean Witter").
Dean Witter is registered with the Commission under the Securities Exchange Act
of 1934 as a Broker-Dealer and is a member of the National Association of
Securities Dealers, Inc.
HSD is registered with the Commission under the Securities Exchange Act of 1934
as a Broker-Dealer and is a member of the National Association of Securities
Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 7% of premium
payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on premium payments made by
policyholders or contract owners. This compensation is usually paid from the
sales charges described in the prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or Surrender variable insurance products.
Hartford currently pays HSD underwriting commissions for its role as Principal
Underwriter of all variable annuities associated with this Separate Account. For
the past three years, the aggregate dollar amount of underwriting commissions
paid to HSD in its role as Principal Underwriter has been: 1999: $23,726,654.71;
1998: $11,655,729 and 1997: $17,944,107. HSD has retained none of these
commissions.
4
<PAGE>
CALCULATION OF YIELD AND RETURN
YIELD OF A MONEY MARKET SUB-ACCOUNT. As summarized in the prospectus under the
heading "Performance Related Information," the yield of a Money Market
Sub-Account for a seven day period (the "base period") will be computed by
determining the "net change in value" of a hypothetical account having a balance
of one unit at the beginning of the period, dividing the net change in account
value by the value of the account at the beginning of the base period to obtain
the base period return, and multiplying the base period return by 365/7 with the
resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include net investment income of
the account (accrued dividends as declared by the underlying funds, less expense
and Contract charges of the account) for the period, but will not include
realized gains or losses or unrealized appreciation or depreciation on the
underlying fund shares.
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from the
result, according to the following formula:
365/7]
Effective Yield = [(Base Period Return + 1) - 1
A MONEY MARKET SUB-ACCOUNT'S YIELD AND EFFECTIVE YIELD WILL VARY IN RESPONSE TO
FLUCTUATIONS IN INTEREST RATES AND IN THE EXPENSES OF THE SUB-ACCOUNT. THE
CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES ON THE SEPARATE
ACCOUNT LEVEL, INCLUDING THE MAXIMUM ANNUAL MAINTENANCE FEE.
YIELD AND EFFECTIVE YIELD FOR THE SEVEN DAY PERIOD ENDING DECEMBER 31, 1999.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
<S> <C> <C>
--------------------------------------------------------------------------------
Money Market 4.02 4.10
--------------------------------------------------------------------------------
</TABLE>
YIELD OF SUB-ACCOUNTS. As summarized in the prospectus under the heading
"Performance Related Information," yields of Sub-Accounts will be computed by
annualizing a recent month's net investment income, divided by a Fund share's
net asset value on the last trading day of that month. Net changes in the value
of a hypothetical account will assume the change in the underlying mutual fund's
"net asset value per share" for the same period in addition to the daily expense
charge assessed, at the sub-account level for the respective period. The
Sub-Accounts' yields will vary from time to time depending upon market
conditions and, the composition of the underlying funds' portfolios. Yield
should also be considered relative to changes in the value of the Sub-Accounts'
shares and to the relative risks associated with the
5
<PAGE>
investment objectives and policies of the underlying Fund.
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL, INCLUDING
THE ANNUAL MAINTENANCE FEE.
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges assessed
against a Contract Owner's account over the base period. Yield quotations based
on a 30-day period were computed by dividing the dividends and interest earned
during the period by the maximum offering price per unit on the last day of the
period, according to the following formula:
Example:
6
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1) - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the period
that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the period.
YIELD QUOTATION BASED ON A 30 DAY PERIOD ENDED DECEMBER 31, 1999.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
SUB-ACCOUNT YIELD
<S> <C>
--------------------------------------------------------------------------------
North American Government Securities (1) 3.92%
--------------------------------------------------------------------------------
Diversified Income 8.08%
--------------------------------------------------------------------------------
High Yield 8.24%
--------------------------------------------------------------------------------
Fixed Income 5.11%
--------------------------------------------------------------------------------
</TABLE>
(1) Closed to new investments or transfers of existing contract values.
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 and assumes that
the Optional Death Benefit has not been elected. The formula for total return
used herein includes three steps: (1) calculating the value of the hypothetical
initial investment of $1,000 as of the end of the period by multiplying the
total number of units owned at the end of the period by the unit value per unit
on the last trading day of the period; (2) assuming
6
<PAGE>
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. Standardized total return will be calculated for one
year, five years, and ten years or some other relevant periods if a Sub-Account
has not been in existence for at least ten years.
The following are the standardized average annual total return quotations for
the Sub-Accounts.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT SINCE
INCEPTION INCEPTION OF
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR SEPARATE ACCOUNT
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market 11/8/94 -6.68% 0.08% N/A -0.20%
------------------------------------------------------------------------------------------------
North American 11/8/94 -8.04% -0.33% N/A -0.64%
Government Securities
(1)
------------------------------------------------------------------------------------------------
Diversified Income 11/8/94 -13.20% 0.31% N/A 0.02%
------------------------------------------------------------------------------------------------
Balanced Growth 11/8/94 -7.92% 9.79% N/A 9.26%
------------------------------------------------------------------------------------------------
Utilities 11/8/94 31.72% 20.88% N/A 19.97%
------------------------------------------------------------------------------------------------
Dividend Growth 11/8/94 -10.87% 17.47% N/A 16.58%
------------------------------------------------------------------------------------------------
Value-Added Market 11/8/94 0.59% 14.61% N/A 13.57%
------------------------------------------------------------------------------------------------
Growth 11/8/94 27.16% 17.60% N/A 16.82%
------------------------------------------------------------------------------------------------
American 11/8/94 43.65% 29.16% N/A 28.02%
Opportunities
------------------------------------------------------------------------------------------------
MidCap Equity 1/21/97 79.44% N/A N/A 27.67%
------------------------------------------------------------------------------------------------
Global Equity 11/8/94 22.27% 11.55% N/A 10.65%
------------------------------------------------------------------------------------------------
Developing Growth 11/8/94 79.85% 28.26% N/A 27.39%
------------------------------------------------------------------------------------------------
Emerging Markets (1) 11/8/94 70.99% 3.62% N/A 3.01%
------------------------------------------------------------------------------------------------
High Yield 1/2/97 -4.38% N/A N/A 2.21%
------------------------------------------------------------------------------------------------
MidCap Value 1/2/97 8.44% N/A N/A 19.75%
------------------------------------------------------------------------------------------------
Emerging Markets 6/16/97 17.59% N/A N/A -10.78%
Debt
------------------------------------------------------------------------------------------------
Emerging Markets 10/1/96 82.97% N/A N/A 4.80%
Equity
------------------------------------------------------------------------------------------------
Fixed Income 1/2/97 -12.99% N/A N/A -1.05%
------------------------------------------------------------------------------------------------
Active International 9/20/99 N/A N/A N/A 7.18%
Allocation
------------------------------------------------------------------------------------------------
Strategic Stock 11/3/97 -11.85% N/A N/A 0.18%
------------------------------------------------------------------------------------------------
Enterprise 6/13/94 14.10% 24.50% N/A 20.75%
------------------------------------------------------------------------------------------------
</TABLE>
(1) Closed to new investments or transfers of existing Contract Values.
Performance figures above do not reflect any deductions for any optional
charges. Performance would have been lower had any optional death benefits
been available and been chosen.
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated since the
inception of the underlying fund for one year, five years, and ten years or
other periods. Non-standardized total return is measured in the same manner as
the standardized total return described above, except that the contingent
deferred sales charge and the Annual Maintenance Fee are not deducted.
Therefore, non-standardized total return for a Sub-Account is higher than
standardized total return for a Sub-Account. The following are the
non-standardized annualized total return quotations for the Sub-Accounts.
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE
INCEPTION OF THE SEPARATE ACCOUNT FOR YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
FUND SINCE
INCEPTION INCEPTION OF
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR FUND
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market 11/8/94 3.32% 3.80% N/A 3.80%
------------------------------------------------------------------------------------------------
North American 11/8/94 1.96% 3.40% N/A 3.39%
Government Securities
(1)
------------------------------------------------------------------------------------------------
Diversified Income 11/8/94 -3.20% 3.90% N/A 3.90%
------------------------------------------------------------------------------------------------
Balanced Growth 11/8/94 2.08% 12.67% N/A 12.37%
------------------------------------------------------------------------------------------------
Utilities 11/8/94 41.72% 23.53% N/A 22.89%
------------------------------------------------------------------------------------------------
Dividend Growth 11/8/94 -0.87% 19.82% N/A 19.14%
------------------------------------------------------------------------------------------------
Value-Added Market 11/8/94 10.59% 17.25% N/A 16.49%
------------------------------------------------------------------------------------------------
Growth 11/8/94 37.16% 20.40% N/A 19.87%
------------------------------------------------------------------------------------------------
American 11/8/94 53.65% 31.51% N/A 30.60%
Opportunities
------------------------------------------------------------------------------------------------
MidCap Equity 1/21/97 89.44% N/A N/A 31.87%
------------------------------------------------------------------------------------------------
Global Equity 11/8/94 32.27% 14.68% N/A 14.11%
------------------------------------------------------------------------------------------------
Developing Growth 11/8/94 89.85% 30.64% N/A 29.98%
------------------------------------------------------------------------------------------------
Emerging Markets (1) 11/8/94 80.99% 7.55% N/A 7.40%
------------------------------------------------------------------------------------------------
High Yield 1/2/97 5.62% N/A N/A 6.92%
------------------------------------------------------------------------------------------------
MidCap Value 1/2/97 18.44% N/A N/A 23.51%
------------------------------------------------------------------------------------------------
Emerging Markets 6/16/97 27.59% N/A N/A -4.01%
Debt
------------------------------------------------------------------------------------------------
Emerging Markets 10/1/96 92.97% N/A N/A 10.68%
Equity
------------------------------------------------------------------------------------------------
Fixed Income 1/2/97 -2.99% N/A N/A 3.83%
------------------------------------------------------------------------------------------------
Active International 9/20/99 N/A N/A N/A 17.18%
Allocation
------------------------------------------------------------------------------------------------
Strategic Stock 11/3/97 -1.85% N/A N/A 6.84%
------------------------------------------------------------------------------------------------
Enterprise 4/6/86 24.10% 26.78% 15.95% 12.86%
------------------------------------------------------------------------------------------------
</TABLE>
(1) Closed to new investments or transfers of existing Contract Values.
Performance figures above do not reflect any deductions for any optional
charges. Performance would have been lower had any optional death benefits
been available and been chosen.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. The total return and yield may also be used to compare
the performance of the Sub-Accounts against certain widely acknowledged outside
standards or indices for stock and bond market performance. Index performance is
not
7
<PAGE>
representative of the performance of the Sub-Account to which it is compared and
is not adjusted for commissions and other costs. Portfolio holdings of the
Sub-Account will differ from those of the index to which it is compared.
Performance comparison indices include the following:
The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics, is a
commonly used measure of the rate of inflation. The index shows the average
change in the cost of selected consumer goods and services and does not
represent a return on an investment vehicle.
The Dow Jones Industrial Average is an unmanaged list of 30 common stocks
frequently used as a general measure of stock market performance. Its
performance figures reflect changes of market prices and reinvestment of all
distributions.
Lehman Brothers Corporate Bond Index is an unmanaged list of publicly issued,
fixed-rate, non-convertible investment-grade domestic corporate debt securities
frequently used as a general measure of the performance of fixed-income
securities. The average quality of bonds included in the index may be higher
than the average quality of those bonds in which a Fund customarily invests. The
index does not include bonds in certain of the lower rating classifications in
which a Fund may invest. The performance figures of the index reflect changes in
market prices and reinvestment of all interest payments.
The Lehman Brothers Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Lehman Brothers Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency. The index does not include bonds in certain of the lower-rating
classifications in which a Fund may invest. Its performance figures reflect
changes in market prices and reinvestment of all interest payments. Morgan
Stanley Capital International World Index is an unmanaged list of approximately
1,450 equity securities listed on the stock exchanges of the United States,
Europe, Canada, Australia, New Zealand and the Far East, with all values
expressed in U.S. dollars. Performance figures reflect changes in market prices
and reinvestment of distributions net of withholding taxes. The securities in
the index change over time to maintain representativeness.
8
<PAGE>
The NASDAQ-OTC Industrial Average (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded. Its performance figures reflect changes of market prices but do not
reflect reinvestment of cash dividends.
Salomon Brothers Long-Term High-Grade Corporate Bond Index is an unmanaged list
of publicly traded corporate bonds having a rating of at least AA by Standard &
Poor's or Aa by Moody's and is frequently used as general measure of the
performance of fixed-income securities. The average quality of bonds included in
the index may be higher than the average quality of those bonds in which a Fund
may customarily invest. The index does not include bonds in certain of the lower
rating classifications in which a Fund may invest. Performance figures for the
index reflect changes of market prices and reinvestment of all distributions.
The Salomon Brothers 7-10 Year Government Bond Index is an unmanaged list of
U.S. Government and government agency securities with maturities of 7 to 10
years. Performance figures for the index reflect changes of market prices and
reinvestment of all interest payments.
The Standard & Poor's Composite Index of 500 stocks (the "S&P 500") is a market
value-weighted and unmanaged index showing changes in the aggregate market value
of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40 financial services
concerns. The S&P 500 represents about 80% of the market value of all issues
traded on the New York Stock Exchange. Its performance figures reflect changes
of market prices and reinvestment of all regular cash dividends.
The Standard & Poor's 40 Utilities Index is unmanaged list of 40 utility stocks.
The Index assumes reinvestment of all distributions and reflects changes in
market prices but does not take into account brokerage commissions or other
fees.
9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
--------------------------------------------------------------------------------
TO HARTFORD LIFE AND 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 and Annuity Insurance Company Separate Account Three (Money
Market, North American Government Securities, Balanced Growth, Utilities,
Dividend Growth, Value-Added Market, Growth, American Opportunities, Global
Equity, Developing Growth, Emerging Markets, Diversified Income, Mid-Cap Equity,
Strategic Stock, Enterprise, High Yield, Mid-Cap Value, Emerging Markets Debt,
Emerging Markets Equity, Active International Allocation, and Fixed Income
sub-accounts), (collectively, the Account) as of December 31, 1999, and the
related statements of operations and the statements of changes in net assets for
the periods presented. These financial statements are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1999, and the results of its operations and the changes in its net assets for
the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 17, 2000 ARTHUR ANDERSEN LLP
------------------------------------ SA-1 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
NORTH AMERICAN
MONEY GOVERNMENT
MARKET SECURITIES
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
ASSETS:
Investments in the Morgan Stanley Dean
Witter Select Dimensions Investment
Series:
Money Market Portfolio
Shares 123,412,023
Cost $123,412,023
Market Value...................... $123,412,023 --
North American Government Securities
Portfolio
Shares 852,351
Cost $8,618,072
Market Value...................... -- $8,549,082
Balanced Growth Portfolio
Shares 7,736,563
Cost $108,754,187
Market Value...................... -- --
Utilities Portfolio
Shares 5,816,577
Cost $90,532,236
Market Value...................... -- --
Dividend Growth Portfolio
Shares 33,214,328
Cost $576,857,235
Market Value...................... -- --
Value-Added Market Portfolio
Shares 7,830,364
Cost $112,297,967
Market Value...................... -- --
Growth Portfolio
Shares 3,448,329
Cost $53,315,696
Market Value...................... -- --
American Opportunities Portfolio
Shares 21,029,679
Cost $400,724,566
Market Value...................... -- --
Global Equity Portfolio
Shares 7,738,438
Cost $95,158,830
Market Value...................... -- --
Due from Hartford Life and Annuity
Insurance Company.................... -- --
Receivable for fund shares sold....... 441,792 1,650
------------ ----------
Total Assets.......................... 123,853,815 8,550,732
------------ ----------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... 441,749 3,496
Payable for fund shares purchased..... -- --
------------ ----------
Total Liabilities..................... 441,749 3,496
------------ ----------
Net Assets (variable annuity contract
liabilities)......................... $123,412,066 $8,547,236
============ ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------ SA-2 -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
BALANCED VALUE-ADDED AMERICAN
GROWTH UTILITIES DIVIDEND GROWTH MARKET GROWTH OPPORTUNITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ --------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in the Morgan Stanley Dean
Witter Select Dimensions Investment
Series:
Money Market Portfolio
Shares 123,412,023
Cost $123,412,023
Market Value...................... -- -- -- -- -- --
North American Government Securities
Portfolio
Shares 852,351
Cost $8,618,072
Market Value...................... -- -- -- -- -- --
Balanced Growth Portfolio
Shares 7,736,563
Cost $108,754,187
Market Value...................... $113,185,919 -- -- -- -- --
Utilities Portfolio
Shares 5,816,577
Cost $90,532,236
Market Value...................... -- $152,685,145 -- -- -- --
Dividend Growth Portfolio
Shares 33,214,328
Cost $576,857,235
Market Value...................... -- -- $661,629,423 -- -- --
Value-Added Market Portfolio
Shares 7,830,364
Cost $112,297,967
Market Value...................... -- -- -- $160,835,669 -- --
Growth Portfolio
Shares 3,448,329
Cost $53,315,696
Market Value...................... -- -- -- -- $80,242,606 --
American Opportunities Portfolio
Shares 21,029,679
Cost $400,724,566
Market Value...................... -- -- -- -- -- $685,567,531
Global Equity Portfolio
Shares 7,738,438
Cost $95,158,830
Market Value...................... -- -- -- -- -- --
Due from Hartford Life and Annuity
Insurance Company.................... 79,289 183,819 -- -- 148,319 498,199
Receivable for fund shares sold....... -- -- 156,744 -- -- --
------------ ------------ ------------ ------------ ----------- ------------
Total Assets.......................... 113,265,208 152,868,964 661,786,167 160,835,669 80,390,925 686,065,730
------------ ------------ ------------ ------------ ----------- ------------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... -- -- 170,323 -- -- --
Payable for fund shares purchased..... 78,002 190,294 -- 160,778 77,078 498,946
------------ ------------ ------------ ------------ ----------- ------------
Total Liabilities..................... 78,002 190,294 170,323 160,778 77,078 498,946
------------ ------------ ------------ ------------ ----------- ------------
Net Assets (variable annuity contract
liabilities)......................... $113,187,206 $152,678,670 $661,615,844 $160,674,891 $80,313,847 $685,566,784
============ ============ ============ ============ =========== ============
<CAPTION>
GLOBAL
EQUITY
SUB-ACCOUNT
------------
<S> <C>
ASSETS:
Investments in the Morgan Stanley Dean
Witter Select Dimensions Investment
Series:
Money Market Portfolio
Shares 123,412,023
Cost $123,412,023
Market Value...................... --
North American Government Securities
Portfolio
Shares 852,351
Cost $8,618,072
Market Value...................... --
Balanced Growth Portfolio
Shares 7,736,563
Cost $108,754,187
Market Value...................... --
Utilities Portfolio
Shares 5,816,577
Cost $90,532,236
Market Value...................... --
Dividend Growth Portfolio
Shares 33,214,328
Cost $576,857,235
Market Value...................... --
Value-Added Market Portfolio
Shares 7,830,364
Cost $112,297,967
Market Value...................... --
Growth Portfolio
Shares 3,448,329
Cost $53,315,696
Market Value...................... --
American Opportunities Portfolio
Shares 21,029,679
Cost $400,724,566
Market Value...................... --
Global Equity Portfolio
Shares 7,738,438
Cost $95,158,830
Market Value...................... $151,905,538
Due from Hartford Life and Annuity
Insurance Company.................... 77,140
Receivable for fund shares sold....... --
------------
Total Assets.......................... 151,982,678
------------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company.................... --
Payable for fund shares purchased..... 77,131
------------
Total Liabilities..................... 77,131
------------
Net Assets (variable annuity contract
liabilities)......................... $151,905,547
============
</TABLE>
------------------------------------ SA-3 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEVELOPING EMERGING DIVERSIFIED MID-CAP
GROWTH MARKETS INCOME EQUITY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in the Morgan
Stanley Dean Witter Select
Dimensions Investment Series:
Developing Growth Portfolio
Shares 3,667,277
Cost $62,378,527
Market Value.............. $146,837,761 -- -- --
Emerging Markets Portfolio
Shares 1,449,262
Cost $15,185,950
Market Value.............. -- $20,999,807 -- --
Diversified Income Portfolio
Shares 8,679,482
Cost $87,923,712
Market Value.............. -- -- $77,768,156 --
Mid-Cap Equity Portfolio
Shares 3,076,269
Cost $39,902,446
Market Value.............. -- -- -- $69,708,246
Investments in Van Kampen Life
Investment Trust:
Strategic Stock Portfolio
Shares 979,146
Cost $11,650,835
Market Value.............. -- -- -- --
Enterprise Portfolio
Shares 841,363
Cost $18,511,018
Market Value.............. -- -- -- --
Investments in the Morgan
Stanley Dean Witter Universal
Funds Inc.:
High Yield Portfolio
Shares 2,226,015
Cost $23,778,925
Market Value.............. -- -- -- --
Mid-Cap Value Portfolio
Shares 1,226,869
Cost $18,100,377
Market Value.............. -- -- -- --
Emerging Markets Debt
Portfolio
Shares 139,096
Cost $982,205
Market Value.............. -- -- -- --
Emerging Markets Equity
Portfolio
Shares 223,485
Cost $2,343,009
Market Value.............. -- -- -- --
Active International
Allocation Portfolio
Shares 48,265
Cost $522,155
Market Value.............. -- -- -- --
Fixed Income Portfolio
Shares 153,493
Cost $1,607,669
Market Value.............. -- -- -- --
Due from Hartford Life and
Annuity Insurance Company.... 81,524 -- -- 165,728
Receivable for fund shares
sold......................... -- 42,726 -- --
------------ ----------- ----------- -----------
Total Assets.................. 146,919,285 21,042,533 77,768,156 69,873,974
------------ ----------- ----------- -----------
LIABILITIES:
Due to Hartford Life and
Annuity Insurance Company.... -- 46,859 63,821 --
Payable for fund shares
purchased.................... 76,588 -- -- 163,007
------------ ----------- ----------- -----------
Total Liabilities............. 76,588 46,859 63,821 163,007
------------ ----------- ----------- -----------
Net Assets (variable annuity
contract liabilities)........ $146,842,697 $20,995,674 $77,704,335 $69,710,967
============ =========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------ SA-4 -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
EMERGING
MID-CAP EMERGING MARKETS
STRATEGIC STOCK ENTERPRISE HIGH YIELD VALUE MARKETS DEBT EQUITY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in the Morgan
Stanley Dean Witter Select
Dimensions Investment Series:
Developing Growth Portfolio
Shares 3,667,277
Cost $62,378,527
Market Value.............. -- -- -- -- -- --
Emerging Markets Portfolio
Shares 1,449,262
Cost $15,185,950
Market Value.............. -- -- -- -- -- --
Diversified Income Portfolio
Shares 8,679,482
Cost $87,923,712
Market Value.............. -- -- -- -- -- --
Mid-Cap Equity Portfolio
Shares 3,076,269
Cost $39,902,446
Market Value.............. -- -- -- -- -- --
Investments in Van Kampen Life
Investment Trust:
Strategic Stock Portfolio
Shares 979,146
Cost $11,650,835
Market Value.............. $11,485,382 -- -- -- -- --
Enterprise Portfolio
Shares 841,363
Cost $18,511,018
Market Value.............. -- $21,967,977 -- -- -- --
Investments in the Morgan
Stanley Dean Witter Universal
Funds Inc.:
High Yield Portfolio
Shares 2,226,015
Cost $23,778,925
Market Value.............. -- -- $22,794,394 -- -- --
Mid-Cap Value Portfolio
Shares 1,226,869
Cost $18,100,377
Market Value.............. -- -- -- $19,163,699 -- --
Emerging Markets Debt
Portfolio
Shares 139,096
Cost $982,205
Market Value.............. -- -- -- -- $961,150 --
Emerging Markets Equity
Portfolio
Shares 223,485
Cost $2,343,009
Market Value.............. -- -- -- -- -- $3,093,291
Active International
Allocation Portfolio
Shares 48,265
Cost $522,155
Market Value.............. -- -- -- -- -- --
Fixed Income Portfolio
Shares 153,493
Cost $1,607,669
Market Value.............. -- -- -- -- -- --
Due from Hartford Life and
Annuity Insurance Company.... 9,671 16,126 14,887 16,996 -- 50,258
Receivable for fund shares
sold......................... -- -- -- -- -- --
----------- ----------- ----------- ----------- -------- ----------
Total Assets.................. 11,495,053 21,984,103 22,809,281 19,180,695 961,150 3,143,549
----------- ----------- ----------- ----------- -------- ----------
LIABILITIES:
Due to Hartford Life and
Annuity Insurance Company.... -- -- -- -- 30 --
Payable for fund shares
purchased.................... 9,492 16,546 14,866 16,764 -- 50,258
----------- ----------- ----------- ----------- -------- ----------
Total Liabilities............. 9,492 16,546 14,866 16,764 30 50,258
----------- ----------- ----------- ----------- -------- ----------
Net Assets (variable annuity
contract liabilities)........ $11,485,561 $21,967,557 $22,794,415 $19,163,931 $961,120 $3,093,291
=========== =========== =========== =========== ======== ==========
<CAPTION>
ACTIVE
INTERNATIONAL
ALLOCATION FIXED INCOME
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
ASSETS:
Investments in the Morgan
Stanley Dean Witter Select
Dimensions Investment Series:
Developing Growth Portfolio
Shares 3,667,277
Cost $62,378,527
Market Value.............. -- --
Emerging Markets Portfolio
Shares 1,449,262
Cost $15,185,950
Market Value.............. -- --
Diversified Income Portfolio
Shares 8,679,482
Cost $87,923,712
Market Value.............. -- --
Mid-Cap Equity Portfolio
Shares 3,076,269
Cost $39,902,446
Market Value.............. -- --
Investments in Van Kampen Life
Investment Trust:
Strategic Stock Portfolio
Shares 979,146
Cost $11,650,835
Market Value.............. -- --
Enterprise Portfolio
Shares 841,363
Cost $18,511,018
Market Value.............. -- --
Investments in the Morgan
Stanley Dean Witter Universal
Funds Inc.:
High Yield Portfolio
Shares 2,226,015
Cost $23,778,925
Market Value.............. -- --
Mid-Cap Value Portfolio
Shares 1,226,869
Cost $18,100,377
Market Value.............. -- --
Emerging Markets Debt
Portfolio
Shares 139,096
Cost $982,205
Market Value.............. -- --
Emerging Markets Equity
Portfolio
Shares 223,485
Cost $2,343,009
Market Value.............. -- --
Active International
Allocation Portfolio
Shares 48,265
Cost $522,155
Market Value.............. $566,062 --
Fixed Income Portfolio
Shares 153,493
Cost $1,607,669
Market Value.............. -- $1,542,603
Due from Hartford Life and
Annuity Insurance Company.... 46,958 --
Receivable for fund shares
sold......................... -- --
-------- ----------
Total Assets.................. 613,020 1,542,603
-------- ----------
LIABILITIES:
Due to Hartford Life and
Annuity Insurance Company.... -- 62
Payable for fund shares
purchased.................... 46,959 --
-------- ----------
Total Liabilities............. 46,959 62
-------- ----------
Net Assets (variable annuity
contract liabilities)........ $566,061 $1,542,541
======== ==========
</TABLE>
------------------------------------ SA-5 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ---------- --------------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE
ACCUMULATION PERIOD:
Money Market Portfolio 1.25%..... 9,489,283 $12.117281 $ 114,984,311
Money Market Portfolio 1.5%...... 568,587 10.439293 5,935,646
Money Market Portfolio 1.65%..... 12,251 10.435390 127,842
Money Market Portfolio 1.4%...... 178,918 12.105339 2,165,869
North American Government
Securities Portfolio 1.25%...... 684,246 11.870066 8,122,043
North American Government
Securities Portfolio 1.5%....... 32,272 10.243966 330,591
North American Government
Securities Portfolio 1.4%....... 6,003 11.858359 71,190
Balanced Growth Portfolio
1.25%........................... 5,961,358 18.230000 108,675,549
Balanced Growth Portfolio 1.5%... 198,439 10.996556 2,182,142
Balanced Growth Portfolio
1.65%........................... 1,633 10.992443 17,953
Balanced Growth Portfolio 1.4%... 122,192 18.211833 2,225,336
Utilities Portfolio 1.25%........ 5,029,716 28.898536 145,351,426
Utilities Portfolio 1.5%......... 207,872 15.922989 3,309,952
Utilities Portfolio 1.65%........ 8,195 15.917054 130,435
Utilities Portfolio 1.4%......... 126,230 28.869918 3,644,255
Dividend Growth Portfolio
1.25%........................... 26,039,033 24.630777 641,361,625
Dividend Growth Portfolio 1.5%... 848,002 10.750975 9,116,844
Dividend Growth Portfolio
1.65%........................... 10,463 10.746952 112,442
Dividend Growth Portfolio 1.4%... 413,699 24.606272 10,179,601
Value-Added Market Portfolio
1.25%........................... 7,132,645 21.944514 156,522,435
Value-Added Market Portfolio
1.5%............................ 103,156 11.871109 1,224,574
Value-Added Market Portfolio
1.65%........................... 1,282 11.866668 15,211
Value-Added Market Portfolio
1.4%............................ 122,524 21.922750 2,686,061
Growth Portfolio 1.25%........... 3,011,788 25.416166 76,548,092
Growth Portfolio 1.5%............ 78,900 14.820183 1,169,309
Growth Portfolio 1.65%........... 5,670 14.814660 83,995
Growth Portfolio 1.4%............ 97,233 25.390936 2,468,842
American Opportunities Portfolio
1.25%........................... 16,616,077 39.531912 656,865,283
American Opportunities Portfolio
1.5%............................ 699,793 17.103552 11,968,952
American Opportunities Portfolio
1.65%........................... 21,026 17.097183 359,489
American Opportunities Portfolio
1.4%............................ 392,159 39.492620 15,487,381
Global Equity Portfolio 1.25%.... 7,432,248 19.732589 146,657,488
Global Equity Portfolio 1.5%..... 170,755 13.820388 2,359,902
Global Equity Portfolio 1.65%.... 7,150 13.815234 98,774
Global Equity Portfolio 1.4%..... 132,454 19.713070 2,611,070
Developing Growth Portfolio
1.25%........................... 3,699,371 38.573629 142,698,182
Developing Growth Portfolio
1.5%............................ 65,181 20.576241 1,341,190
Developing Growth Portfolio
1.65%........................... 7,066 20.568597 145,343
Developing Growth Portfolio
1.4%............................ 61,802 38.535362 2,381,578
Emerging Markets Portfolio
1.25%........................... 1,421,047 14.444234 20,525,934
Emerging Markets Portfolio
1.5%............................ 7,816 16.578521 129,575
Emerging Markets Portfolio
1.4%............................ 16,107 14.429938 232,425
Diversified Income Portfolio
1.25%........................... 6,139,351 12.174809 74,745,421
Diversified Income Portfolio
1.5%............................ 234,256 9.635306 2,257,129
Diversified Income Portfolio
1.65%........................... 1,036 9.631697 9,978
Diversified Income Portfolio
1.4%............................ 54,554 12.162658 663,522
Mid-Cap Equity Portfolio 1.25%... 2,887,266 22.567847 65,159,378
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------ SA-6 -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ---------- --------------
<S> <C> <C> <C>
Mid-Cap Equity Portfolio 1.5%...... 93,418 $19.825174 $ 1,852,024
Mid-Cap Equity Portfolio 1.65%..... 13,522 19.817812 267,976
Mid-Cap Equity Portfolio 1.4%...... 107,853 22.545394 2,431,589
Strategic Stock Portfolio 1.25%.... 1,046,841 10.093336 10,566,113
Strategic Stock Portfolio 1.5%..... 39,996 10.445212 417,767
Strategic Stock Portfolio 1.65%.... 1,945 10.441396 20,309
Strategic Stock Portfolio 1.4%..... 47,740 10.083303 481,372
Enterprise Portfolio 1.25%......... 1,421,039 13.219240 18,785,060
Enterprise Portfolio 1.5%.......... 85,535 13.818024 1,181,918
Enterprise Portfolio 1.4%.......... 148,965 13.206158 1,967,250
Enterprise Portfolio 1.65%......... 2,413 13.812991 33,329
High Yield Portfolio 1.25%......... 1,926,264 10.554381 20,330,522
High Yield Portfolio 1.4%.......... 71,139 10.543954 750,083
High Yield Portfolio 1.5%.......... 162,726 10.531861 1,713,810
Mid-Cap Value Portfolio 1.25%...... 1,322,605 11.977275 15,841,201
Mid-Cap Value Portfolio 1.65%...... 1,528 13.230525 20,217
Mid-Cap Value Portfolio 1.4%....... 128,705 11.965487 1,540,020
Mid-Cap Value Portfolio 1.5%....... 133,166 13.235353 1,762,493
Emerging Markets Debt Portfolio
1.25%............................. 78,118 8.615091 672,996
Emerging Markets Debt Portfolio
1.5%.............................. 13,695 10.679132 146,251
Emerging Markets Debt Portfolio
1.4%.............................. 15,204 8.606516 130,852
Emerging Markets Debt Portfolio
1.65%............................. 1,032 10.675235 11,021
Emerging Markets Equity Portfolio
1.25%............................. 170,056 14.353528 2,440,907
Emerging Markets Equity Portfolio
1.65%............................. 2,492 14.339621 35,737
Emerging Markets Equity Portfolio
1.5%.............................. 10,403 14.342270 149,200
Emerging Markets Equity Portfolio
1.4%.............................. 32,582 14.346777 467,447
Active International Allocation
Portfolio 1.25%................... 36,203 11.718265 424,236
Active International Allocation
Portfolio 1.5%.................... 3,092 11.710114 36,210
Active International Allocation
Portfolio 1.4%.................... 9,017 11.713372 105,615
Fixed Income Portfolio 1.25%....... 109,324 10.065310 1,100,377
Fixed Income Portfolio 1.5%........ 11,984 10.057387 120,530
Fixed Income Portfolio 1.4%........ 31,970 10.060554 321,634
--------------
SUB-TOTAL.......................... 2,531,587,631
--------------
ANNUITY CONTRACTS IN THE ANNUITY
PERIOD:
Money Market Portfolio........... 16,373 12.117281 198,398
North American Government
Securities Portfolio............ 1,972 11.870066 23,412
Balanced Growth Portfolio........ 4,730 18.230000 86,226
Utilities Portfolio.............. 8,395 28.898536 242,602
Dividend Growth Portfolio........ 34,320 24.630777 845,332
Value-Added Market Portfolio..... 10,326 21.944514 226,610
Growth Portfolio................. 1,716 25.416166 43,609
American Opportunities
Portfolio....................... 22,404 39.531912 885,679
Global Equity Portfolio.......... 9,036 19.732589 178,313
Developing Growth Portfolio...... 7,166 38.573629 276,404
Emerging Markets Portfolio....... 7,459 14.444234 107,740
Diversified Income Portfolio..... 2,323 12.174809 28,285
--------------
SUB-TOTAL........................ 3,142,610
--------------
GRAND TOTAL:....................... $2,534,730,241
==============
</TABLE>
------------------------------------ SA-7 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
NORTH AMERICAN
MONEY GOVERNMENT
MARKET SECURITIES
SUB-ACCOUNT SUB-ACCOUNT
----------- --------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.................................. $ 5,523,647 $ 391,465
EXPENSES:
Mortality and expense undertakings......... (1,488,588) (109,310)
----------- ---------
Net investment income (loss)............. 4,035,059 282,155
----------- ---------
CAPITAL GAINS INCOME......................... -- --
----------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized (loss) gain on security
transactions.............................. -- (2,295)
Net unrealized (depreciation) appreciation
of investments during the period.......... -- (98,426)
----------- ---------
Net (loss) gain on investments........... -- (100,721)
----------- ---------
Net increase (decrease) in net assets
resulting from operations............... $ 4,035,059 $ 181,434
=========== =========
</TABLE>
* Formerly American Value Sub-Account; change effective May 1, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------ SA-8 -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
BALANCED VALUE-ADDED
GROWTH UTILITIES DIVIDEND GROWTH MARKET GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................. $ 3,309,619 $ 1,677,499 $ 12,763,908 $ 1,694,354 $ 3,451
EXPENSES:
Mortality and expense undertakings......... (1,365,537) (1,320,691) (8,729,052) (1,934,373) (708,134)
------------ ----------- ------------ ----------- -----------
Net investment income (loss)............. 1,944,082 356,808 4,034,856 (240,019) (704,683)
------------ ----------- ------------ ----------- -----------
CAPITAL GAINS INCOME......................... 12,263,090 719,571 61,332,549 5,499,038 4,191,496
------------ ----------- ------------ ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized (loss) gain on security
transactions.............................. (73,288) 19,860 (2,732,578) 275,018 164,575
Net unrealized (depreciation) appreciation
of investments during the period.......... (12,320,805) 40,186,992 (70,396,747) 9,944,964 16,049,317
------------ ----------- ------------ ----------- -----------
Net (loss) gain on investments........... (12,394,093) 40,206,852 (73,129,325) 10,219,982 16,213,892
------------ ----------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations............... $ 1,813,079 $41,283,231 $ (7,761,920) $15,479,001 $19,700,705
============ =========== ============ =========== ===========
<CAPTION>
AMERICAN GLOBAL
OPPORTUNITIES EQUITY
SUB-ACCOUNT* SUB-ACCOUNT
------------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.................................. $ 1,449,748 $ 433,055
EXPENSES:
Mortality and expense undertakings......... (5,636,258) (1,486,761)
------------ -----------
Net investment income (loss)............. (4,186,510) (1,053,706)
------------ -----------
CAPITAL GAINS INCOME......................... 40,966,154 --
------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized (loss) gain on security
transactions.............................. (200,293) 105,344
Net unrealized (depreciation) appreciation
of investments during the period.......... 185,622,773 37,067,653
------------ -----------
Net (loss) gain on investments........... 185,422,480 37,172,997
------------ -----------
Net increase (decrease) in net assets
resulting from operations............... $222,202,124 $36,119,291
============ ===========
</TABLE>
* Formerly American Value Sub-Account; change effective May 1, 1999.
------------------------------------ SA-9 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEVELOPING EMERGING DIVERSIFIED MID-CAP
GROWTH MARKETS INCOME EQUITY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT***
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends....................................... $ 48,080 $ 26,969 $ 6,753,074 $ 154,413
EXPENSES:
Mortality and expense undertakings.............. (1,106,088) (192,804) (1,009,251) (409,231)
----------- ---------- ----------- -----------
Net investment (loss) income.................. (1,058,008) (165,835) 5,743,823 (254,818)
----------- ---------- ----------- -----------
CAPITAL GAINS INCOME.............................. -- -- -- --
----------- ---------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on security
transactions................................... 1,312,196 (203,975) (39,961) 103,985
Net unrealized appreciation (depreciation) of
investments during the period.................. 66,388,520 9,904,528 (8,188,376) 27,634,475
----------- ---------- ----------- -----------
Net gain (loss) on investments................ 67,700,716 9,700,553 (8,228,337) 27,738,460
----------- ---------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations.................... $66,642,708 $9,534,718 $(2,484,514) $27,483,642
=========== ========== =========== ===========
</TABLE>
* From inception, September 7, 1999, to December 31, 1999.
** From inception, September 20, 1999, to December 31, 1999.
*** Formerly Mid-Cap Growth Sub-Account; change effective September 8, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------ SA-10 -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
MID-CAP EMERGING
STRATEGIC STOCK ENTERPRISE HIGH YIELD VALUE MARKETS DEBT
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends....................................... $ 72,628 $ 24,469 $1,710,348 $ 27,823 $113,374
EXPENSES:
Mortality and expense undertakings.............. (117,755) (142,466) (225,656) (162,785) (6,990)
--------- ---------- ---------- ---------- --------
Net investment (loss) income.................. (45,127) (117,997) 1,484,692 (134,962) 106,384
--------- ---------- ---------- ---------- --------
CAPITAL GAINS INCOME.............................. 19,014 576,428 -- 2,170,992 --
--------- ---------- ---------- ---------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on security
transactions................................... (1,919) 4,371 3,214 23,187 867
Net unrealized appreciation (depreciation) of
investments during the period.................. (445,298) 2,973,314 (563,346) 629,983 46,701
--------- ---------- ---------- ---------- --------
Net gain (loss) on investments................ (447,217) 2,977,685 (560,132) 653,170 47,568
--------- ---------- ---------- ---------- --------
Net increase (decrease) in net assets
resulting from operations.................... $(473,330) $3,436,116 $ 924,560 $2,689,200 $153,952
========= ========== ========== ========== ========
<CAPTION>
EMERGING ACTIVE
MARKETS INTERNATIONAL
EQUITY ALLOCATION FIXED INCOME
SUB-ACCOUNT* SUB-ACCOUNT** SUB-ACCOUNT*
------------ ------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends....................................... $ -- $ 848 $ 65,663
EXPENSES:
Mortality and expense undertakings.............. (5,722) (782) (4,582)
-------- ------- --------
Net investment (loss) income.................. (5,722) 66 61,081
-------- ------- --------
CAPITAL GAINS INCOME.............................. -- -- --
-------- ------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on security
transactions................................... 4,110 499 5,167
Net unrealized appreciation (depreciation) of
investments during the period.................. 750,282 43,907 (65,066)
-------- ------- --------
Net gain (loss) on investments................ 754,392 44,406 (59,899)
-------- ------- --------
Net increase (decrease) in net assets
resulting from operations.................... $748,670 $44,472 $ 1,182
======== ======= ========
</TABLE>
* From inception, September 7, 1999, to December 31, 1999.
** From inception, September 20, 1999, to December 31, 1999.
*** Formerly Mid-Cap Growth Sub-Account; change effective September 8, 1999.
------------------------------------ SA-11 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
NORTH AMERICAN
MONEY MARKET GOVERMENT SECURITIES
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 4,035,059 $ 282,155
Capital gains income.................. -- --
Net realized (loss) gain on security
transactions......................... -- (2,295)
Net unrealized (depreciation)
appreciation of investments during
the period........................... -- (98,426)
------------ ----------
Net increase (decrease) in net assets
resulting from operations............ 4,035,059 181,434
------------ ----------
UNIT TRANSACTIONS:
Purchases............................. 23,817,068 563,929
Net transfers......................... 15,198,089 928,086
Surrenders for benefit payments and
fees................................. (28,455,931) (661,447)
Net annuity transactions.............. 66,438 (6,541)
------------ ----------
Net increase (decrease) in net assets
resulting from unit transactions..... 10,625,664 824,027
------------ ----------
Total increase in net assets.......... 14,660,723 1,005,461
NET ASSETS:
Beginning of period................... 108,751,343 7,541,775
------------ ----------
End of period......................... $123,412,066 $8,547,236
============ ==========
</TABLE>
* Formerly American Value Sub-Account; change effective May 1, 1999.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
NORTH AMERICAN
MONEY MARKET GOVERMENT SECURITIES
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 (depreciation)
appreciation of investments during
the period........................... -- (10,221)
------------ ----------
Net increase 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 in net assets resulting
from unit transactions............... 30,598,132 2,707,089
------------ ----------
Total increase 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>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------ SA-12 -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
BALANCED VALUE-ADDED AMERICAN
GROWTH UTILITIES DIVIDEND GROWTH MARKET GROWTH OPPORTUNITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
------------ ------------ --------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 1,944,082 $ 356,808 $ 4,034,856 $ (240,019) $ (704,683) $ (4,186,510)
Capital gains income.................. 12,263,090 719,571 61,332,549 5,499,038 4,191,496 40,966,154
Net realized (loss) gain on security
transactions......................... (73,288) 19,860 (2,732,578) 275,018 164,575 (200,293)
Net unrealized (depreciation)
appreciation of investments during
the period........................... (12,320,805) 40,186,992 (70,396,747) 9,944,964 16,049,317 185,622,773
------------ ------------ ------------ ------------ ----------- ------------
Net increase (decrease) in net assets
resulting from operations............ 1,813,079 41,283,231 (7,761,920) 15,479,001 19,700,705 222,202,124
------------ ------------ ------------ ------------ ----------- ------------
UNIT TRANSACTIONS:
Purchases............................. 8,636,011 11,974,424 47,158,874 8,568,182 6,335,812 49,350,136
Net transfers......................... 16,333,341 28,022,803 42,003,115 (84,774) 11,373,024 112,929,991
Surrenders for benefit payments and
fees................................. (8,597,616) (8,175,407) (62,420,672) (10,796,247) (4,922,308) (32,300,071)
Net annuity transactions.............. 40,306 170,763 484,672 165,381 24,763 592,185
------------ ------------ ------------ ------------ ----------- ------------
Net increase (decrease) in net assets
resulting from unit transactions..... 16,412,042 31,992,583 27,225,989 (2,147,458) 12,811,291 130,572,241
------------ ------------ ------------ ------------ ----------- ------------
Total increase in net assets.......... 18,225,121 73,275,814 19,464,069 13,331,543 32,511,996 352,774,365
NET ASSETS:
Beginning of period................... 94,962,085 79,402,856 642,151,775 147,343,348 47,801,851 332,792,419
------------ ------------ ------------ ------------ ----------- ------------
End of period......................... $113,187,206 $152,678,670 $661,615,844 $160,674,891 $80,313,847 $685,566,784
============ ============ ============ ============ =========== ============
<CAPTION>
GLOBAL
EQUITY
SUB-ACCOUNT
------------
<S> <C>
OPERATIONS:
Net investment income (loss).......... $ (1,053,706)
Capital gains income.................. --
Net realized (loss) gain on security
transactions......................... 105,344
Net unrealized (depreciation)
appreciation of investments during
the period........................... 37,067,653
------------
Net increase (decrease) in net assets
resulting from operations............ 36,119,291
------------
UNIT TRANSACTIONS:
Purchases............................. 8,046,187
Net transfers......................... 7,428,110
Surrenders for benefit payments and
fees................................. (8,976,935)
Net annuity transactions.............. 152,229
------------
Net increase (decrease) in net assets
resulting from unit transactions..... 6,649,591
------------
Total increase in net assets.......... 42,768,882
NET ASSETS:
Beginning of period................... 109,136,665
------------
End of period......................... $151,905,547
============
</TABLE>
<TABLE>
<CAPTION>
BALANCED VALUE-ADDED AMERICAN
GROWTH UTILITIES DIVIDEND GROWTH MARKET GROWTH OPPORTUNITIES
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 (depreciation)
appreciation 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 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 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 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
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 (depreciation)
appreciation of investments during
the period........................... 11,960,357
------------
Net increase 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 in net assets resulting
from unit transactions............... 7,841,998
------------
Total increase in net assets.......... 19,557,773
NET ASSETS:
Beginning of period................... 89,578,892
------------
End of period......................... $109,136,665
============
</TABLE>
------------------------------------ SA-13 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEVELOPING EMERGING DIVERSIFIED MID-CAP
GROWTH MARKETS INCOME EQUITY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT****
------------ ----------- ----------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (1,058,008) $ (165,835) $ 5,743,823 $ (254,818)
Capital gains income.................. -- -- -- --
Net realized gain (loss) on security
transactions......................... 1,312,196 (203,975) (39,961) 103,985
Net unrealized appreciation
(depreciation) of investments during
the period........................... 66,388,520 9,904,528 (8,188,376) 27,634,475
------------ ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations............ 66,642,708 9,534,718 (2,484,514) 27,483,642
------------ ----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................. 5,143,087 798,422 4,716,433 5,404,680
Net transfers......................... 7,894,645 (219,128) 1,271,481 14,052,003
Surrenders for benefit payments and
fees................................. (7,509,093) (1,275,935) (6,571,543) (1,960,056)
Net annuity transactions.............. 192,035 67,560 9,251 --
------------ ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions..... 5,720,674 (629,081) (574,378) 17,496,627
------------ ----------- ----------- -----------
Total increase (decrease) in net
assets............................... 72,363,382 8,905,637 (3,058,892) 44,980,269
NET ASSETS:
Beginning of period................... 74,479,315 12,090,037 80,763,227 24,730,698
------------ ----------- ----------- -----------
End of period......................... $146,842,697 $20,995,674 $77,704,335 $69,710,967
============ =========== =========== ===========
</TABLE>
** From inception, September 7, 1999, to December 31, 1999.
*** From inception, September 20, 1999, to December 31, 1999.
**** Formerly Mid-Cap Growth Sub-Account; change effective September 8, 1999.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DEVELOPING EMERGING DIVERSIFIED MID-CAP
GROWTH MARKETS INCOME EQUITY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT****
------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (862,789) $ (25,420) $ 4,075,834 $ (163,766)
Capital gains income.................. 110,206 44,837 85,594 198,842
Net realized (loss) gain on security
transactions......................... (327,553) (1,361,056) 548 (166,311)
Net unrealized appreciation
(depreciation) of investments during
the
period............................... 5,740,263 (4,702,323) (2,456,320) 790,477
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations............ 4,660,127 (6,043,962) 1,705,656 659,242
----------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................. 4,110,151 726,460 8,572,861 4,768,336
Net transfers......................... (5,495,094) (3,374,149) 21,054,049 2,911,337
Surrenders for benefit payments and
fees................................. (4,440,843) (1,031,340) (5,684,565) (810,632)
Net annuity transactions.............. (3,733) (3,230) 6,816 --
----------- ----------- ----------- -----------
Net (decrease) increase in net assets
resulting from unit transactions..... (5,829,519) (3,682,259) 23,949,161 6,869,041
----------- ----------- ----------- -----------
Total (decrease) increase in net
assets............................... (1,169,392) (9,726,221) 25,654,817 7,528,283
NET ASSETS:
Beginning of period................... 75,648,707 21,816,258 55,108,410 17,202,415
----------- ----------- ----------- -----------
End of period......................... $74,479,315 $12,090,037 $80,763,227 $24,730,698
=========== =========== =========== ===========
</TABLE>
* From inception, April 1, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------ SA-14 -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
MID-CAP EMERGING
STRATEGIC STOCK ENTERPRISE HIGH YIELD VALUE MARKETS DEBT
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (45,127) $ (117,997) $ 1,484,692 $ (134,962) $106,384
Capital gains income.................. 19,014 576,428 -- 2,170,992 --
Net realized gain (loss) on security
transactions......................... (1,919) 4,371 3,214 23,187 867
Net unrealized appreciation
(depreciation) of investments during
the period........................... (445,298) 2,973,314 (563,346) 629,983 46,701
----------- ----------- ----------- ----------- --------
Net increase (decrease) in net assets
resulting from operations............ (473,330) 3,436,116 924,560 2,689,200 153,952
----------- ----------- ----------- ----------- --------
UNIT TRANSACTIONS:
Purchases............................. 2,332,280 5,182,021 4,749,557 3,567,981 294,224
Net transfers......................... 4,383,997 10,043,099 8,661,074 5,842,947 284,171
Surrenders for benefit payments and
fees................................. (299,166) (1,024,385) (1,647,709) (355,169) (31,896)
Net annuity transactions.............. -- -- -- -- --
----------- ----------- ----------- ----------- --------
Net increase (decrease) in net assets
resulting from unit transactions..... 6,417,111 14,200,735 11,762,922 9,055,759 546,499
----------- ----------- ----------- ----------- --------
Total increase (decrease) in net
assets............................... 5,943,781 17,636,851 12,687,482 11,744,959 700,451
NET ASSETS:
Beginning of period................... 5,541,780 4,330,706 10,106,933 7,418,972 260,669
----------- ----------- ----------- ----------- --------
End of period......................... $11,485,561 $21,967,557 $22,794,415 $19,163,931 $961,120
=========== =========== =========== =========== ========
<CAPTION>
EMERGING ACTIVE
MARKETS INTERNATIONAL FIXED
EQUITY ALLOCATION INCOME
SUB-ACCOUNT** SUB-ACCOUNT*** SUB-ACCOUNT**
------------- -------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (5,722) $ 66 $ 61,081
Capital gains income.................. -- -- --
Net realized gain (loss) on security
transactions......................... 4,110 499 5,167
Net unrealized appreciation
(depreciation) of investments during
the period........................... 750,282 43,907 (65,066)
---------- -------- ----------
Net increase (decrease) in net assets
resulting from operations............ 748,670 44,472 1,182
---------- -------- ----------
UNIT TRANSACTIONS:
Purchases............................. 637,643 303,214 271,824
Net transfers......................... 1,712,968 221,037 1,291,003
Surrenders for benefit payments and
fees................................. (5,990) (2,662) (21,468)
Net annuity transactions.............. -- -- --
---------- -------- ----------
Net increase (decrease) in net assets
resulting from unit transactions..... 2,344,621 521,589 1,541,359
---------- -------- ----------
Total increase (decrease) in net
assets............................... 3,093,291 566,061 1,542,541
NET ASSETS:
Beginning of period................... -- -- --
---------- -------- ----------
End of period......................... $3,093,291 $566,061 $1,542,541
========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
MID-CAP EMERGING
STRATEGIC STOCK ENTERPRISE HIGH YIELD VALUE MARKETS DEBT
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
--------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (23,290) $ (18,104) $ 496,873 $ (20,531) $ 29,495
Capital gains income.................. -- -- 96,662 161,531 --
Net realized (loss) gain on security
transactions......................... 53 (1,243) (1,146) 458 (1,631)
Net unrealized appreciation
(depreciation) of investments during
the
period............................... 279,845 483,645 (421,185) 433,339 (67,755)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations............ 256,608 464,298 171,204 574,797 (39,891)
----------- ----------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................. 1,952,495 1,417,282 3,719,605 2,520,643 119,619
Net transfers......................... 3,478,285 2,480,461 6,350,686 4,446,588 185,592
Surrenders for benefit payments and
fees................................. (145,608) (31,335) (134,562) (123,056) (4,651)
Net annuity transactions.............. -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net (decrease) increase in net assets
resulting from unit transactions..... 5,285,172 3,866,408 9,935,729 6,844,175 300,560
----------- ----------- ----------- ----------- -----------
Total (decrease) increase in net
assets............................... 5,541,780 4,330,706 10,106,933 7,418,972 260,669
NET ASSETS:
Beginning of period................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
End of period......................... $ 5,541,780 $ 4,330,706 $10,106,933 $ 7,418,972 $ 260,669
=========== =========== =========== =========== ===========
</TABLE>
------------------------------------ SA-15 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. ORGANIZATION:
Separate Account Three (the Account) is a separate investment account within
Hartford Life and Annuity Insurance Company (the Company) and is registered
with the Securities and Exchange Commission (SEC) as a unit investment trust
under the Investment Company Act of 1940, as amended. Both the Company and
the Account are subject to supervision and regulation by the Department of
Insurance of the State of Connecticut and the SEC. The Account invests
deposits by variable annuity contractowners of the Company in various mutual
funds (the Funds) as directed by the contractowners.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Realized gains and
losses on the sales of securities are computed on the basis of identified
cost of the fund shares sold. Dividend and capital gains income is
accrued as of the ex-dividend date. Capital gains income represents
dividends from the Funds which are characterized as capital gains under
tax regulations.
b) SECURITY VALUATION--The investments in shares of the Morgan Stanley Dean
Witter Select Dimensions Investment Series, the Van Kampen Life
Investment Trust, and the Morgan Stanley Dean Witter Universal Funds,
Inc. are valued at the closing net asset value per share as determined by
the appropriate Fund as of December 31, 1999.
c) UNIT TRANSACTIONS--Unit transactions are executed based on the unit
values calculated at the close of the business day.
d) 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.
e) 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 charges
are reflected in surrenders for benefit payments and fees on the
accompanying statements of changes in net assets.
------------------------------------ SA-16 -------------------------------------
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------------------
To the Board of Directors of
Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory balance sheets of Hartford Life and
Annuity Insurance Company (a Connecticut Corporation and wholly owned subsidiary
of Hartford Life Insurance Company) (the Company) as of December 31, 1999 and
1998, and the related statutory statements of operations, changes in capital and
surplus, and cash flows for each of the three years in the period ended December
31, 1999. These statutory financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statutory financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 2 of notes to statutory financial
statements. When financial statements are presented for purposes other than for
filing with a regulatory agency, auditing standards generally accepted in the
United States require that an auditors' report on them state whether they are
presented in conformity with accounting principles generally accepted in the
United States. The accounting practices used by the Company vary from accounting
principles generally accepted in the United States as explained and quantified
in Note 2.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the statutory financial statements referred to above do not present
fairly, in conformity with accounting principles generally accepted in the
United States, the financial position of the Company as of December 31, 1999 and
1998, or the results of its operations or its cash flows for each of the three
years in the period ended December 31, 1999.
In our opinion, the statutory financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with statutory accounting practices as described in Note 2.
Hartford, Connecticut
January 31, 2000 ARTHUR ANDERSEN LLP
F-1
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
BALANCE SHEETS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
<S> <C> <C>
------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998
------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Bonds $ 1,465,815 $ 1,453,792
Common stocks 42,430 40,650
Mortgage loans 63,784 59,548
Policy loans 59,429 47,212
Cash and short-term investments 267,579 469,955
------------------------------------------------------------------------------------------------
Other invested assets 2,892 2,188
------------------------------------------------------------------------------------------------
Total cash and invested assets 1,901,929 2,073,345
Investment income due and accrued 21,069 20,126
Other assets 39,576 45,691
Separate account assets 44,865,042 32,876,278
------------------------------------------------------------------------------------------------
TOTAL ASSETS $46,827,616 $35,015,440
------------------------------------------------------------------------------------------------
LIABILITIES
Aggregate reserves for future benefits $ 591,621 $ 579,140
Policy and contract claim liabilities 7,677 5,667
Liability for premium and other deposit funds 1,969,262 2,011,672
Asset valuation reserve 4,935 21,782
Payable to affiliates 14,084 19,271
Accrued expense allowances and other amounts due from
separate accounts (1,377,927) (1,173,513)
Remittances and items not allocated 111,582 87,449
Other liabilities 118,464 111,182
Separate account liabilities 44,865,042 32,876,278
------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 46,304,740 34,538,928
------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS
Common stock 2,500 2,500
Gross paid-in and contributed surplus 226,043 226,043
Unassigned funds 294,333 247,969
------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS 522,876 476,512
------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $46,827,616 $35,015,440
------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-2
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums and annuity considerations $ 621,789 $ 469,343 $ 296,645
Annuity and other fund deposits 2,991,363 2,051,251 1,981,246
Net investment income 122,322 129,982 102,285
Commissions and expense allowances on reinsurance ceded 379,905 444,241 396,921
Reserve adjustment on reinsurance ceded 1,411,342 3,185,590 3,672,076
Fee income 647,565 448,260 290,675
Other revenues 842 9,930 (2,043)
-------------------------------------------------------------------------------------------------------
TOTAL REVENUES 6,175,128 6,738,597 6,737,805
-------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Death and annuity benefits 47,372 43,152 65,961
Disability and other benefits 6,270 6,352 7,532
Surrenders and other fund withdrawals 1,250,813 739,663 454,417
Commissions 467,338 435,994 470,334
Increase (Decrease) in aggregate reserves for future
benefits 12,481 (10,711) 33,213
(Decrease) Increase in liability for premium and other
deposit funds (47,852) 218,642 640,840
General insurance expenses 192,196 190,979 77,237
Net transfers to separate accounts 4,160,501 4,956,007 4,914,980
Other expenses 35,385 22,091 15,671
-------------------------------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 6,124,504 6,602,169 6,680,185
-------------------------------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS
Before federal income tax (benefit) expense 50,624 136,428 57,620
Federal income tax (benefit) expense (10,231) 35,887 (14,878)
-------------------------------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS 60,855 100,541 72,498
Net realized capital (losses) gains, after tax (36,428) 2,085 1,544
-------------------------------------------------------------------------------------------------------
NET INCOME $ 24,427 $ 102,626 $ 74,042
-------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-3
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Beginning and end of year $ 2,500 $ 2,500 $ 2,500
-------------------------------------------------------------------------------------------------
GROSS PAID-IN AND CONTRIBUTED SURPLUS
Beginning and end of year 226,043 226,043 226,043
-------------------------------------------------------------------------------------------------
UNASSIGNED FUNDS
Balance, beginning of year 247,969 143,257 74,570
Net income 24,427 102,626 74,042
Change in net unrealized capital gains on common stocks
and other invested assets 2,258 1,688 2,186
Change in asset valuation reserve 16,847 (8,112) (6,228)
Change in non-admitted assets 6,557 (1,277) (1,313)
Credit on reinsurance ceded (3,725) 9,787 --
-------------------------------------------------------------------------------------------------
Balance, end of year 294,333 247,969 143,257
-------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS,
End of year $522,876 $476,512 $371,800
-------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-4
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums and annuity considerations $3,613,217 $2,520,655 $2,277,874
Net investment income 122,998 127,425 101,991
Fee income 647,565 448,260 290,675
Other income 1,799,323 3,644,704 4,091,043
-------------------------------------------------------------------------------------------------------
Total income 6,183,103 6,741,044 6,761,583
-------------------------------------------------------------------------------------------------------
Benefits paid 1,303,801 790,051 529,733
Federal income tax (recoveries) payments (8,815) 25,780 (14,499)
Net transfers to separate accounts 4,364,914 5,222,144 5,199,354
Other expenses 669,525 626,240 547,692
-------------------------------------------------------------------------------------------------------
Total benefits and expenses 6,329,425 6,664,215 6,262,280
-------------------------------------------------------------------------------------------------------
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES (146,322) 76,829 499,303
-------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD
Bonds 753,358 633,926 614,413
Common stocks 939 34,010 11,481
Mortgage loans 53,704 85,275 --
Other 1,490 19,990 152
-------------------------------------------------------------------------------------------------------
NET INVESTMENT PROCEEDS 809,491 773,201 626,046
-------------------------------------------------------------------------------------------------------
COST OF INVESTMENTS ACQUIRED
Bonds 804,947 586,913 848,267
Common stocks 464 7,012 28,302
Mortgage loans 57,665 59,702 85,103
Other 14,211 11,847 26,227
-------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS ACQUIRED 877,287 665,474 987,899
-------------------------------------------------------------------------------------------------------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES $ (67,796) $ 107,727 $ (361,853)
-------------------------------------------------------------------------------------------------------
FINANCING AND MISCELLANEOUS ACTIVITIES
Net other cash provided (used) 11,742 (24,033) (4,848)
-------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) FINANCING
AND MISCELLANEOUS ACTIVITIES 11,742 (24,033) (4,848)
-------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and short-term investments (202,376) 160,523 132,602
Cash and short-term investments, beginning of year 469,955 309,432 176,830
-------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF YEAR $ 267,579 $ 469,955 $ 309,432
-------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(STATUTORY BASIS)
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
--------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS:
Hartford Life and Annuity Insurance Company (the "Company") is a wholly owned
subsidiary of Hartford Life Insurance Company ("HLIC"), which is an indirect
subsidiary of Hartford Life, Inc. ("HLI"). HLI is indirectly majority owned by
The Hartford Financial Services Group, Inc. ("The Hartford"). On February 10,
1997, HLI filed a registration statement, as amended, with the Securities and
Exchange Commission relating to the initial public offering of HLI Class A
Common Stock (the "Offering"). Pursuant to the Offering on May 22, 1997, HLI
sold to the public 26 million shares, representing approximately 18.6% of the
equity ownership of HLI.
In 1998, the Company changed its name to Hartford Life and Annuity Insurance
Company from ITT Hartford Life and Annuity Insurance Company.
The Company offers a complete line of fixed and variable annuities, as well as
variable, universal and traditional individual life insurance.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying statutory basis financial statements of the Company were
prepared in conformity with statutory accounting practices prescribed or
permitted by the National Association of Insurance Commissioners ("NAIC") and
the State of Connecticut Department of Insurance. Certain reclassifications have
been made to prior year financial information to conform to the current year
presentation.
Current prescribed statutory accounting practices include accounting
publications of the NAIC, as well as state laws, regulations and general
administrative rules. Permitted statutory accounting practices encompass
accounting practices approved by state insurance departments. The Company does
not follow any permitted statutory accounting practices that have a material
effect on statutory surplus, statutory net income or risk-based capital.
The preparation of financial statements in conformity with statutory accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reported periods. Actual results could
differ from those estimates. The most significant estimates include those used
in determining the liability for aggregate reserves for future benefits and the
liability for premium and other deposit funds. Although some variability is
inherent in these estimates, management believes the amounts provided are
adequate.
STATUTORY ACCOUNTING PRACTICES VERSUS GAAP
Statutory accounting practices and generally accepted accounting principles
("GAAP") differ in certain significant respects. These differences principally
involve:
(1) treatment of policy acquisition costs (commissions, underwriting and selling
expenses, etc.) which are charged to expense when incurred for statutory
purposes rather than on a pro-rata basis over the expected life and gross
profit stream of the policy for GAAP purposes;
(2) recognition of premium revenues, which for statutory purposes are generally
recorded as collected or when due during the premium paying period of the
contract and which for GAAP purposes, for universal life policies and
investment products, generally only consist of charges assessed to policy
account balances for cost of insurance, policy administration and
surrenders. When policy charges received relate to coverage or services to
be provided in the future, the charges are recognized as revenue on a
pro-rata basis over the expected life and gross profit stream of the policy.
Also, for GAAP purposes, premiums for traditional life insurance policies
are recognized as revenues when they are due from policyholders;
(3) development of liabilities for future policy benefits, which for statutory
purposes predominantly use interest rate and mortality assumptions
prescribed by the NAIC which may vary considerably from interest and
mortality assumptions used under GAAP;
(4) providing for income taxes based on current taxable income only for
statutory purposes, rather than establishing additional assets or
liabilities for deferred Federal income taxes to recognize the tax effect
related to reporting revenues and expenses in different periods for
financial reporting and tax return purposes or required under GAAP;
(5) excluding certain assets designated as non-admitted assets (e.g., negative
Interest Maintenance Reserve, and past due agents' balances) from the
balance sheet for statutory purposes by directly charging surplus;
(6) the calculation of post retirement benefits obligation which, for statutory
accounting, excludes non-vested employees whereas GAAP liabilities include a
provision for such employees; statutory and GAAP accounting permit either
immediate recognition of the liability or straight-line amortization of the
liability over a period not to exceed 20 years. For GAAP, The Hartford's
obligation was immediately recognized, whereas for statutory accounting, the
obligation is being recognized ratably over a 20 year period;
F-6
<PAGE>
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve) for statutory purposes; as well as the deferral and
amortization of realized gains and losses, caused by changes in interest
rates during the period the asset is held, into income over the remaining
life to maturity of the asset sold (Interest Maintenance Reserve) for
statutory purposes; whereas on a GAAP basis, no such formula reserve is
required and realized gains and losses are recognized in the period the
asset is sold;
(8) the reporting of reserves and benefits net of reinsurance ceded for
statutory purposes; whereas on a GAAP basis, reserves are reported gross of
reinsurance with reserve credits presented as recoverable assets;
(9) the reporting of fixed maturities at amortized cost for statutory purposes,
whereas GAAP requires that fixed maturities be classified as
"held-to-maturity," "available-for-sale" or "trading," based on the
Company's intentions with respect to the ultimate disposition of the
security and its ability to affect those intentions. The Company's bonds
were classified on a GAAP basis as available-for-sale and accordingly, those
investments and common stocks were reflected at fair value with the
corresponding impact included as a separate component of Stockholder's
Equity; as well as the change in the basis of the Company's other invested
assets, which consist primarily of limited partnership investments, which is
recognized as income under GAAP and as a change in surplus under statutory
accounting; and
(10) statutory accounting calculates separate account liabilities using
prescribed actuarial methodologies, which approximate the market value of
separate account assets less applicable surrender charges. The separate
account surplus generated by these reserving methods is recorded as an
amount due to or from the separate account on the statutory basis balance
sheet, with changes reflected in the statutory basis results of operations.
On a GAAP basis, separate account assets and liabilities are held at fair
value.
As of and for the years ended December 31, the significant differences between
Statutory and GAAP basis net income and capital and surplus for the Company are
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
----------------------------------------
GAAP Net Income $ 75,654 $ 74,525 $ 58,050
Deferral and amortization of policy
acquisition costs, net (272,171) (331,882) (345,657)
Change in unearned revenue reserve (64,915) 23,118 4,058
Deferred taxes 57,833 2,476 47,092
Separate account expense allowance 214,388 259,287 282,818
Asset impairments and write-downs (17,250) 17,250 --
Benefit reserve adjustment 11,491 5,360 24,666
Gain on commutation of reinsurance
(Note 4) -- 52,026 --
Prepaid reinsurance premium (3,524) -- --
Statutory voluntary reserve (6,286) -- --
Other, net 29,207 466 3,015
----------------------------------------
STATUTORY NET INCOME $ 24,427 $ 102,626 $ 74,042
----------------------------------------
GAAP Stockholder's Equity $ 676,428 $ 648,097 $ 570,469
Deferred policy acquisition costs (1,887,824) (1,615,653) (1,283,771)
Unearned revenue reserve 95,965 160,951 134,789
Deferred taxes 122,105 68,936 64,522
Separate account expense allowance 1,398,030 1,183,642 924,355
Asset impairments and write-downs -- 17,250 --
Unrealized losses (gains) on
investments 26,292 (24,955) (21,451)
Benefit reserve adjustment 81,111 69,233 16,378
Asset valuation reserve (4,935) (21,782) (13,670)
Adjustment relating to Lyndon
contribution (Note 4) -- -- (23,671)
Prepaid reinsurance premium (7,728) (4,204) --
Statutory voluntary reserve (6,286) -- --
Other, net 29,718 (5,003) 3,850
----------------------------------------
STATUTORY CAPITAL AND SURPLUS $ 522,876 $ 476,512 $ 371,800
----------------------------------------
</TABLE>
F-7
<PAGE>
AGGREGATE RESERVES FOR FUTURE BENEFITS AND LIABILITY FOR PREMIUM AND OTHER
DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits were
computed in accordance with applicable actuarial standards. Reserves for life
insurance policies are generally based on the 1958 and 1980 Commissioner's
Standard Ordinary Mortality Tables and various valuation rates ranging from 2.5%
to 6%. Accumulation and on-benefit annuity reserves are based principally on
individual annuity tables at various rates ranging from
2.5% to 8.75% and using the Commissioners Annuity Reserve Valuation Method
("CARVM").
The Company has established separate accounts to segregate the assets and
liabilities of certain life insurance and annuity contracts that must be
segregated from the Company's general assets under the terms of its contracts.
The assets consist primarily of marketable securities and are reported at market
value. Premiums, benefits and expenses of these contracts are reported in the
statutory basis statements of operations.
An analysis of Annuity Actuarial Reserves and Deposit Liabilities by Withdrawal
Characteristics as of December 31, 1999 (including general and separate account
liabilities) is as follows:
<TABLE>
<CAPTION>
% of
Amount Total
<S> <C> <C>
--------------------
Subject to discretionary withdrawal:
--------------------
With market value adjustment $ 4,564 0.0%
At book value less current surrender charge of 5% or more 1,427,302 3.2%
At market value 42,431,996 95.4%
--------------------
Total with adjustment or at market value 43,863,862 98.6%
At book value without adjustment (minimal or no charge or
adjustment): 573,583 1.3%
Not subject to discretionary withdrawal: 34,816 0.1%
--------------------
Total, gross 44,472,261 100.0%
Reinsurance ceded --
------------
Total, net $44,472,261
------------
</TABLE>
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds that are deemed
ineligible to be held at amortized cost by the NAIC Securities Valuation Office
("SVO") are carried at the appropriate SVO published value. When a reduction in
the value of a security is deemed to be unrecoverable, the decline in value is
reported as a realized loss and the carrying value is adjusted accordingly.
Short-term investments consist of money market funds and are stated at cost,
which approximates fair value. Common stocks are carried at fair value with the
current year change in the difference from cost reflected in surplus. Mortgage
loans, which are carried at cost and approximate fair value, include investments
in assets backed by mortgage loan pools. Other invested assets are generally
recorded at fair value.
The Asset Valuation Reserve ("AVR") is designed to provide a standardized
reserving process for realized and unrealized losses due to default and equity
risks associated with invested assets. The AVR balances were $4,935 and $21,782
as of December 31, 1999 and 1998, respectively. Additionally, the Interest
Maintenance Reserve ("IMR") captures net realized capital gains and losses, net
of applicable income taxes, resulting from changes in interest rates and
amortizes these gains or losses into income over the life of the bond or
mortgage sold. The IMR balance as of December 31, 1999 is an asset balance of
$981 and is reflected as a component of non-admitted assets in Unassigned Funds
in accordance with statutory accounting practices. The IMR balance as of
December 31, 1998 is a liability balance of $452 and is reflected as an other
liability. The net capital (losses) gains transferred to the IMR in 1999, 1998
and 1997 were $(1,255), $852 and $(719), respectively. The amount of income
(expense) amortized from the IMR in 1999, 1998 and 1997 included in the
Company's Statements of Operations, was $178, $(207), and $(85), respectively.
Realized capital gains and losses, net of taxes, not included in the IMR are
reported in the statutory basis statements of operations. Realized investment
gains and losses are determined on a specific identification basis.
CODIFICATION
The NAIC adopted the Codification of Statutory Accounting Principles in March
1998. The proposed effective date for this statutory accounting guidance is
January 1, 2001. It is expected that Connecticut, the Company's domiciliary
state, will adopt these accounting standards and, therefore, the Company will
make the necessary accounting and reporting changes required for implementation.
The Company has not yet determined the impact that these new accounting
standards will have on its statutory basis financial statements.
F-8
<PAGE>
3. INVESTMENTS:
(a) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
-----------------------------
Interest income from bonds and short-term investments $113,646 $123,370 $100,475
Interest income from policy loans 3,494 3,133 1,958
Interest and dividends from other investments 6,371 4,482 1,005
-----------------------------
Gross investment income 123,511 130,985 103,438
Less: investment expenses 1,189 1,003 1,153
-----------------------------
NET INVESTMENT INCOME $122,322 $129,982 $102,285
-----------------------------
</TABLE>
(b) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND
SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
-----------------------------
Gross unrealized capital gains $ 561 $ 10,905 $23,357
Gross unrealized capital losses (6,441) (833) (1,906)
-----------------------------
Net unrealized capital (losses) gains (5,880) 10,072 21,451
Balance, beginning of year 10,072 21,451 7,979
-----------------------------
CHANGE IN NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND
SHORT-TERM INVESTMENTS $(15,952) $(11,379) $13,472
-----------------------------
</TABLE>
(c) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON COMMON STOCKS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Gross unrealized capital gains $2,508 $ 2,204 $ 537
Gross unrealized capital losses (24) (1,871) (1,820)
--------------------------
Net unrealized capital gains (losses) 2,484 333 (1,283)
Balance, beginning of year 333 (1,283) (3,447)
--------------------------
CHANGE IN NET UNREALIZED CAPITAL GAINS ON COMMON STOCKS $2,151 $ 1,616 $ 2,164
--------------------------
</TABLE>
(d) COMPONENTS OF NET REALIZED CAPITAL (LOSSES) GAINS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Bonds and short-term investments $(37,959) $1,314 $ (120)
Common stocks 104 1,624 421
Other invested assets 172 (1) (307)
--------------------------
Realized capital (losses) gains (37,683) 2,937 (6)
Capital gains benefit -- -- (831)
--------------------------
Net realized capital (losses) gains (37,683) 2,937 825
Less: amounts transferred to the IMR (1,255) 852 (719)
--------------------------
NET REALIZED CAPITAL (LOSSES) GAINS $(36,428) $2,085 $1,544
--------------------------
</TABLE>
Sales and maturities of investments in bonds and short-term investments for the
years ended December 31, 1999, 1998 and 1997 resulted in proceeds of $1,367,027,
$1,354,563 and $1,435,820, gross realized capital gains of $1,106, $1,705, and
$964 and gross realized capital losses of $39,065, $391, and $1,084,
respectively, before transfers to the IMR. Sale of common stocks for the years
ended December 31, 1999, 1998 and 1997 resulted in proceeds of $939, $33,088,
and $10,168, gross realized capital gains of $115, $1,688, and $421 and gross
realized capital losses of $11, $64, and $0, respectively.
(e) DERIVATIVE INVESTMENTS
The Company had no significant derivative holdings as of December 31, 1999, 1998
or 1997.
(f) CONCENTRATION OF CREDIT RISK
Excluding U.S. government and government agency investments, the Company is not
exposed to any significant concentrations of credit risk in fixed maturities of
a single issuer greater than 10% of capital and surplus as of December 31, 1999.
F-9
<PAGE>
(g) BONDS, SHORT-TERM INVESTMENTS AND COMMON STOCKS
<TABLE>
<CAPTION>
1999
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
----------------------------------------------
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored $ 4,768 $ 1 $ (37) $ 4,732
-- Guaranteed and sponsored -- asset backed 170,746 -- -- 170,746
States, municipalities and political subdivisions 10,401 -- (48) 10,353
International governments 7,351 94 (15) 7,430
Public utilities 18,413 92 (73) 18,432
All other corporate -- excluding asset-backed 592,233 374 (6,194) 586,413
All other corporate -- asset-backed 539,688 -- -- 539,688
Short-term investments 228,105 -- -- 228,105
Certificates of deposit 5,158 -- (74) 5,084
Parents, subsidiaries and affiliates 117,057 -- -- 117,057
----------------------------------------------
TOTAL BONDS AND SHORT-TERM INVESTMENTS $1,693,920 $561 $(6,441) $1,688,040
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------
Common stock -- unaffiliated $ 4,562 $1,105 $ (24) $ 5,643
Common stock -- affiliated 35,384 1,403 -- 36,787
--------------------------------------------
TOTAL COMMON STOCKS $39,946 $2,508 $ (24) $42,430
--------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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 -- excluding asset-backed 607,679 8,473 (792) 615,360
All other corporate -- asset-backed 505,900 -- -- 505,900
Short-term investments 343,783 -- -- 343,783
Certificates of deposit 130,216 84 -- 130,300
Parents, subsidiaries and affiliates 117,057 -- -- 117,057
----------------------------------------------
TOTAL BONDS AND SHORT-TERM INVESTMENTS $1,897,575 $10,905 $(833) $1,907,647
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------
Common stock -- unaffiliated $ 4,933 $ 290 $ (50) $ 5,173
Common stock -- affiliated 35,384 1,914 (1,821) 35,477
--------------------------------------------
TOTAL COMMON STOCKS $40,317 $2,204 $(1,871) $40,650
--------------------------------------------
</TABLE>
The amortized cost and estimated fair value of bonds and short-term investments
as of December 31, 1999 by estimated maturity year are shown below. Asset-backed
securities, including mortgage-backed securities and collaterialized mortgage
obligations, are distributed to maturity year based on the Company's estimates
of the rate of
F-10
<PAGE>
future prepayments of principal over the remaining lives of the securities.
Expected maturities differ from contractual maturities due to call or prepayment
provisions.
<TABLE>
<CAPTION>
Amortized Estimated
Maturity Cost Fair Value
<S> <C> <C>
--------------------------
One year or less $ 545,290 $ 543,397
Over one year through five years 692,881 690,476
Over five years through ten years 370,835 369,548
Over ten years 84,914 84,619
--------------------------
TOTAL $1,693,920 $1,688,040
--------------------------
</TABLE>
Bonds with a carrying value of $10,457 were on deposit as of December 31, 1999
with various regulatory authorities as required.
(h) FAIR VALUE OF FINANCIAL INSTRUMENTS-BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1999 1998
-------------------------- --------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
------------------------------------------------------
ASSETS
Bonds and short-term investments $1,694 $1,688 $1,898 $1,908
Common stocks 42 42 41 41
Policy loans 59 59 47 47
Mortgage loans 64 64 60 60
Other invested assets 3 3 2 2
LIABILITIES
Deposit funds and other benefits $2,051 $2,017 $2,078 $2,053
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments: fair value of bonds, short-term
investments, common stock, and other invested assets approximate those
quotations published by the NAIC; policy loans and mortgage loans carrying
amounts approximates fair value; and fair value of liabilities on deposit funds
and other benefits is determined by forecasting future cash flows and
discounting the forecasted cash flows at current market rates.
4. REINSURANCE:
The Company cedes insurance to other insurers in order to limit its maximum
losses. Such transfer does not relieve the Company of its primary liability to
the policyholder. Failure of reinsurers to honor their obligations could result
in losses to the Company. The Company reduces this risk by evaluating the
financial condition of reinsurers and monitoring for possible concentrations of
credit risk.
The Company cedes significant portions of its variable annuity business written
since 1994 to RGA Reinsurance Company ("RGA"). Certain core annuity products
were excluded from this reinsurance arrangement beginning in the second quarter
of 1999 and, as such, the amounts ceded to RGA have declined significantly.
In 1995, The Hartford was "spun-off" from ITT Industries, Inc. and became its
own, autonomous entity. In conjunction with this spin-off, the assets and
liabilities of Lyndon Insurance Company (Lyndon) were merged into the Company.
The statutory net assets contributed to the Company as a result of this
transaction were approximately $112 million and were reflected as an increase in
Gross Paid-In and Contributed Surplus at December 31, 1995. This amount was
approximately $41 million lower than the value of net assets contributed on a
GAAP basis.
The majority of the business written in Lyndon was assumed from an unaffiliated
insurer. In 1998, this unaffiliated insurer recaptured the inforce blocks of
business it had been ceding to the Company through Lyndon. In conjunction with
this commutation transaction, the Company transferred statutory basis reserves
of $26,404. Additionally, the Company received fair value consideration for the
bonds it transferred which exceeded the statutory statement value of these
assets by $25,622. As a result of this activity, the Company recognized a
pre-tax gain from this transaction of $52,026 in its 1998 Statements of
Operations.
There were no material reinsurance recoverables from reinsurers outstanding as
of and for the years ended, December 31, 1999 and 1998.
F-11
<PAGE>
The effect of reinsurance as of and for the years ended December 31, is
summarized as follows:
<TABLE>
<CAPTION>
1999 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 784,502 $ 53 $ (192,934) $ 591,621
Policy and Contract Claim
Liabilities $ 7,827 $ 203 $ (353) $ 7,677
Premium and Annuity Considerations $ 674,219 $ 1,261 $ (53,691) $ 621,789
Annuity and Other Fund Deposits $6,195,917 $ -- $(3,204,554) $2,991,363
Death, Annuity, Disability and
Other Benefits $ 65,251 $ 1,104 $ (12,713) $ 53,642
Surrenders $2,541,449 $ -- $(1,290,636) $1,250,813
</TABLE>
<TABLE>
<CAPTION>
1998 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 713,375 $ 50 $ (134,285) $ 579,140
Policy and Contract Claim
Liabilities $ 5,895 $ 85 $ (313) $ 5,667
Premium and Annuity Considerations $ 483,328 $24,954 $ (38,939) $ 469,343
Annuity and Other Fund Deposits $6,461,470 $ -- $(4,410,219) $2,051,251
Death, Annuity, Disability and
Other Benefits $ 64,331 $ 1,574 $ (16,401) $ 49,504
Surrenders $1,481,797 $ -- $ (742,134) $ 739,663
</TABLE>
<TABLE>
<CAPTION>
1997 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Premium and Annuity Considerations $ 266,427 $51,630 $ (21,412) $ 296,645
Annuity and Other Fund Deposits $6,515,347 $ -- $(4,534,101) $1,981,246
Death, Annuity, Disability and
Other Benefits $ 79,779 $ 839 $ (7,126) $ 73,492
Surrenders $ 882,094 $ -- $ (427,677) $ 454,417
</TABLE>
5. RELATED PARTY TRANSACTIONS:
Transactions between the Company and its affiliates, relate principally to tax
settlements, reinsurance, insurance coverages, rental and service fees, capital
contributions and payments of dividends. In addition, certain affiliated
insurance companies purchased group annuity contracts from the Company to fund
pension costs and claim annuities to settle casualty claims. Substantially all
general insurance expenses related to the Company, including rent and benefit
plan expenses, are initially paid by The Hartford. Direct expenses are allocated
using specific identification and indirect expenses are allocated using other
applicable methods. Indirect expenses include those for corporate areas which,
depending on type, are allocated based on either a percentage of direct expenses
or on utilization.
The Company has also invested in bonds of its affiliates, Hartford Financial
Services Corporation and HL Investment Advisors, Inc., and common stock of its
subsidiary, Hartford Life, LTD.
For additional information, see Notes 4, 6, and 8.
6. FEDERAL INCOME TAXES:
The Company and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. Federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were filing separate Federal, state and local
income tax returns.
As long as The Hartford continues to own at least 80% of the combined voting
power and 80% of the value of the outstanding capital stock of HLI, the Company
will be included for Federal income tax purposes in the affiliated group of
which The Hartford is the common parent. The Hartford and its non-life
subsidiaries filed a single consolidated Federal income tax return for 1998 and
1997 and intend to file a separate consolidated Federal income tax return for
1999. The life insurance companies filed a separate consolidated Federal income
tax return for 1998 and 1997 and intend to file a separate consolidated Federal
income tax return for 1999. Federal income taxes (received) paid by the Company
for operations and capital gains (losses) were $(8,815), $25,780, and $(14,499)
in 1999, 1998 and 1997, respectively. The effective tax rate was (73)%, 27%, and
(28)% in 1999, 1998 and 1997, respectively.
F-12
<PAGE>
The following schedule provides a reconciliation of the tax provision (including
realized capital gains(losses)) at the U.S. Federal Statutory rate to Federal
income tax (benefit) expense (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
------------------
Tax provision at U.S. Federal Statutory rate $ 5 $48 $ 20
Tax deferred acquisition costs 31 25 25
Statutory to tax reserve differences (7) 8 1
Investments (31) (60) (61)
Other (8) 15 (1)
------------------
FEDERAL INCOME TAX (BENEFIT) EXPENSE $(10) $36 $(16)
------------------
</TABLE>
7. CAPITAL AND SURPLUS AND SHAREHOLDER DIVIDEND RESTRICTIONS:
The maximum amount of dividends which can be paid to shareholders by Connecticut
domiciled insurance companies, without prior approval, is generally restricted
to the greater of 10% of surplus as of the preceding December 31st or the net
gain from operations for the previous year. Dividends are paid as determined by
the Board of Directors and are not cumulative. No dividends were paid in 1999,
1998 or 1997. The amount available for dividend in 2000 is approximately
$60,855.
8. PENSION, RETIREMENT, AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:
All employees that work for The Hartford's life insurance companies are included
in The Hartford's non-contributory defined benefit pension plans. These plans
provide pension benefits that are based on years of service and the employee's
compensation during the last ten years of employment. The Hartford's funding
policy is to contribute annually an amount between the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974,
as amended, and the maximum amount that can be deducted for U.S. Federal income
tax purposes. Generally, pension costs are funded through the purchase of group
pension contracts sold by affiliates. The costs that were allocated to the
Company for pension related expenses were $762, $1,045 and $840 for 1999, 1998
and 1997, respectively.
Employees of The Hartford's life insurance companies are also provided, through
The Hartford, certain health care and life insurance benefits for eligible
retired employees. The contribution for health care benefits depends on the
retiree's date of retirement and years of service. In addition, this benefit
plan has a defined dollar cap, which limits average company contributions. The
Hartford has prefunded a portion of the health care and life insurance
obligations through trust funds where such prefunding can be accomplished on a
tax effective basis. Postretirement health care and life insurance benefits
expense allocated to the Company was not material to the results of operations
for 1999, 1998 or 1997.
The assumed rate in the per capita cost of health care (the health care trend
rate) was 7.1% for 1999, decreasing ratably to 5.0% in the year 2003. Increasing
the health care trend rates by one percent per year would have an immaterial
impact on the accumulated postretirement benefit obligation and the annual
expense. To the extent that the actual experience differs from the inherent
assumptions, the effect will be amortized over the average future service of
covered employees.
Substantially all of The Hartford's life insurance companies' employees are
eligible to participate in The Hartford's Investment and Savings Plan. Under
this plan, designated contributions, which may be invested in Class A Common
Stock of HLI or certain other investments, are matched to a limit of 3% of
compensation.
9. SEPARATE ACCOUNTS:
The Company maintains separate account assets totaling $44.9 billion and $32.9
billion as of December 31, 1999 and 1998, respectively. Separate account assets
are segregated from other investments and reported at fair value. Separate
account liabilities are determined in accordance with prescribed actuarial
methodologies, which approximate the market value less applicable surrender
charges. The resulting surplus is recorded in the general account statement of
operations as a component of Net Transfers to Separate Accounts. The Company's
separate accounts are non-guaranteed, wherein the policyholder assumes
substantially all the investment risk and rewards. Investment income (including
investment gains and losses) and interest credited to policyholders on separate
account assets are not separately reflected in the statutory statements of
operations.
Separate account management fees, net of minimum guarantees, were $493 million,
$363 million, and $252 million in 1999, 1998 and 1997, respectively, and are
recorded as a component of fee income on the Company's statutory basis
Statements of Operations.
F-13
<PAGE>
10. COMMITMENTS AND CONTINGENT LIABILITIES:
(a) LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for alleged economic and punitive damages
have been asserted. Some of these cases have been filed as purported class
actions and some cases have been filed in certain jurisdictions that permit
punitive damage awards disproportionate to the actual damages incurred. Although
there can be no assurances, at the present time, the Company does not anticipate
that the ultimate liability, arising from such pending or threatened litigation,
will have a material adverse effect on the statutory capital and surplus of the
Company.
(b) GUARANTY FUNDS
Under insurance guaranty fund laws in each state, the District of Columbia and
Puerto Rico, insurers licensed to do business can be assessed by state insurance
guaranty associations for certain obligations of insolvent insurance companies
to policyholders and claimants. Recent regulatory actions against certain large
life insurers encountering financial difficulty have prompted various state
insurance guaranty associations to begin assessing life insurance companies for
the deemed losses. Most of these laws do provide, however, that an assessment
may be excused or deferred if it would threaten an insurer's solvency and
further provide annual limits on such assessments. Part of the assessments paid
by the Company pursuant to these laws may be used as credits for a portion of
the associated premium taxes. The Company paid guaranty fund assessments of
approximately $523, $1,043 and $1,544 in 1999, 1998, and 1997, respectively, of
which $318, $995, and $548 in 1999, 1998 and 1997, respectively were estimated
to be creditable against premium taxes.
(c) TAX MATTERS
The Company's Federal income tax returns are routinely audited by the Internal
Revenue Service ("IRS"). The Company's 1997 and 1996 Federal income tax returns
are currently under audit by the IRS. As of March 31, 2000, the audit was in its
initial stage and no material issues had been raised.
F-14
<PAGE>
PART C
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
(b) (1) Resolution of the Board of Directors of Hartford Life and
Annuity Insurance Company ("Hartford") authorizes the
establishment of the Separate Account.(1)
(2) Not applicable.
(3) (a) Principal Underwriter Agreement.(2)
(3) (b) Form of Dealer Agreement.(2)
(4) Form of Individual Flexible Premium Variable Annuity
Contract.(3)
(5) Form of Application.(3)
(6) (a) Certificate of Incorporation of Hartford.(2)
(6) (b) Bylaws of Hartford.(1)
(7) Not applicable.
(8) Form of Fund Participation Agreement.(4)
(9) Opinion and Consent of Christine Hayer Repasy, Senior Vice
President, General Counsel and Corporate Secretary.
--------
(1) Incorporated by reference to Post-Effective Amendment No. 2,
to the Registration Statement File No. 33-80732, dated May 1,
1995.
(2) Incorporated by reference to Post-Effective Amendment No. 3,
to the Registration Statement File No. 33-80732, dated April
29, 1996.
(3) Incorporated by reference to the initial filing to the
Registration Statement File No. 333-69491, filed on December
22, 1998.
(4) Incorporated by reference to the Post-Effective Amendment
No. 6, to the Registration Statement File No. 333-70153,
dated August 25, 2000.
<PAGE>
(10) Consent of Arthur Andersen LLP, Independent Public
Accountants.
(11) No financial statements are omitted.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
NAME POSITION WITH HARTFORD
------------------------------------------------------------------------------------------------------------------------
<S> <C>
David A. Carlson Vice President
------------------------------------------------------------------------------------------------------------------------
Peter W. Cummins Senior Vice President
------------------------------------------------------------------------------------------------------------------------
Bruce W. Ferris Vice President
------------------------------------------------------------------------------------------------------------------------
Timothy M. Fitch Vice President & Actuary
------------------------------------------------------------------------------------------------------------------------
Mary Jane B. Fortin Vice President & Chief Accounting Officer
------------------------------------------------------------------------------------------------------------------------
David T. Foy Senior Vice President, Chief Financial Officer & Treasurer, Director*
------------------------------------------------------------------------------------------------------------------------
Lois W. Grady Senior Vice President
------------------------------------------------------------------------------------------------------------------------
Stephen T. Joyce Senior Vice President
------------------------------------------------------------------------------------------------------------------------
Michael D. Keeler Vice President
------------------------------------------------------------------------------------------------------------------------
Robert A. Kerzner Senior Vice President
------------------------------------------------------------------------------------------------------------------------
Thomas M. Marra President, Director*
------------------------------------------------------------------------------------------------------------------------
Steven L. Matthiesen Vice President & Actuary
------------------------------------------------------------------------------------------------------------------------
Deanne Osgood Vice President
------------------------------------------------------------------------------------------------------------------------
Craig R. Raymond Senior Vice President and Chief Actuary
------------------------------------------------------------------------------------------------------------------------
Christine Hayer Repasy Senior Vice President, General Counsel, and Corporate Secretary, Director*
------------------------------------------------------------------------------------------------------------------------
Lowndes A. Smith Chariman of the Board, Chief Executive Officer, Director*
------------------------------------------------------------------------------------------------------------------------
Joe M. Thomson Senior Vice President
------------------------------------------------------------------------------------------------------------------------
John C. Walters Executive Vice President, Director*
------------------------------------------------------------------------------------------------------------------------
David M. Znamierowski Senior Vice President & Chief Investment Officer, Director*
------------------------------------------------------------------------------------------------------------------------
</TABLE>
Unless otherwise indicated, the principal business address of each of the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
*Denotes Board of Directors.
<PAGE>
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Filed herewith as Exhibit 16.
Item 27. Number of Contract Owners
As of October 31, 2000, there were 33,469 Contract Owners.
Item 28. Indemnification
Sections 33-770 to 33-778, inclusive, of the Connecticut General
Statutes ("CGS") provide that a corporation may provide indemnification
of or advance expenses to a director, officer, employee or agent.
Reference is hereby made to Section 33-771(e) of CGS regarding
indemnification of directors and Section 33-776(d) of CGS regarding
indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide, in general, that Connecticut
corporations incorporated prior to January 1, 1997 shall, except to the
extent that their certificate of incorporation expressly provides
otherwise, indemnify their directors, officers, employees and agents
against "liability" (defined as the obligation to pay a judgment,
settlement, penalty, fine, including an excise tax assessed with
respect to an employee benefit plan, or reasonable expenses incurred
with respect to a proceeding) when (1) a determination is made pursuant
to Section 33-775 that the party seeking indemnification has met the
standard of conduct set forth in Section 33-771 or (2) a court has
determined that indemnification is appropriate pursuant to Section
33-774. Under Section 33-775, the determination of and the
authorization for indemnification are made (a) by the disinterested
directors, as defined in Section 33-770(3); (b) by special counsel; (c)
by the shareholders; or (d) in the case of indemnification of an
officer, agent or employee of the corporation, by the general counsel
of the corporation or such other officer(s) as the board of directors
may specify. Also, Section 33-772 provides that a corporation shall
indemnify an individual who was wholly successful on the merits or
otherwise against reasonable expenses incurred by him in connection
with a proceeding to which he was a party because he was a director of
the corporation. In the case of a proceeding by or in the right of the
corporation or with respect to conduct for which the director, officer,
agent or employee was adjudged liable on the basis that he received a
<PAGE>
financial benefit to which he was not entitled, indemnification is
limited to reasonable expenses incurred in connection with the
proceeding against the corporation to which the individual was named a
party.
Under the Depositor's bylaws, the Depositor must indemnify both
directors and officers of the Depositor for (1) any claims and
liabilities to which they become subject by reason of being or having
been directors or officers of the Depositor and (2) legal and other
expenses incurred in defending against such claims, in each case, to
the extent such is consistent with statutory provisions.
Section 33-777 of CGS specifically authorizes a corporation to procure
indemnification insurance on behalf of an individual who was a
director, officer, employer or agent of the corporation. Consistent
with the statute, the directors and officers of the Depositor and
Hartford Securities Distribution Company, Inc. ("HSD") are covered
under a directors and officers liability insurance policy issued to The
Hartford Financial Services Group, Inc. and its subsidiaries.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Item 29. Principal Underwriters
(a) HSD acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - Separate Account One
Hartford Life Insurance Company - Separate Account Two
Hartford Life Insurance Company - Separate Account Two (DC
Variable Account I)
Hartford Life Insurance Company - Separate Account Two (DC
Variable Account II)
Hartford Life Insurance Company - Separate Account Two (QP
Variable Account)
<PAGE>
Hartford Life Insurance Company - Separate Account Two (Variable
Account "A")
Hartford Life Insurance Company - Separate Account Two (NQ
Variable Account)
Hartford Life Insurance Company - Putnam Capital Manager Trust
Separate Account
Hartford Life Insurance Company - Separate Account Three
Hartford Life Insurance Company - Separate Account Five
Hartford Life Insurance Company - Separate Account Seven
Hartford Life and Annuity Insurance Company - Separate Account One
Hartford Life and Annuity Insurance Company - Putnam Capital
Manager Trust Separate Account Two
Hartford Life and Annuity Insurance Company - Separate Account
Three
Hartford Life and Annuity Insurance Company - Separate Account
Five
Hartford Life and Annuity Insurance Company - Separate Account Six
Hartford Life and Annuity Insurance Company - Separate Account
Seven
Hart Life Insurance Company - Separate Account One
Hart Life Insurance Company - Separate Account Two
American Maturity Life Insurance Company - Separate Account AMLVA
Servus Life Insurance Company - Separate Account One
Servus Life Insurance Company - Separate Account Two
(b) Directors and Officers of HSD
<TABLE>
<CAPTION>
Positions and Offices
Name With Underwriter
---------------- ----------------
<S> <C>
William A. Campagna Vice President
David A. Carlson Vice President
Peter W. Cummins Senior Vice President
Bruce W. Ferris Vice President
David T. Foy Treasurer
George R. Jay Controller
Ryan Johnson Vice President
Thomas M. Marra President, Director
Christine Hayer Repasy Senior Vice President, General Counsel and Corporate
Secretary
Lowndes A. Smith Chairman of the Board and
Chief Executive Officer, Director
John C. Walters Executive Vice President, Director
</TABLE>
Unless otherwise indicated, the principal business address of each of
the above individuals is P.O. Box 2999, Hartford, Connecticut
06104-2999.
<PAGE>
Item 30. Location of Accounts and Records
All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder are maintained by Hartford at 200 Hopmeadow Street,
Simsbury, Connecticut 06089.
Item 31. Management Services
All management contracts are discussed in Part A and Part B of this
Registration Statement.
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective
amendment to this Registration Statement as frequently as is
necessary to ensure that the audited financial statements in the
Registration Statement are never more than 16 months old so long
as payments under the variable annuity Contracts may be accepted.
(b) The Registrant hereby undertakes to include either (1) as part of
any application to purchase a Contract offered by the Prospectus,
a space that an applicant can check to request a Statement of
Additional Information, or (2) a post card or similar written
communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional
Information.
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to
be made available under this Form promptly upon written or oral
request.
(d) Hartford hereby represents that the aggregate fees and charges
under the Contract are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks
assumed by Hartford.
The Registrant is relying on the no-action letter issued by the
Division of Investment Management to American Counsel of Life
Insurance, Ref. No. IP-6-88, November 28, 1988. Registrant has
complied with conditions one through four of the no-action letter.
<PAGE>
SIGNATURES
----------
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf, in the Town of Simsbury, and State of Connecticut on this
29th day of December, 2000.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT THREE
(Registrant)
*By: Thomas M. Marra *By: /s/ Marianne O'Doherty
------------------------------------------ ----------------------
Thomas M. Marra, President Marianne O'Doherty
Attorney-in-Fact
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Depositor)
*By: Thomas M. Marra
------------------------------------------
Thomas M. Marra, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons and in the capacities and on
the dates indicated.
David T. Foy, Senior Vice President, Chief
Financial Officer and Treasurer, Director*
Thomas M. Marra, President, Director* By: /s/ Marianne O'Doherty
Christine Hayer Repasy, Senior Vice President, ----------------------
General Counsel and Corporate Secretary, Marianne O'Doherty
Director* Attorney-in-Fact
Lowndes A. Smith, Chairman of the Board, Chief
Executive Officer, Director* Date: December 29, 2000
John C. Walters, Executive Vice President, Director*
David M. Znamierowski, Senior Vice President
and Chief Investment Officer, Director*
333-69491
<PAGE>
EXHIBIT INDEX
(9) Opinion and Consent of Christine Hayer Repasy, Senior Vice President,
General Counsel and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(15) Power of Attorney.
(16) Organizational Chart.
