<PAGE>
As filed with the Securities and Exchange Commission on April 7, 2000.
File No. 333-69491
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. 1 [ ]
--------
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. _17_ [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, Inc.
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 May 1, 2000 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on ___________, 2000 pursuant to paragraph (a)(1) of Rule 485
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Pursuant to Rule 24F-2(a) under the Investment Company Act of 1940, the
registrant has registered an indefinite amount of securities.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(A)
<TABLE>
<CAPTION>
N-4 ITEM NO. PROSPECTUS HEADING
- ----------------------------------------------------------------------------------------------
<S> <C>
1. Cover Page Hartford Life and Annuity Insurance Company-
Separate Account Three
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Yield Information
Information
5. General Description of Hartford Life Insurance Company, The Separate
Registrant Account, The Fixed Accounts, and The Funds
6. Deductions Contract Charges
7. General Description of The Contract, The Separate Account, The
Annuity Contracts Fixed Accounts, and Surrenders
8. Annuity Period Settlement Provisions
9. Death Benefit Death Benefits
10. Purchases and Contract Value The Contract, and
Contract Value
11. Redemptions Surrenders
12. Taxes Federal Tax Considerations
13. Legal Proceedings Legal Matters and Experts
14. Table of Contents of the Table of Contents to
Statement of Additional Statement of Additional
Information Information
15. Cover Page Part B; Statement of Additional
Information
16. Table of Contents Table of Contents
17. General Information and History Summary
<PAGE>
18. Services None
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Data Calculation of Yield and Return
22. Annuity Payments Settlement Provisions
23. Financial Statements Financial Statements
24. Financial Statements and Financial Statements and
Exhibits Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Common Control with the Depositor
Depositor or Registrant or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Location of Accounts and Records
Records
31. Management Services Management Services
32. Undertakings Undertakings
</TABLE>
<PAGE>
PART A
<PAGE>
<TABLE>
<S> <C>
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) [LOGO]
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Insurance Company where you agree to make at least one payment to us
and we agree to make a series of annuity payments to you at a later date. This
annuity is a flexible premium, tax-deferred, variable annuity offered to both
individuals and groups. It is:
x Flexible, because you may add premium payments at any time.
x Tax-deferred, which means you don't pay taxes until you take money out or
until we start to make annuity payments to you.
x Variable, because the value of your annuity will fluctuate with the
performance of the underlying funds.
- --------------------------------------------------------------------------------
At purchase, you allocate your premium payment, which is any purchase payment
less any Premium Taxes, to "Sub-Accounts". These are subdivisions of our
Separate Account, an account that keeps your annuity assets separate from our
company assets. The Sub-Accounts then purchase shares of mutual funds set up
exclusively for variable annuity or variable life insurance products. These are
not the same mutual funds that you buy through your stockbroker or through a
retail mutual fund. They may have similar investment strategies and the same
portfolio managers as retail mutual funds. This annuity offers you 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 transfer 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 Value);
- - 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; and
- - ENTERPRISE SUB-ACCOUNT which purchases shares of Enterprise Portfolio of the
Van Kampen Life Investment Trust.
You may also allocate some or all of your premium payment to one of the "Fixed
Accounts", which pays an interest rate guaranteed for a certain time period from
the time the payment is made. Premium payments put in a Fixed Account are not
segregated from our company assets like the assets of the Separate Account.
If you decide to buy this annuity, you should keep this prospectus for your
records. You can also call us at 1-800-862-6668 to get a Statement of Additional
Information, free of charge. The Statement of Additional Information contains
more information about this annuity and, like this prospectus, is filed with the
Securities and Exchange Commission. We have included the Table of Contents for
the Statement of Additional Information at the end of this Prospectus.
Although we file the Prospectus and the Statement of Additional Information with
the Securities and Exchange Commission, the Commission doesn't approve or
disapprove these securities or determine if the information is truthful or
complete. Anyone who represents that the Securities and Exchange Commission does
these things may be guilty of a criminal offense.
This Prospectus and the Statement of Additional Information can also be obtained
from the Securities and Exchange Commission's website (HTTP://WWW.SEC.GOV).
This annuity IS NOT:
- A bank deposit or obligation
- Federally insured
- Endorsed by any bank or governmental agency
This annuity may not be available for sale in all states.
- --------------------------------------------------------------------------------
PROSPECTUS DATED: MAY 1, 2000
STATEMENT OF ADDITIONAL INFORMATION DATED: MAY 1, 2000
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
- ----------------------------------------------------------------------
GLOSSARY OF SPECIAL TERMS 4
- ----------------------------------------------------------------------
FEE TABLE 5
- ----------------------------------------------------------------------
ACCUMULATION UNIT VALUES 10
- ----------------------------------------------------------------------
SUMMARY 13
- ----------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
- ----------------------------------------------------------------------
THE SEPARATE ACCOUNT 15
- ----------------------------------------------------------------------
THE FUNDS 15
- ----------------------------------------------------------------------
The Investment Advisers 17
- ----------------------------------------------------------------------
PERFORMANCE RELATED INFORMATION 19
- ----------------------------------------------------------------------
THE FIXED ACCOUNTS 19
- ----------------------------------------------------------------------
THE CONTRACT 20
- ----------------------------------------------------------------------
Contract Value -- Before the Annuity Commencement Date 21
- ----------------------------------------------------------------------
Contract Value Transfers Before and After the Annuity
Commencement Date 21
- ----------------------------------------------------------------------
Surrenders 22
- ----------------------------------------------------------------------
Contract Charges 23
- ----------------------------------------------------------------------
Death Benefits 25
- ----------------------------------------------------------------------
SETTLEMENT PROVISIONS 27
- ----------------------------------------------------------------------
Annuity Payments 28
- ----------------------------------------------------------------------
Other Information 30
- ----------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS 30
- ----------------------------------------------------------------------
A. General 30
- ----------------------------------------------------------------------
B. Taxation of Hartford and the Separate Account 30
- ----------------------------------------------------------------------
C. Taxation of Annuities -- General Provisions Affecting
Purchasers Other Than Qualified Retirement Plans 30
- ----------------------------------------------------------------------
D. Federal Income Tax Withholding 33
- ----------------------------------------------------------------------
E. General Provisions Affecting Qualified Retirement Plans 33
- ----------------------------------------------------------------------
F. Annuity Purchases by Nonresident Aliens and Foreign
Corporations 33
- ----------------------------------------------------------------------
G. Generation-Skipping Transfers 33
- ----------------------------------------------------------------------
MISCELLANEOUS 33
- ----------------------------------------------------------------------
How Contracts Are Sold 33
- ----------------------------------------------------------------------
Legal Matters 34
- ----------------------------------------------------------------------
Experts 34
- ----------------------------------------------------------------------
More Information 34
- ----------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION 35
- ----------------------------------------------------------------------
APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT
PLANS 36
- ----------------------------------------------------------------------
APPENDIX II -- OPTIONAL DEATH BENEFIT -- EXAMPLES 39
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
GLOSSARY OF SPECIAL TERMS
ACCOUNT: Any of the Sub-Accounts or Fixed Accounts.
ACCUMULATION UNIT: A unit of measure we use to calculate values before we begin
to make annuity payments to you.
ADMINISTRATIVE OFFICE: Located at 200 Hopmeadow Street, Simsbury, Connecticut
06089. The mailing address is: Investment Product Services, P.O. Box 5085,
Hartford, Connecticut 06102-5085.
ANNIVERSARY VALUE: The value equal to the Contract Value as of a Contract
Anniversary, increased by the dollar amount of any premium payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary.
ANNUAL MAINTENANCE FEE: An annual $30 charge for annuities having a value of
less than $50,000 on the most recent Contract Anniversary or when the annuity is
Surrendered in full. The charge is deducted proportionately from the portfolios
in use at the time.
ANNUITANT: The person on whose life the Contract is based. The Annuitant may not
be changed.
ANNUITY: A Contract issued by us that provides, in exchange for premium
payments, a series of annuity payments.
ANNUITY CALCULATION DATE: The date we calculate your first annuity payment.
ANNUITY COMMENCEMENT DATE: The date we start to make annuity payments to you.
ANNUITY UNIT: A unit of measure we use to calculate the value of the annuity
payments we make to you.
ASSUMED INVESTMENT RETURN ("AIR"): The investment return, either 3%, 5% or 6%,
which we base your variable dollar amount payments on. You select the AIR before
we start to make annuity payments.
BENEFICIARY: The person or persons you designate to receive payment of the death
benefit upon the death of the Contract Owner.
CODE: The Internal Revenue Code of 1986, as amended.
COMMUTED VALUE: The present value of any remaining guaranteed Annuity Payouts.
This amount is calculated using the Assumed Investment Return for variable
dollar amount Annuity Payouts or the underlying rate of return for fixed dollar
amount Annuity Payouts.
CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before we begin making annuity payments.
CONTRACT: The contract is the individual Annuity contract and any endorsements
or riders. If you have a group annuity, you will receive a certificate rather
than a contract.
CONTRACT ANNIVERSARY: The annual anniversary of the date we issued your annuity.
If your contract anniversary falls on a day that is not a Valuation Day, then
the next Valuation Day will be your Contract Anniversary for that year.
CONTRACT OWNER(S) OR YOU: The owner(s) or holder(s) of this Annuity.
CONTRACT VALUE: The total value of your Annuity that we get by adding up the
value of each of your Sub-Accounts and Fixed Accounts on any Valuation Day.
CONTRACT YEAR: The 12 months following the date you purchased your annuity and
from any Contract Anniversary.
DOLLAR COST AVERAGING ("DCA"): Systematic transfers from one Account to another.
DCA PROGRAM FIXED ACCOUNTS: Fixed Accounts we establish to use for dollar cost
averaging programs. These are part of our General Account.
DEATH BENEFIT: The amount we pay when the Contract Owner or the Annuitant dies.
DUE PROOF OF DEATH: A certified copy of a death certificate, an order of a court
of competent jurisdiction, or any other proof acceptable to us.
FIXED ACCOUNT: This is an account that is part of our General Account. You may
allocate all or a portion of your premium payments or transfer of Contract Value
to this account.
FUNDS: Currently, the Morgan Stanley Dean Witter Select Dimensions Investment
Series, The Universal Institutional Funds, Inc. and the Van Kampen Life
Investment Trust.
GENERAL ACCOUNT: Our General Account that includes our company assets and your
annuity assets allocated to any of the Fixed Accounts or DCA Program Fixed
Accounts.
HARTFORD OR WE: Hartford Life and Annuity Insurance Company.
MAXIMUM ANNIVERSARY VALUE: This is the highest Anniversary Value prior the
deceased's 81st birthday or the date of death, if earlier.
PAYEE: The person or party designated by you to receive annuity payments.
PREMIUM TAX: A tax charged by a state or municipality on premium payments.
SEPARATE ACCOUNT: An account that we establish to separate the assets for your
annuity Sub-Accounts from our company assets. Hartford Life and Annuity
Insurance Company Separate Account Three.
SUB-ACCOUNT: Divisions established within the Separate Account.
SURRENDER: A complete or partial withdrawal or distribution from your annuity.
SURRENDER VALUE: What we pay you if you terminate your annuity before we begin
to make annuity payments.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined as of the close of the New York
Stock Exchange (generally 4:00 p.m. Eastern Time).
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
- --------------------------------------------------------------------------------
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
SALES CHARGE IMPOSED ON PURCHASES (as a percentage of
Premium Payments) None
- ---------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE (as a percentage of Premium
Payments) (1)
First Year (2) 7%
- ---------------------------------------------------------------------
Second Year 6%
- ---------------------------------------------------------------------
Third Year 6%
- ---------------------------------------------------------------------
Fourth Year 5%
- ---------------------------------------------------------------------
Fifth Year 4%
- ---------------------------------------------------------------------
Sixth Year 3%
- ---------------------------------------------------------------------
Seventh Year 2%
- ---------------------------------------------------------------------
Eighth Year 0%
- ---------------------------------------------------------------------
ANNUAL MAINTENANCE FEE (3) $30
- ---------------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average
daily Sub-Account Value)
Mortality and Expense Risk Charge 1.25%
- ---------------------------------------------------------------------
Administrative Fees 0.15%
- ---------------------------------------------------------------------
Total Separate Account Annual Expenses 1.40%
- ---------------------------------------------------------------------
OPTIONAL CHARGES (as a percentage of average daily
Sub-Account Value)
Optional Death Benefit Charge 0.15%
- ---------------------------------------------------------------------
Total Separate Account Annual Expenses with the Optional
Death Benefit Charge 1.55%
- ---------------------------------------------------------------------
</TABLE>
(1) Each Premium Payment has its own Contingent Deferred Sales Charge schedule.
See "Charges and Fees -- The Contingent Deferred Sales Charge." The
Contingent Deferred Sales Charge is not assessed on partial Surrenders which
do not exceed the Annual Withdrawal Amount.
(2) Length of time from each Premium Payment.
(3) An annual $30 charge deducted on a Contract Anniversary or upon Surrender if
the Contract Value at either of those times is less than $50,000. It is
deducted proportionately from the Accounts in which you are invested at the
time of the charge.
The purpose of the Fee Table and Examples is to assist you in understanding
various costs and expenses that you will pay directly or indirectly. The Fee
Table and Examples reflect expenses of the Separate Account and underlying
Funds. We will deduct any Premium Taxes that apply.
The Examples should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. The Annual
Maintenance Fee has been reflected in the Examples by a method intended to show
the "average" impact of the Annual Maintenance Fee on an investment in the
Separate Account. We do this by approximating an "average" 0.06% annual charge.
<PAGE>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
as of the Fund's Year End
(as a percentage of average net assets)
<TABLE>
<CAPTION>
TOTAL FUND
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
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
MANAGEMENT FEES EXPENSES EXPENSES
<S> <C> <C> <C>
PORTFOLIO
- -----------------------------------------------------------------------------------------------------
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>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
- --------------------------------------------------------------------------------
(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
MANAGEMENT FEES EXPENSES EXPENSES
<S> <C> <C> <C>
PORTFOLIO
- -----------------------------------------------------------------------------------------------------
Strategic Stock 0.24% 0.41% 0.65%
- -----------------------------------------------------------------------------------------------------
Enterprise 0.47% 0.13% 0.60%
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
EXAMPLE
THE FOLLOWING EXAMPLE ASSUMES THE OPTIONAL DEATH BENEFIT IS NOT SELECTED:
<TABLE>
<CAPTION>
If you Surrender your Contract at the If you annuitize your Contract at the
end of the applicable time period you end of the applicable time period you
would pay the following expenses on would pay the following expenses on
a $1,000 investment, assuming a 5% a $1,000 investment, assuming a 5%
annual return on assets: annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Money Market $ 81 $119 $149 $234 $20 $ 63 $108 $234
- --------------------------------------------------------------------------------------------------------------------
North American Government
Securities (1) $ 86 $133 $172 $283 $25 $ 77 $132 $282
- --------------------------------------------------------------------------------------------------------------------
Diversified Income $ 81 $118 $146 $228 $19 $ 61 $105 $227
- --------------------------------------------------------------------------------------------------------------------
Balanced Growth $ 82 $122 $154 $245 $21 $ 66 $113 $244
- --------------------------------------------------------------------------------------------------------------------
Utilities $ 83 $124 $157 $251 $22 $ 68 $116 $251
- --------------------------------------------------------------------------------------------------------------------
Dividend Growth $ 82 $121 $152 $241 $21 $ 65 $111 $240
- --------------------------------------------------------------------------------------------------------------------
Value-Added Market $ 82 $120 $149 $236 $20 $ 63 $109 $235
- --------------------------------------------------------------------------------------------------------------------
Growth $ 85 $130 $167 $272 $24 $ 74 $127 $271
- --------------------------------------------------------------------------------------------------------------------
American Opportunities $ 83 $123 $155 $247 $21 $ 66 $114 $246
- --------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity $ 85 $131 $168 $274 $24 $ 74 $128 $273
- --------------------------------------------------------------------------------------------------------------------
Global Equity $ 87 $135 $176 $290 $25 $ 79 $136 $290
- --------------------------------------------------------------------------------------------------------------------
Developing Growth $ 82 $120 $151 $239 $20 $ 64 $110 $238
- --------------------------------------------------------------------------------------------------------------------
Emerging Markets (1) $ 95 $157 $212 $364 $33 $102 $174 $363
- --------------------------------------------------------------------------------------------------------------------
High Yield $ 87 $136 $177 $293 $26 $ 80 $137 $293
- --------------------------------------------------------------------------------------------------------------------
Mid-Cap Value $ 90 $144 $190 $319 $28 $ 88 $151 $318
- --------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt $ 94 $156 $209 $358 $33 $101 $171 $358
- --------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity $103 $180 $249 $434 $41 $126 $212 $433
- --------------------------------------------------------------------------------------------------------------------
Fixed Income $ 86 $132 $170 $278 $24 $ 76 $130 $277
- --------------------------------------------------------------------------------------------------------------------
Active International
Allocation $103 $180 N/A N/A $41 $126 N/A N/A
- --------------------------------------------------------------------------------------------------------------------
Strategic Stock $ 85 $130 $167 $273 $24 $ 74 $127 $272
- --------------------------------------------------------------------------------------------------------------------
Enterprise $ 82 $122 $153 $243 $21 $ 65 $112 $242
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
If you do not Surrender your
Contract, you would pay the
following expenses on a $1,000
investment, assuming a 5% annual
return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------
Money Market $21 $ 63 $109 $234
- -----------------------------
North American Government
Securities (1) $25 $ 78 $133 $283
- -----------------------------
Diversified Income $20 $ 61 $106 $228
- -----------------------------
Balanced Growth $22 $ 66 $114 $245
- -----------------------------
Utilities $22 $ 68 $117 $251
- -----------------------------
Dividend Growth $21 $ 65 $112 $241
- -----------------------------
Value-Added Market $21 $ 64 $109 $236
- -----------------------------
Growth $24 $ 74 $127 $272
- -----------------------------
American Opportunities $22 $ 67 $115 $247
- -----------------------------
Mid-Cap Equity $24 $ 75 $128 $274
- -----------------------------
Global Equity $26 $ 80 $137 $290
- -----------------------------
Developing Growth $21 $ 65 $111 $239
- -----------------------------
Emerging Markets (1) $34 $103 $175 $364
- -----------------------------
High Yield $26 $ 81 $138 $293
- -----------------------------
Mid-Cap Value $29 $ 89 $151 $319
- -----------------------------
Emerging Markets Debt $33 $101 $172 $358
- -----------------------------
Emerging Markets Equity $42 $126 $213 $434
- -----------------------------
Fixed Income $25 $ 76 $130 $278
- -----------------------------
Active International
Allocation $42 $127 N/A N/A
- -----------------------------
Strategic Stock $24 $ 75 $128 $273
- -----------------------------
Enterprise $21 $ 66 $113 $243
- ---------------------------------------------------------------------------------
</TABLE>
(1) Closed to new investments or transfers of existing contract values.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
THE FOLLOWING EXAMPLE ASSUMES THE OPTIONAL DEATH BENEFIT IS SELECTED:
<TABLE>
<CAPTION>
If you Surrender your Contract at the If you annuitize your Contract at the
end of the applicable time period you end of the applicable time period you
would pay the following expenses on would pay the following expenses on
a $1,000 investment, assuming a 5% a $1,000 investment, assuming a 5%
annual return on assets: annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Money Market $ 83 $124 $156 $250 $21 $ 67 $116 $249
- --------------------------------------------------------------------------------------------------------------------
North American Government
Securities (1) $ 88 $138 $179 $298 $26 $ 82 $140 $298
- --------------------------------------------------------------------------------------------------------------------
Diversified Income $ 82 $122 $153 $244 $21 $ 65 $113 $243
- --------------------------------------------------------------------------------------------------------------------
Balanced Growth $ 84 $127 $161 $261 $22 $ 70 $121 $260
- --------------------------------------------------------------------------------------------------------------------
Utilities $ 85 $128 $164 $267 $23 $ 72 $124 $266
- --------------------------------------------------------------------------------------------------------------------
Dividend Growth $ 84 $126 $159 $257 $22 $ 69 $119 $256
- --------------------------------------------------------------------------------------------------------------------
Value-Added Market $ 83 $124 $157 $251 $22 $ 68 $116 $251
- --------------------------------------------------------------------------------------------------------------------
Growth $ 87 $134 $174 $287 $25 $ 78 $134 $287
- --------------------------------------------------------------------------------------------------------------------
American Opportunities $ 84 $127 $162 $263 $23 $ 71 $122 $262
- --------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity $ 87 $135 $175 $289 $25 $ 79 $135 $289
- --------------------------------------------------------------------------------------------------------------------
Global Equity $ 88 $140 $183 $305 $27 $ 84 $144 $305
- --------------------------------------------------------------------------------------------------------------------
Developing Growth $ 83 $125 $158 $254 $22 $ 69 $118 $254
- --------------------------------------------------------------------------------------------------------------------
Emerging Markets (1) $ 96 $162 $219 $378 $35 $107 $181 $377
- --------------------------------------------------------------------------------------------------------------------
High Yield $ 89 $141 $184 $308 $27 $ 85 $145 $308
- --------------------------------------------------------------------------------------------------------------------
Mid-Cap Value $ 91 $148 $197 $334 $30 $ 93 $158 $333
- --------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt $ 96 $160 $217 $372 $34 $105 $178 $372
- --------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity $104 $184 $256 $447 $43 $130 $219 $446
- --------------------------------------------------------------------------------------------------------------------
Fixed Income $ 87 $136 $177 $293 $26 $ 80 $137 $293
- --------------------------------------------------------------------------------------------------------------------
Active International
Allocation $104 $184 N/A N/A $43 $131 N/A N/A
- --------------------------------------------------------------------------------------------------------------------
Strategic Stock $ 87 $135 $175 $288 $25 $ 79 $135 $288
- --------------------------------------------------------------------------------------------------------------------
Enterprise $ 84 $126 $160 $259 $22 $ 70 $120 $258
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
If you do not Surrender your
Contract, you would pay the
following expenses on a $1,000
investment, assuming a 5% annual
return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------
Money Market $22 $ 68 $117 $250
- -----------------------------
North American Government
Securities (1) $27 $ 82 $141 $298
- -----------------------------
Diversified Income $21 $ 66 $113 $244
- -----------------------------
Balanced Growth $23 $ 71 $122 $261
- -----------------------------
Utilities $24 $ 73 $125 $267
- -----------------------------
Dividend Growth $23 $ 70 $120 $257
- -----------------------------
Value-Added Market $22 $ 68 $117 $251
- -----------------------------
Growth $26 $ 79 $135 $287
- -----------------------------
American Opportunities $23 $ 72 $123 $263
- -----------------------------
Mid-Cap Equity $26 $ 80 $136 $289
- -----------------------------
Global Equity $28 $ 85 $144 $305
- -----------------------------
Developing Growth $22 $ 69 $119 $254
- -----------------------------
Emerging Markets (1) $35 $108 $182 $378
- -----------------------------
High Yield $28 $ 86 $146 $308
- -----------------------------
Mid-Cap Value $31 $ 93 $159 $334
- -----------------------------
Emerging Markets Debt $35 $106 $179 $372
- -----------------------------
Emerging Markets Equity $43 $131 $220 $447
- -----------------------------
Fixed Income $26 $ 81 $138 $293
- -----------------------------
Active International
Allocation $43 $131 N/A N/A
- -----------------------------
Strategic Stock $26 $ 79 $136 $288
- -----------------------------
Enterprise $23 $ 70 $121 $259
- -------------------------------------------------------------------------------------------
</TABLE>
(1) Closed to new investments or transfers of existing contract values.
<PAGE>
10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES
(For an Accumulation Unit outstanding throughout the period)
The following information has been derived from the audited financial statements
of the Separate Account, which have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and should be read in conjunction with those statements which are
included in the Statement of Additional Information, which is incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
MONEY MARKET SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14, 1994)
Accumulation Unit Value at beginning of period $11.728
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.117
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 9,489
- --------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT SECURITIES SUB-ACCOUNT (INCEPTION
DATE SEPTEMBER 14, 1994)
Accumulation Unit Value at beginning of period $11.642
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.870
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 684
- --------------------------------------------------------------------------------
DIVERSIFIED INCOME SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14,
1994)
Accumulation Unit Value at beginning of period $12.577
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.175
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 6,139
- --------------------------------------------------------------------------------
BALANCED GROWTH SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14,
1994)
Accumulation Unit Value at beginning of period $17.859
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $18.230
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 5,961
- --------------------------------------------------------------------------------
UTILITIES SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14, 1994)
Accumulation Unit Value at beginning of period $20.391
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $28.898
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 5,030
- --------------------------------------------------------------------------------
DIVIDEND GROWTH SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14,
1994)
Accumulation Unit Value at beginning of period $24.847
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $24.631
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 26,039
- --------------------------------------------------------------------------------
VALUE-ADDED MARKET SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14,
1994)
Accumulation Unit Value at beginning of period $19.843
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $21.945
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 7,133
- --------------------------------------------------------------------------------
GROWTH SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14, 1994)
Accumulation Unit Value at beginning of period $18.530
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $25.416
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 3,012
- --------------------------------------------------------------------------------
AMERICAN OPPORTUNITIES SUB-ACCOUNT (INCEPTION DATE SEPTEMBER
14, 1994)
Accumulation Unit Value at end of period $25.729
- --------------------------------------------------------------------------------
Accumulation Unit Value at beginning of period $39.532
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 16,616
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
MID-CAP EQUITY SUB-ACCOUNT (INCEPTION DATE JANUARY 2, 1997)
Accumulation Unit Value at beginning of period $11.913
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $22.568
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 2,887
- --------------------------------------------------------------------------------
GLOBAL EQUITY SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14,
1994)
Accumulation Unit Value at beginning of period $14.918
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $19.733
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 7,342
- --------------------------------------------------------------------------------
DEVELOPING GROWTH SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14,
1994)
Accumulation Unit Value at beginning of period $20.318
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $38.574
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 3,699
- --------------------------------------------------------------------------------
EMERGING MARKETS SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 14,
1994)
Accumulation Unit Value at beginning of period $ 7.981
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $14.444
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 1,421
- --------------------------------------------------------------------------------
HIGH YIELD SUB-ACCOUNT (INCEPTION DATE APRIL 1, 1998)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.554
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 1,926
- --------------------------------------------------------------------------------
MID-CAP VALUE SUB-ACCOUNT (INCEPTION DATE APRIL 1, 1998)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.977
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 1,323
- --------------------------------------------------------------------------------
EMERGING MARKETS DEBT SUB-ACCOUNT (INCEPTION DATE APRIL 1,
1998)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 8.615
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 78
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY SUB-ACCOUNT (INCEPTION DATE
SEPTEMBER 7, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $14.353
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 170
- --------------------------------------------------------------------------------
FIXED INCOME SUB-ACCOUNT (INCEPTION DATE SEPTEMBER 7, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.065
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 109
- --------------------------------------------------------------------------------
ACTIVE INTERNATIONAL ALLOCATION SUB-ACCOUNT (INCEPTION DATE
SEPTEMBER 20, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.718
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 36
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
STRATEGIC STOCK SUB-ACCOUNT (INCEPTION DATE APRIL 1, 1998)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.093
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 1,047
- --------------------------------------------------------------------------------
ENTERPRISE SUB-ACCOUNT (INCEPTION DATE APRIL 1, 1998)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $13.219
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 1,421
- --------------------------------------------------------------------------------
</TABLE>
Accumulation Unit Values do not include the Optional Death Benefit charge. If
you elect the Optional Death Benefit, Accumulation Unit Values would be lower.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
SUMMARY
HOW DO I PURCHASE THIS ANNUITY?
You must complete our application or order request and submit it to us for
approval with your first premium payment. Your first premium payment must be at
least $1,000 and subsequent premium payments must be at least $500. The minimum
premium payment requirements may differ if you are participating in our
automatic investing ("InvestEase-Registered Trademark-") program.
- For a limited time, usually within ten days after you receive your annuity,
you may cancel your annuity without paying a Contingent Deferred Sales
Charge. You bear the investment risk for your premium payment prior to our
receipt of your request for cancellation.
WHAT TYPE OF SALES CHARGE WILL I PAY?
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
You don't pay a sales charge when you purchase your Annuity. We may charge you a
CDSC when you partially or fully Surrender your Annuity. The CDSC will depend on
the amount you choose to Surrender and the length of time the Premium Payments
you made have been in your Annuity. The percentage used to calculate the CDSC is
equal to:
<TABLE>
<CAPTION>
CONTINGENT
NUMBER OF YEARS FROM DEFERRED SALES
PREMIUM PAYMENT CHARGE
<S> <C>
- ------------------------------------
One Year 7%
- ------------------------------------
Two Years 6%
- ------------------------------------
Three Years 6%
- ------------------------------------
Four Years 5%
- ------------------------------------
Five Years 4%
- ------------------------------------
Six Years 3%
- ------------------------------------
Seven Years 2%
- ------------------------------------
Eight Years 0%
- ------------------------------------
</TABLE>
IS THERE AN ANNUAL MAINTENANCE FEE?
Yes. We deduct this $30 fee each year on your Contract Anniversary or when you
completely Surrender your annuity, if, on either of those dates, the value of
your annuity is less than $50,000.
WHAT CHARGES WILL I PAY ON AN ANNUAL BASIS?
In addition to the Annual Maintenance Fee, you pay three different types of
charges each year. The first type of charge is the fee you pay for insurance.
This charge is:
A mortality and expense risk charge that is subtracted daily and is equal to an
annual charge of 1.25% of your Contract Value invested in the Portfolios.
The second type of charge is the fee you pay for the Separate Account. This
charge is:
An administrative fee is .15% per year of the Contract Values held in the
Separate Account.
The third type of charge is the fee you pay for the Portfolios. See the Annual
Operation Expense Table for more complete information and the portfolios'
prospectuses attached to this Prospectus.
If an Optional Death Benefit is elected an additional charge is deducted daily
from your Contract Value and is equal to 0.15% per year of your Contract Value
invested in the Funds.
CAN I TAKE OUT ANY OF MY MONEY?
You can partially or fully Surrender your Contract subject to a Contingent
Deferred Sales Charge (CDSC). You can partially Surrender your Contract without
any CDSC applied to the Surrender under the following conditions:
- - Surrenders which don't exceed 15% of premium payments per Contract Year
(Annual Withdrawal Amount);
- - Surrenders made from premium payments invested more than seven years;
- - 100% Surrender of earnings after the seventh Contract Year;
- - Surrenders under the nursing home waiver (described as Eligible Confinement in
the Contract); or
- - Surrenders eligible for disability waiver under a group qualified plan.
WILL HARTFORD PAY A DEATH BENEFIT?
Your Contract has a Death Benefit and we offer an Optional Interest Accumulation
Death Benefit ("Optional Death Benefit") that you can elect for an additional
fee. There is a Death Benefit if the Contract Owner, joint owner or Annuitant,
die before we begin to make annuity payments. The Death Benefit will remain
invested in the Sub-Accounts according to your last instructions (unless
otherwise mutually specified by your Beneficiaries) and will be subject to
market fluctuations.
IF YOU DO NOT ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments you have made to us reduced by any
subsequent Surrenders;
- - The Contract Value of your annuity, or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries, of Contract Values, premium payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death. The Anniversary Value is equal to the
Contract Value as of a Contract Anniversary, increased by the dollar amount of
any premium payments made since that anniversary and reduced by the dollar
amount of any partial Surrenders since that anniversary. The Maximum Anniversary
Value is
<PAGE>
14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
equal to the greatest Anniversary Value attained from this series of
calculations.
IF YOU ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments you have made to us reduced by any
subsequent Surrenders;
- - The Contract Value of your annuity;
- - Your Maximum Anniversary Value, which is the highest Anniversary Value before
the deceased's 81st birthday or date of death; or
- - Your Interest Accumulation Value.
THE INTEREST ACCUMULATION VALUE is calculated by accumulating interest on your
premium payments at a rate of 5% per year up to the deceased's 81st birthday or
date of death, assuming you have not taken any Surrenders. If you have taken any
Surrenders, the 5% will be accumulated on your premium payments, but there will
be an adjustment for any of the Surrenders. This adjustment will reduce the
Optional Death Benefit proportionally for the Surrenders. The Optional Death
Benefit is limited to a maximum of 200% of premium payments, less proportional
adjustments for any Surrenders. For examples on how the Optional Death Benefit
is calculated see "Appendix II". If you elect the Optional Death Benefit, we
will deduct an additional charge daily from your Contract Value equal to .15%
per year of the Sub-Account value. The Optional Death Benefit may not be
available if the Contract Owner or Annuitant is age 75 or older. For Contracts
issued in the state of Washington, the Optional Death Benefit is not available.
If you elect the Optional Death Benefit at any time after you purchase your
annuity, the Optional Death Benefit calculation will be different.
SPOUSAL CONTRACT CONTINUATION -- If a Beneficiary is the Contract Owner's
spouse, that portion of the Contract for which the spouse is the Beneficiary
will continue with the spouse as Contract Owner, unless the spouse elects to
receive the Death Benefit as a lump sum payment. If the Contract continues with
the spouse as Contract Owner, we will adjust the Contract Value to the amount
that we would have paid as the Death Benefit payment, had the spouse elected to
receive the Death Benefit as a lump sum payment or as an annuity payment option.
Spousal Contract Continuation will only apply one time for each Contract.
WHAT ANNUITY PAYMENT OPTIONS ARE AVAILABLE?
When you purchase your annuity, you may choose one of the following annuity
payment options, or receive a lump sum payment:
LIFE ANNUITY where we make scheduled payments for the Annuitant's life.
- Payments under this option stop upon the death of the Annuitant, even if the
Annuitant dies after one payment.
LIFE ANNUITY WITH CASH REFUND where we make payments during the life of the
Annuitant and when the Annuitant dies, we pay the remaining value to the
Beneficiary. The remaining value is calculated at the time we receive Due Proof
of Death by subtracting the annuity payments already made from the Contract
Value, less any applicable Premium Taxes, applied to this annuity payment
option.
- This option is only available if you select a variable dollar amount payment
with the 5% AIR or fixed dollar amount annuity payments.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN where we make payments for the
life of the Annuitant but you are at least guaranteed payments for a time period
you select which is a minimum of 5 years and a maximum of 100 years minus your
annuitant's age.
- If the Annuitant dies prior to the end of the period selected, we will pay
the value of the remaining payments to your Beneficiary, either in a lump
sum or we will continue payments until the end of the period selected.
JOINT AND LAST SURVIVOR ANNUITY where we make payments during the lifetimes of
the Annuitant and another designated individual called the Joint Annuitant. At
the time of electing this annuity payment option, the Contract Owner may elect
reduced payments over the remaining lifetime of the survivor.
- Payments under this option stop upon the death of the Annuitant and Joint
Annuitant, even if the Annuitant and Joint Annuitant die after one payment.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN where we
make payments during the lifetime of the Annuitant and a Joint Annuitant, and we
guarantee that those payments for a time period you select which is a minimum of
5 years and a maximum 100 years minus the younger Annuitant's age. At the time
of electing this Annuity Option, the Contract Owner may elect reduced payments
over the remaining lifetime of the survivor.
- If the Annuitant and the Joint Annuitant die prior to the end of the period
selected, we will pay the value of the remaining payments to your
Beneficiary, either in a lump sum or we will continue payments until the end
of the period selected.
PAYMENTS FOR A PERIOD CERTAIN where we agree to make payments for a specified
time. The minimum period that you can select is 10 years during the first two
Contract Years and 5 years after the second Contract Anniversary. The maximum
period that you can select is 100 years minus your Annuitant's age.
- If you select this option under a variable dollar amount payment, YOU MAY
SURRENDER YOUR ANNUITY after annuity payments have started and we will give
you the present value of the remaining payments less any applicable
Contingent Deferred Sales Charge.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
- If the Annuitant dies prior to the end of the period selected, we will pay
the value of the remaining payments to your Beneficiary, either in a lump
sum or we will continue payments until the end of the period selected.
You must begin to take payments before the Annuitant's 90th birthday or the end
of the 10th Contract Year, which ever comes later, unless you elect a later date
to begin receiving payments subject to the laws and regulations then in effect
and our approval. If you do not tell us what annuity payment option you want
before that time, we will pay you under the Life Annuity with a 10 year period
certain. You and Hartford can agree to start payments at a later date if the
laws in effect allow us to defer payment and we agree to allow you to defer.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut. Our offices are
located in Simsbury, Connecticut; however, our mailing address is P.O. Box 2999,
Hartford, CT 06104-2999. We are ultimately controlled by The Hartford Financial
Services Group, Inc., one of the largest financial service providers in the
United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
EFFECTIVE DATE
RATING AGENCY OF RATING RATING BASIS OF RATING
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
A.M. Best and
Company, Inc. 1/1/99 A+ Financial performance
- --------------------------------------------------------------------------------
Standard & Poor's 8/1/99 AA Insurer financial strength
- --------------------------------------------------------------------------------
Duff & Phelps 7/1/99 AA+ Claims paying ability
- --------------------------------------------------------------------------------
</TABLE>
THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
The Separate Account is where we set aside and invest the assets of some of our
annuity contracts, including this Contract. The Separate Account was established
on 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 Commission of the management or the investment practices of the Separate
Account or Hartford. The Separate Account meets the definition of "Separate
Account" under federal securities law. This Separate Account holds only assets
for variable annuity contracts. The Separate Account:
- - Holds assets for the benefit of you and other Contract Owners, and the persons
entitled to the payments described in the Contract.
- - Is not subject to the liabilities arising out of any other business Hartford
may conduct.
- - Is not affected by the rate of return of Hartford's General Account or by the
investment performance of any of Hartford's other Separate Accounts.
- - May be subject to liabilities from a Sub-Account of the Separate Account which
holds assets of other variable annuity contracts offered by the Separate
Account which are not described in this Prospectus.
- - Is credited with income and gains, and takes losses, whether or not realized,
from the assets it holds.
We do not guarantee the investment results of the Separate Account. There is no
assurance that the value of your Annuity will equal the total of the payments
you make to us.
THE FUNDS
- --------------------------------------------------------------------------------
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:
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 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 may 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.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
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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.
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,
- ---------
* 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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18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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 are sold to our other
Separate Accounts and our insurance company affiliates or other unaffiliated
insurance companies to serve as the underlying investment for both variable
annuity contracts and variable life insurance contracts, a practice known as
"mixed and shared funding." As a result, there is a possibility that a material
conflict may arise between the interests of Contract Owners, and of owners of
other contracts whose contract values are allocated to one or more of these
other Separate Accounts investing in any one of the Portfolios. In the event of
any such material conflicts, we will consider what action may be appropriate,
including removing the Portfolio from the Separate Account or replacing the
Portfolio with another Portfolio. There are certain risks associated with mixed
and shared funding, as disclosed in the portfolios' prospectus.
VOTING RIGHTS -- We are the legal owners of all Portfolio shares held in the
Separate Account and we have the right to vote at the Portfolio's shareholder
meetings. To the extent required by federal securities laws or regulations, we
will:
- - Notify you of any Portfolio shareholders' meeting if the shares held for your
Contract may be voted.
- - Send proxy materials and a form of instructions that you can use to tell us
how to vote the Portfolio shares held for your Contract.
- - Arrange for the handling and tallying of proxies received from Contract
Owners.
- - Vote all Portfolio shares attributable to your Contract according to
instructions received from you, and
- - Vote all Portfolio shares for which no voting instructions are received in the
same proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present interpretation,
change to permit us to vote Portfolio shares on our own, we may decide to do so.
You may attend any Shareholder Meeting at which shares held for your Contract
may be voted. After we begin to make Annuity Payments to you, the number of
votes you have will decrease.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF PORTFOLIOS -- We reserve the right,
subject to any applicable law, to make certain changes to the Portfolios offered
under your Contract. We may, in our sole discretion, establish new Portfolios.
New Portfolios will be will be made available to existing Contract Owners as we
determined appropriate. We may also close one or more Portfolios to additional
payments or transfers from existing Sub-Accounts.
We reserve the right to eliminate the shares of any of the Portfolios for any
reason and to substitute shares of another registered investment company for the
shares of any Portfolio already purchased or to be purchased in the future by
the Separate Account. To the extent required by the 1940 Act, substitutions of
shares attributable to your interest in a Portfolio will not be made until we
have the approval of the Commission and we have notified you of the change.
In the event of any substitution or change, We may, by appropriate endorsement,
make such changes in the Contract as may be necessary or appropriate to reflect
such substitution or change. If we decide that it is in the best interest of the
Contract Owners, the Separate Account may be operated as a management company
under the 1940 Act or any other form permitted by law, may be de-registered
under the 1940 Act in the event such registration is no longer required, or may
be combined with one or more other Separate Accounts.
ADMINISTRATIVE SERVICES -- Hartford has entered into agreements with the
investment advisers or distributors of many of the Funds. Under the terms of
these agreements, Hartford provides administrative services and the Funds pay a
fee to Hartford that is usually based on an annual percentage of the average
daily net assets of the Funds. These agreements may be different for each Fund
or each Fund family.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
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PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
When a Sub-Account advertises its STANDARDIZED TOTAL RETURN, it will usually be
calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period and assumes that the Optional Death Benefit
has not been elected.
The Separate Account may also advertise NON-STANDARD TOTAL RETURNS THAT PRE-DATE
THE INCEPTION DATE OF THE SEPARATE ACCOUNT. These non-standardized total returns
are calculated by assuming that the Sub-Accounts have been in existence for the
same periods as the underlying Portfolios and by taking deductions for charges
equal to those currently assessed against the Sub-Accounts. These
non-standardized returns must be accompanied by standardized total returns.
If applicable, the Sub-Accounts may advertise YIELD IN ADDITION TO TOTAL RETURN.
The yield will be computed in the following manner: The net investment income
per unit earned during a recent one month period, divided by the unit value on
the last day of the period. This figure reflects the recurring charges at the
Separate Account level including the Annual Maintenance Fee.
The Money Market Portfolio Sub-Account may advertise yield and effective yield.
The yield of a Sub-Account is based upon the income earned by the Sub-Account
over a seven-day period and then annualized, i.e. the income earned in the
period is assumed to be earned every seven days over a 52-week period and stated
as a percentage of the investment. Effective yield is calculated similarly but
when annualized, the income earned by the investment is assumed to be reinvested
in Sub-Account units and thus compounded in the course of a 52-week period.
Yield and effective yield reflect the recurring charges at the Separate Account
level including the Annual Maintenance Fee.
We may provide information on various topics to Contract Owners and prospective
Contract Owners in advertising, sales literature or other materials. These
topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, dollar cost averaging and
asset allocation), the advantages and disadvantages of investing in tax-deferred
and taxable instruments, customer profiles and hypothetical purchase scenarios,
financial management and tax and retirement planning, and other investment
alternatives, including comparisons between the Contracts and the
characteristics of and market for such alternatives.
THE FIXED ACCOUNTS
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IMPORTANT INFORMATION YOU SHOULD KNOW: THIS PORTION OF THE CONTRACT RELATING TO
THE FIXED ACCOUNTS IS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 ("1933
ACT") AND THE FIXED ACCOUNTS ARE NOT REGISTERED AS INVESTMENT COMPANIES UNDER
THE INVESTMENT COMPANY ACT OF 1940 ("1940 ACT"). NONE OF THE FIXED ACCOUNTS OR
ANY OF THEIR INTERESTS ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933
ACT OR THE 1940 ACT, AND THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS
NOT REVIEWED THE DISCLOSURE REGARDING THE FIXED ACCOUNTS. THE FOLLOWING
DISCLOSURE ABOUT THE FIXED ACCOUNTS MAY BE SUBJECT TO CERTAIN GENERALLY
APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND
COMPLETENESS OF DISCLOSURE.
Payments and Contract Values allocated to a Fixed Account become a part of our
general assets. We invest the assets of the General Account in accordance with
applicable law governing the investments of insurance company General Accounts.
We have more than one Fixed Account. The standard Fixed Account (the "Fixed
Account") and then a number of DCA Program Fixed Accounts, which we collectively
refer to as the "Fixed Accounts".
Currently, we guarantee that we will credit interest at a rate of not less than
3% per year, compounded annually, to amounts you allocate to the Fixed Account.
We reserve the right, in our sole discretion, to credit interest at a rate in
excess of 3% per year. You assume the risk that interest credited to the Fixed
Account may not exceed the minimum guarantee of 3% for any given year.
We will periodically publish the Fixed Account interest rates currently in
effect. There is no specific formula for the determination of interest rates.
Some of the factors that we may consider in determining whether to credit excess
interest are: general economic trends, rates of return currently available and
anticipated on our investments, regulatory and tax requirements and competitive
factors. We will account for any deductions, Surrenders or transfers from the
Fixed Account on a "first-in", "first-out" basis. For Contracts issued in the
state of New York, Fixed Account interest rates may vary from other states.
From time to time, we may credit increased interest rates to Contract Owners
under certain programs established at our sole discretion.
DOLLAR COST AVERAGING PLUS ("DCA PLUS") PROGRAMS -- These programs will use
designated DCA Program Fixed Accounts. Currently, Contract Owners may enroll in
a special pre-authorized transfer program known as our Dollar Cost Averaging
Plus Program (the "Program"). Under this Program, Contract Owners who enroll may
allocate a minimum of $5,000 of
<PAGE>
20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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their payment into the appropriate DCA Program Fixed Account (we may allow a
lower minimum premium payment for qualified plan transfers or rollovers,
including IRAs) and pre-authorize transfers to any of the Sub-Accounts under
either the 6-Month Transfer Program or 12-Month Transfer Program. The 6-Month
Transfer Program and the 12-Month Transfer Program will generally have different
credited interest rates. Under the 6-Month Transfer Program, the interest rate
can accrue up to 6 months and all payments and accrued interest must be
transferred from the DCA Program Fixed Account in use to the selected Sub-
Accounts in 3 to 6 months. Under the 12-Month Transfer Program, the interest
rate can accrue up to 12 months and all payments and accrued interest must be
transferred to the selected Sub-Accounts in 7 to 12 months. This will be
accomplished by monthly transfers for the period selected and a final transfer
of the entire amount remaining in the Program, which will generally be less than
the prior monthly transfer amounts. Contract Owners who purchase their Contracts
in New York have a different DCA Plus Program, which includes different credited
interest rates. Currently, only one DCA Plus Program transfer period is
available in New York, but that period allows transfers to selected Sub-Accounts
in 3 to 12 months.
The pre-authorized transfers will begin within 15 days after we receive the
initial Program payment and complete enrollment instructions. If we do not
receive complete Program enrollment instructions within 15 days of receipt of
the initial Program payment, the Program will be voided and the entire balance
in the Program will be transferred to the Accounts designated by you. If you do
not designate an Account, we will transfer any remaining amounts to the Fixed
Account and you will receive the Fixed Account's current effective interest
rate. Any subsequent payments we receive within the Program period selected will
be allocated to the Sub-Accounts over the remainder of that Program transfer
period, unless otherwise directed by You.
You may only have one dollar cost averaging program in place at one time, this
means one standard dollar cost averaging plan or one Dollar Cost Averaging Plus
Program.
You may elect to terminate the pre-authorized transfers by calling or writing us
of your intent to cancel enrollment in the Program. Upon cancellation of
enrollment in the Program, you will no longer receive the increased interest
rate and unless we receive instructions to the contrary, the amounts remaining
in the DCA Program Fixed Account may be transferred to the Fixed Account and
accrue the interest rate currently in effect.
Transfers made under a Dollar Cost Averaging Program do not count towards the
twelve transfers each Contract Year that we allow without charge and are not
subject to our rule that prohibits any two transfers from occurring on
Consecutive Valuation Days.
We reserve the right to discontinue, modify or amend the Program or any other
interest rate program established by Hartford. Any change to the Program will
not affect Contract Owners currently enrolled in the Program.
THE CONTRACT
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THE CONTRACT OFFERED -- The Contracts are individual or group tax-deferred
variable annuity contracts. They are designed for retirement planning purposes
and may be purchased by any individual, group or trust, including; (a) any
trustee or custodian for a retirement plan qualified under Sections 401(a), or
403(a) of the Internal Revenue Code (which includes Section 401(k));
(b) annuity purchase plans adopted by public school systems and certain
tax-exempt organizations according to Section 403(b) of the Code;
(c) Individual Retirement Annuities adopted according to Section 408 of the
Code; (d) employee pension plans established for employees by a state, a
political subdivision of a state, or an agency or instrumentality of either a
state or a political subdivision of a state, and (e) certain eligible deferred
compensation plans as defined in Section 457 of the Code ("Qualified
Contracts"). If you are purchasing the Contract for use in an IRA or other
qualified retirement plan, you should consider other features of the Contract
besides tax deferral, since any investment vehicle used within an IRA or other
qualified plan receives tax deferred treatment under the Code.
PURCHASING A CONTRACT -- A prospective Contract Owner may purchase a Contract by
completing and submitting an application or an order request along with an
initial premium payment to the Administrative Office of the Company. The maximum
age for Annuitant, Owner and Joint Owner on the Contract Issue Date is 85.
Generally, the minimum premium payment is $1,000. The minimum subsequent premium
payment is $500. Certain plans may be allowed to make smaller periodic premium
payments. Unless we give our prior approval, we will not accept a premium
payment in excess of $1,000,000. Each premium payment, which is your premium
payment after the deduction of any applicable Premium Taxes, may be split among
the various Accounts subject to minimum amounts then in effect. For Contracts
issued in Oregon, premium payments will only be accepted prior to the third
Contract Anniversary. For Contracts issued in Massachusetts, subsequent premium
payments will only be accepted until the Annuitant's 63rd birthday or the third
Contract Anniversary, whichever is later. We will send you a confirmation notice
upon receipt and acceptance of your premium payment.
In Oregon, Premium Payments are only allowed in the first three Contract Years.
In Massachusetts, Premium Payments are only allowed in the first three Contract
Years or until the Contract Owner turns 63, whichever is later.
RIGHT TO EXAMINE THE CONTRACT -- If you are not satisfied with your purchase,
you may cancel the Contract by returning it within 10 days (or longer in some
states) after you receive it. You must send a written request for cancellation
along with the Contract. We will, without deduction for any CDSC normally
assessed, pay you an amount equal to the Contract Value. YOU
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
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BEAR THE INVESTMENT RISK DURING THE PERIOD PRIOR TO OUR RECEIPT OF YOUR REQUEST
FOR CANCELLATION. We will refund the premium paid only for Individual Retirement
Annuities, if returned within seven days of receipt, and in those states where
required by law.
CREDITING AND VALUATION -- Your premium payment, which is the balance remaining
after the deduction of any Premium Tax, is credited to your Contract within two
business days of receipt by us at our Administrative Office of a properly
completed application or an order to purchase a Contract and the premium
payment. The payment will be credited to the Accounts according to the
instructions we receive from you.
If your application or other information is incomplete when received, your
payment will be credited to the Accounts within five business days of receipt of
complete information. If the payment is not credited within five business days,
it will be immediately returned to you unless you have been informed of the
delay and tell us not to return it.
Subsequent premium payments are priced on the Valuation Day we receive the
payment in our Administrative Office, provided it is received before the New
York Stock Exchange closes. Unless otherwise specified, We will allocate any
subsequent payments to Accounts according to your most recent instructions.
CONTRACT VALUE -- BEFORE THE ANNUITY COMMENCEMENT DATE
Your Contract Value reflects interest rate credited any amounts allocated to the
Fixed Accounts and the investment performance of the Sub-Accounts where you have
payments allocated.
SUB-ACCOUNT VALUES -- Your Sub-Account Values on the date we issue your Contract
is the amount of your premium payment allocated to any Sub-Account. After that,
we determine your Sub-Account value by determining the Accumulation Unit value
for each Sub-Account, and then multiplying that value by the number of those
units. Sub-Account Value reflects any variation of the interest income,
dividends, net capital gains or losses, realized or unrealized, and any amounts
transferred into or out of that Sub-Account.
ACCUMULATION UNITS -- When Premium Payments are credited to your Sub-Accounts,
they are converted into accumulation Units by dividing the amount of your
Premium Payments, minus any Premium Taxes, by the Accumulation Unit Value for
that day. The more Premium Payments you put into your Contract, the more
Accumulation Units you will own. You decrease the number of Accumulation Units
you have by requesting Surrenders, transferring money out of an Account,
settling a Death Benefit claim or by annuitizing your Contract.
ACCUMULATION UNIT VALUE -- The Accumulation Unit value for each Sub-Account was
arbitrarily set initially at $1 when the Sub-Account began operations. After
that, the Accumulation Unit value for each Sub-Account will equal (a) the
Accumulation Unit value at the end of the preceding Valuation Day multiplied by
(b) the Net Investment Factor (see the definition below) for the Valuation Day
for which the Accumulation Unit value is being calculated.
You will be advised, at least semiannually, of the number of Accumulation Units
credited to each Sub-Account, the current Accumulation Unit values, and the
total value of your Contract.
THE NET INVESTMENT FACTOR (BEFORE AND AFTER THE ANNUITY COMMENCEMENT
DATE) -- The Net Investment Factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. For each
Sub-Account, the Net Investment Factor reflects the investment performance of
the Portfolio in which that Sub-Account invests and the charges assessed against
that Sub-Account for a Valuation Period. The Net Investment Factor is calculated
by dividing (a) by (b) and subtracting (c) from the result, where:
- - Is the Net Asset Value of the Portfolio held in that Sub-Account, determined
at the end of the current Valuation Period (plus the per share amount of any
dividends or capital gains distributions made by that Portfolio);
- - Is the Net Asset Value of the Portfolio held in the Sub-Account, determined at
the beginning of the Valuation Period;
- - Is a daily factor representing the mortality and expense risk charge and any
optional charges deducted from the Sub-Account, adjusted for the number of
days in the Valuation Period.
CONTRACT VALUE TRANSFERS BEFORE AND AFTER THE ANNUITY COMMENCEMENT DATE
You may transfer your Contract Values from one or more Accounts to another
Account free of charge. WE RESERVE THE RIGHT TO LIMIT THE NUMBER OF TRANSFERS TO
12 PER CONTRACT YEAR, WITH NO 2 TRANSFERS OCCURRING ON CONSECUTIVE VALUATION
DAYS. There may be limitations on transfers to and from the Fixed Accumulation
Features that are described in your Contract. Some states may allow us to limit
the dollar amount transferred.
TELEPHONE AND INTERNET TRANSFERS -- In most states, you, or your
attorney-in-fact acting pursuant to a power of attorney, can make transfers:
- - By calling us at (800) 862-6668
- - Electronically, when available, by the Internet through our website at
http://online.hartford.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
<PAGE>
22 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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next Valuation Day. If you do not receive an electronic acknowledgement, you
should telephone us as soon as possible.
We will send you a confirmation when we process your transfer. You are
responsible for verifying transfer confirmations and promptly advising us of any
errors within 30 days of receiving the confirmation.
Telephone or Internet transfer requests may currently only be cancelled by
calling us at (800) 862-6668 before the close of the New York Stock Exchange.
Hartford, our agents or our affiliates are NOT responsible for losses resulting
from telephone or electronic requests that we believe are genuine. We will use
reasonable procedures to confirm that instructions received by telephone or
through our website are genuine, including a requirement that contract owners
provide certain identification information, including a personal identification
number. We record all telephone transfer instructions. We reserve the right to
suspend, modify, or terminate telephone or electronic transfer privileges at any
time.
We may permit you to pre-authorize transfers under certain circumstances.
Transfers between the Accounts may be made both before and after the Annuity
Commencement Date. Generally, the minimum allocation to any Sub-Account may not
be less than $500. All percentage (%) allocations must be in whole numbers
(e.g., 1%). No minimum balance is presently required in any Account.
The right to reallocate Contract Values is subject to modification if we
determine, in our sole opinion, that the exercise of that right by one or more
Contract Owners is, or would be, to the disadvantage of other Contract Owners.
Any modification could be applied to transfers to or from some or all of the
Accounts and could include, but not be limited to, the requirement of a minimum
time period between each transfer, not accepting transfer requests of an agent
acting under a power of attorney on behalf of more than one Contract Owner, or
limiting the dollar amount that may be transferred between the Sub-Accounts by
you at any one time. SUCH RESTRICTIONS MAY BE APPLIED IN ANY MANNER REASONABLY
DESIGNED TO PREVENT ANY USE OF THE TRANSFER RIGHT WHICH WE CONSIDER TO BE TO THE
DISADVANTAGE OF OTHER CONTRACT OWNERS.
For Contracts issued in THE STATE OF FLORIDA, MARYLAND OR OREGON, the
reservation of rights set forth in the preceding paragraph is limited to: (i)
requiring up to a maximum of 10 Valuation Days between each transfer; (ii)
limiting the amount to be transferred on any one Valuation Day to no more than
$2 million; and (iii) upon 30 days prior written notice, to only accepting
transfer instructions from you and not from your representative, agent or person
acting under a power of attorney for you.
Currently, we will not accept instructions from agents acting under a power of
attorney of multiple Contract Owners whose Accounts aggregate more than $2
million, unless the agent has entered into a third party transfer services
agreement with us.
Transfers made under a Dollar Cost Averaging Program do not count towards the
twelve transfers each Contract Year that we allow without charge and are not
subject to our rule that prohibits any two transfers from occurring on
Consecutive Valuation Days.
SURRENDERS
Contract Owners should consult their qualified tax adviser regarding the tax
consequences of a Surrender.
- A Surrender made before age 59 1/2 may result in adverse tax consequences,
including a penalty tax of 10% of the taxable portion of the Surrender
Value. (See "Federal Tax Considerations")
PAYMENT OF SURRENDER AMOUNTS -- Payment of any request for a full or partial
Surrender from the Accounts will be made as soon as possible and in any event no
later than seven days after we receive the request at our Administrative Office.
There may be postponement in the payment of Surrender Amounts whenever (a) the
New York Stock Exchange is closed; (b) trading on the New York Stock Exchange is
restricted as determined by the Commission; (c) the Commission permits
postponement and so orders; or (d) the Commission determines that an emergency
exists making valuation of the amounts or disposal of securities not reasonably
practicable.
FULL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE -- At any time prior to
the Annuity Commencement Date, you have the right to fully Surrender the
Contract. In such event, the Surrender Value of the Contract may be taken in the
form of a lump sum cash payment.
The Surrender Value of the Contract is equal to the Contract Value less any
Premium Taxes, the Annual Maintenance Fee and any Contingent Deferred Sales
Charge, if applicable. The Surrender Value may be more or less than the amount
of the payments made to your Contract.
PARTIAL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE -- You may make a
partial Surrender of your Contract Value at any time prior to the Annuity
Commencement Date so long as the amount Surrendered is at least equal to our
minimum amount rules then in effect. Additionally, if the remaining Contract
Value following a Surrender is less than $500, we may terminate the Contract and
pay the Surrender Value. For Contracts issued in TEXAS, the Contract will not be
terminated when the remaining Contract Value after a Surrender is less than $500
unless there were no payments made during the previous 2 Contract Years.
WHEN REQUESTING A PARTIAL SURRENDER, YOU SHOULD SPECIFY THE ACCOUNT(S) FROM
WHICH THE PARTIAL SURRENDER WILL BE TAKEN; OTHERWISE, THE SURRENDER WILL BE
TAKEN ON A PRO RATA BASIS ACCORDING TO THE VALUE IN EACH ACTIVE ACCOUNT.
We may permit you to pre-authorize partial Surrenders subject to certain
limitations then in effect. We permit partial Surrenders by telephone subject to
dollar amount limitations in effect at the time you request the Surrender. To
request partial Surrenders by
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
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telephone, you must have completed and returned to us a Telephone Redemption
Program Enrollment Form authorizing telephone Surrenders. If there are joint
Contract Owners, both must authorize us to accept telephone instructions and
agree that We may accept telephone instructions for partial Surrenders from
either Contract Owner. Partial Surrender requests will not be honored until we
receive all required documents in proper form.
Telephone authorization will remain valid until (a) we receive written notice of
revocation by you, or, in the case of joint Contract Owners, written notice from
either Contract Owner; (b) we discontinue the privilege; or (c) we have reason
to believe that you have entered into a market timing agreement with an
investment adviser and/or broker/dealer.
We may record any telephone calls to verify data concerning transactions and may
adopt other procedures to confirm that telephone instructions are genuine. We
will not be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine.
In order to obtain that day's unit values on Surrender, We must receive
telephone Surrender instructions prior to the close of trading on the New York
Stock Exchange (generally 4:00 p.m.).
We may modify, suspend, or terminate telephone transaction privileges at any
time.
SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- You may fully Surrender your
Contract on or after the Annuity Commencement Date if you elect the Payment For
a Period Certain Settlement Option. We pay you the commuted value that is equal
to the present value of the remaining payments we are scheduled to make less any
applicable Contingent Deferred Sales Charge. The commuted value is determined as
of the date we receive your written request for Surrender at our Administrative
Office.
Partial Surrenders are permitted after the Annuity Commencement Date if you
elect a variable dollar amount payment under the Payments for a Period Certain
Settlement Option, but check with your qualified tax adviser because there may
be adverse tax consequences.
IMPORTANT TAX INFORMATION -- There are certain restrictions on section 403(b)
tax-sheltered annuities. As of December 31, 1988, all section 403(b) annuities
have limits on full and partial Surrenders. Contributions to the Contract made
after December 31, 1988 and any increases in cash value after December 31, 1988
may not be distributed unless the Contract Owner/employee has a) attained age
59 1/2, b) separated from service, c) died, d) become disabled or e) experienced
financial hardship (cash value increases may not be distributed for hardships
prior to age 59 1/2). Distributions prior to age 59 1/2 due to financial
hardship or separation from service may still be subject to a penalty tax of
10%. We will not assume any responsibility for determining whether a surrender
is permissible, with or without tax penalty, in any particular situation; or in
monitoring Surrender requests regarding pre or post January 1, 1989 Contract
Values. Any full or partial Surrender described above may affect the continuing
tax-qualified status of some Contracts or plans and may result in adverse tax
consequences to the Contract Owner. The Contract Owner, therefore, should
consult with a tax adviser before undertaking any such Surrender. (See "Federal
Tax Considerations")
CONTRACT CHARGES
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
The CDSC covers some of the expenses relating to the sale and distribution of
the Contract, including commissions paid to registered representatives and the
cost of preparing sales literature and other promotional activities.
We may assess a CDSC when you request a full or partial Surrender. The CDSC is
based on the amount you choose to Surrender and how long your Premium Payments
have been in the Contract. Each Premium Payment has its own CDSC schedule.
Premium Payments are Surrendered in the order in which they were received. The
longer you leave your Premium Payments in the Contract, the lower the CDSC will
be when you Surrender. The amount assessed a CDSC will not exceed your total
Premium Payments.
The percentage used to calculate the CDSC is equal to:
<TABLE>
<CAPTION>
NUMBER OF 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 CDSC as follows.
- - Hartford will Surrender the Annual Withdrawal Amount which is equal to 15% of
your total Premium Payments or $4,500 without charging a CDSC.
- - We will then Surrender the Premium Payments that have been in the Annuity the
longest.
- - That means we would Surrender the entire $10,000 initial Premium Payment and
deduct a CDSC of 4% on that amount or $400.00.
- - The remaining $500 will come from the additional Premium Payment made one year
ago and we will deduct a CDSC of 7% of the $500 or $35.00.
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24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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- - Your CDSC is $435.00
If you have any questions about these charges, please contact your financial
adviser or Hartford.
PAYMENTS NOT SUBJECT TO CDSC
ANNUAL WITHDRAWAL AMOUNT -- During the first seven Contract years, you may make
a partial Surrender of Contract Values of up to 15% of the premium payments each
Contract Year on a non-cumulative basis, as determined on the date of the
requested Surrender, without the application of the CDSC. After the seventh
Contract Year, you may make a partial Surrender each Contract Year of 15% of
premium payments made during the seven years prior to the Surrender and 100% of
the Contract Value less the premium payments made during the seven years prior
to the Surrender. These amounts are different for group unallocated Contracts
and Contracts issued to a Charitable Remainder Trust.
EXTENDED SURRENDER PRIVILEGE -- This privilege allows Annuitants who attain age
70 1/2 with a Contract held under an Individual Retirement Account or
403(b) plan to Surrender an amount equal to the required minimum distribution
for the stated Contract without incurring any CDSC.
WAIVERS OF CDSC
CONFINEMENT IN A NURSING HOME, HOSPITAL OR LONG TERM CARE FACILITY (DESCRIBED AS
ELIGIBLE CONFINEMENT IN THE CONTRACT) -- We will waive any CDSC applicable to a
partial or full Surrender if the Annuitant, Contract Owner or joint owner is
confined, at the recommendation of a physician for medically necessary reasons,
for at least 180 calendar days to: a hospital recognized as a general hospital
by the proper authority of the state in which it is located; or a hospital
recognized as a general hospital by the Joint Commission on the Accreditation of
Hospitals; or a facility certified as a hospital or long-term care facility; or
a nursing home licensed by the state in which it is located and offers the
services of a registered nurse 24 hours a day.
The Annuitant, Contract Owner, or joint owner cannot be confined at the time the
Contract is purchased in order to receive this waiver and the Contract Owner(s)
must have been the Contract Owner(s) continuously since the Contract issue date.
You must provide written proof of confinement satisfactory to Hartford and you
must request the partial or full Surrender within 91 calendar days of the last
day of confinement.
This waiver may not be available in all states. Please contact your registered
representative or contact Us to determine availability.
DEATH OF THE ANNUITANT OR CONTRACT OWNER OR PAYMENTS UNDER AN ANNUITY
OPTION -- No CDSC otherwise applicable will be assessed in the event of death of
the Annuitant, death of the Contract Owner or if payments are made under an
Annuity option (other than a Surrender of variable payments for a Period Certain
Annuity option) provided for under the Contract.
OTHER PLANS OR PROGRAMS -- Certain plans or programs established by us from time
to time may have different Surrender privileges.
MORTALITY AND EXPENSE RISK CHARGE -- For assuming risks under the Contract, We
deduct a daily charge at the rate of 1.25% per year against all Contract Values
held in the Accounts during the life of the Contract. Although variable annuity
payments made under the Contracts will vary in accordance with the investment
performance of the underlying Portfolio shares held in the Sub-Account(s), the
payments will not be affected by (a) our actual mortality experience among
Annuitants before or after the Annuity Commencement Date or (b) our actual
expenses, if greater than the deductions provided for in the Contracts because
of the expense and mortality undertakings by us.
There are two types of mortality risks: those made during the accumulation or
deferral phase and those made during the annuity payout phase. The mortality
risk we take in the accumulation phase is that we may experience a loss
resulting from the assumption of the mortality risk relative to the death
benefit in event of the death of an Annuitant or Contract Owner before
commencement of Annuity payments, in periods of declining value. The mortality
risk we take during the annuity payout phase is to make monthly Annuity payments
(determined in accordance with the 1983a Individual Annuity Mortality Table and
other provisions contained in the Contract) to Annuitants regardless of how long
an Annuitant may live, and regardless of how long all Annuitants as a group may
live. These mortality undertakings are based on our determination of expected
mortality rates among all Annuitants. If actual experience among Annuitants
during the Annuity payment period deviates from our actuarial determination of
expected mortality rates among Annuitants because, as a group, their longevity
is longer than anticipated, we must provide amounts from our general funds to
fulfill our contractual obligations. We will bear the loss in such a situation.
During the accumulation phase, we also provide an expense undertaking. We assume
the risk that the Annual Maintenance Fee for maintaining the Contracts prior to
the Annuity Commencement Date may be insufficient to cover the actual cost of
providing such items.
ANNUAL MAINTENANCE FEE -- Each year, on each Contract Anniversary on or before
the Annuity Commencement Date, we will deduct an Annual Maintenance Fee, if
applicable, from Contract Values to reimburse us for expenses relating to the
maintenance of the Contract and Accounts. If during a Contract Year the Contract
is Surrendered for its full value, we will deduct the Annual Maintenance Fee at
the time of such Surrender. The fee is a flat fee that will be due in the full
amount regardless of the time of the Contract Year that Contract Values are
Surrendered. The Annual Maintenance Fee is $30 per Contract Year for Contracts
with less than $50,000 Contract Value on the Contract Anniversary. Fees will be
deducted on a pro rata basis according to the value in each Account under a
Contract.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
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WAIVERS OF THE ANNUAL MAINTENANCE FEE -- Annual Maintenance Fees are waived for
Contracts with Contract Value equal to or greater than $50,000. In addition, we
will waive one Annual Maintenance Fee for Contract Owners who own one or more
Contracts with a combined Contract Value of $50,000 up to $100,000. If you have
multiple Contracts with a combined Contract Value of $100,000 or greater, we
will waive the Annual Maintenance Fee on all Contracts. However, we reserve the
right to limit the number of Annual Maintenance Fee waivers to a total of six
Contracts. We reserve the right to waive the Annual Maintenance Fee under other
conditions.
ADMINISTRATIVE CHARGE -- For administration, we apply a daily charge at the rate
of .15% per year against all Contract Values held in the Separate Account during
both the accumulation and annuity phases of the Contract. There is not
necessarily a relationship between the amount of administrative charge imposed
on a given Contract and the amount of expenses that may be attributable to that
Contract; expenses may be more or less than the charge.
The types of expenses incurred by the Separate Account include, but are not
limited to, expenses of issuing the Contract and expenses for confirmations,
Contract quarterly statements, processing of transfers and surrenders,
responding to Contract Owner inquiries, reconciling and depositing cash
receipts, calculation and monitoring daily Sub-Account unit values, Separate
Account reporting, including semiannual and annual reports and mailing and
tabulation of shareholder proxy solicitations.
You should refer to the Trust prospectus for a description of deductions and
expenses paid out of the assets of the Trust's portfolios.
PREMIUM TAXES -- Charges are also deducted for Premium Tax, if applicable,
imposed by state or other governmental entity. Certain states impose a Premium
Tax, currently ranging up to 3.5%. Some states assess the tax at the time
purchase payments are made; others assess the tax at the time of annuitization.
We will pay Premium Taxes at the time imposed under applicable law. At our sole
discretion, we may deduct Premium Taxes at the time we pay such taxes to the
applicable taxing authorities, at the time the Contract is Surrendered, at the
time a death benefit is paid, or at the time the Contract annuitizes.
OPTIONAL DEATH BENEFIT FEE -- If you elect the Optional Death Benefit, we will
deduct daily from your Contract Value an additional charge which equals .15% per
year of the Sub-Account value.
EXCEPTIONS TO CHARGES UNDER THE CONTRACT -- We may offer, at our discretion,
reduced fees and charges including, but not limited to, CDSC, the mortality and
expense risk charge, administration charges, optional charges and the Annual
Maintenance Fee for certain sales (including employer sponsored savings plans)
under circumstances which may result in savings of certain costs and expenses.
Reductions in these fees and charges will not be unfairly discriminatory against
any Contract Owner.
DEATH BENEFITS
DEATH BEFORE THE ANNUITY COMMENCEMENT DATE
DETERMINATION OF THE BENEFICIARY -- If the Contract Owner or the Annuitant dies
before the Annuity Commencement Date, we will pay a Death Benefit to the
Beneficiary.
- IF THE CONTRACT OWNER DIES before the Annuity Commencement Date, any
surviving joint Contract Owner becomes the Beneficiary. If there is no
surviving joint Contract Owner, the designated Beneficiary will be the
Beneficiary. If the Contract Owner's spouse is the sole Beneficiary, the
spouse may elect, in lieu of receiving the Death Benefit, to be treated as
the Contract Owner. If the Annuitant is not living and there is no
Contingent Annuitant, the spouse will be presumed to be the Contingent
Annuitant. If no Beneficiary designation is in effect or if the Beneficiary
has predeceased the Contract Owner, the Contract Owner's estate will be the
Beneficiary.
- IF THE ANNUITANT DIES before the Annuity Commencement Date, the Contingent
Annuitant will become the Annuitant. If either (a) there is no Contingent
Annuitant, (b) the Contingent Annuitant predeceases the Annuitant, or
(c) if any sole Contract Owner dies before the Annuity Commencement Date,
the Beneficiary, as determined under the Contract control provisions, will
receive the Death Benefit. However, if the Annuitant dies prior to the
Annuity Commencement Date and the Contract Owner is living, the Contract
Owner shall be the Beneficiary. In that case, the rights of any designated
Beneficiary shall be void.
DETERMINATION OF THE DEATH BENEFIT
IF YOU DID NOT ELECT THE OPTIONAL DEATH BENEFIT, Your Death Benefit, which we
will calculate as of the date we receive Due Proof of Death, will be calculated
as follows:
If the deceased HAD NOT REACHED THEIR 81ST BIRTHDAY, the Death Benefit is the
greater of:
- - 100% of the total premium payments made to the Contract, reduced by any
subsequent Surrenders, or
- - The Contract Value of your annuity, or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, premium payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death. The Anniversary Value is equal to the
Contract Value as of a Contract Anniversary, increased by the dollar amount of
any premium payments made since that anniversary and reduced by the dollar
amount of any partial Surrenders since that anniversary. The Maximum Anniversary
Value is equal to the greatest Anniversary Value attained from this series of
calculations.
<PAGE>
26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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IF THE DECEASED REACHED THEIR 81ST BIRTHDAY, then the Death Benefit is the
greater of:
- - 100% of the total premium payments made to us, reduced by any subsequent
Surrenders; or
- - The Contract Value of your annuity; or
- - The Maximum Anniversary Value.
IF YOU DID ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments made to us, reduced by any subsequent
Surrenders;
- - The Contract Value of your annuity;
- - The Maximum Anniversary Value; or
- - The Interest Accumulation Value, which is described below.
The Interest Accumulation Value is calculated by accumulating interest on your
premium payments at a rate of 5% per year up to the deceased's 81st birthday or
date of death, assuming you have not taken any Surrenders. If you have taken any
Surrenders, the 5% will be accumulated on your premium payments, but there will
be an adjustment for any of the Surrenders. This adjustment will reduce the
Optional Death Benefit proportionally for the Surrenders. We stop compounding
interest on the deceased's 81st birthday or date of death. After that date, the
Interest Accumulation Value will be adjusted by adding any subsequent payments
and subtracting proportional adjustments for any partial Surrenders. The
Optional Death Benefit is limited to a maximum of 200% of premium payments, less
proportional adjustments for any Surrenders. For examples on how the Optional
Death Benefit is calculated see "Appendix II". The Optional Death Benefit may
not be available if the Contract Owner or Annuitant is age 75 or older. For
Contracts issued in the state of Washington, the Optional Death Benefit is not
available.
If you elect to add the Optional Death Benefit after you purchase your annuity,
the Interest Accumulation Value calculation will be:
- - Your Contract Value on the date we add the Optional Death Benefit to your
annuity;
- - Plus any Premium Payments made after the Optional Death Benefit is added;
- - Minus any partial Surrenders after the Optional Death Benefit is added;
- - Compounded daily at an annual interest rate of 5%.
SPOUSAL CONTRACT CONTINUATION -- If a Beneficiary is the Contract Owner's
spouse, that portion of the Contract for which the spouse is considered the
Beneficiary will continue with the spouse as Contract Owner, unless the spouse
elects to receive the Death Benefit as a lump sum payment or as an annuity
payment option. If the Contract continues with the spouse as Contract Owner, we
will adjust the Contract Value to the amount that we would have paid as the
Death Benefit payment, had the spouse elected to receive the Death Benefit as a
lump sum payment. Spousal Contract Continuation will only apply one time for
each Contract.
CALCULATION OF THE DEATH BENEFIT -- If the Contract Owner or Annuitant dies
before the Annuity Commencement Date and a Death Benefit is payable to the
Beneficiary, the Death Benefit will be calculated as of the date we receive
written notification of Due Proof of Death. THE DEATH BENEFIT REMAINS INVESTED
IN THE SEPARATE ACCOUNT ACCORDING TO YOUR LAST INSTRUCTIONS UNTIL THE PROCEEDS
ARE PAID OR WE RECEIVE NEW SETTLEMENT INSTRUCTIONS FROM THE BENEFICIARY. DURING
THE TIME PERIOD BETWEEN OUR RECEIPT OF WRITTEN NOTIFICATION OF DUE PROOF OF
DEATH AND OUR RECEIPT OF THE COMPLETE SETTLEMENT INSTRUCTIONS, THE CALCULATED
DEATH BENEFIT WILL BE SUBJECT TO MARKET FLUCTUATIONS. UPON RECEIPT OF COMPLETE
SETTLEMENT INSTRUCTIONS, WE WILL CALCULATE THE PAYABLE AMOUNT.
Any Annuity payments made on or after the date of death, but before receipt of
written notification of Due Proof of Death will be recovered by us from the
Payee.
DEATH ON OR AFTER THE ANNUITY COMMENCEMENT DATE
If, on or after the Annuity Commencement Date, the Contract Owner dies and the
Annuitant is living, the Beneficiary becomes the Contract Owner. If the
Annuitant dies and the Contract Owner is living, the Contract Owner becomes the
Beneficiary.
If the Annuitant dies on or after the Annuity Commencement Date, a Death Benefit
may be paid or payments may continue under the following annuity payment
options:
- - Life Annuity with Cash Refund
- - Life Annuity with payments for a Period Certain
- - Joint and Last Survivor Life Annuity with payments for a Period Certain and
- - Payments for a Period Certain.
Proceeds from the Death Benefit may be left with us for at least 5 years from
the date of the Contract Owner's death if the death occurs prior to the Annuity
Commencement Date. These proceeds will remain in the Account(s) to which they
were allocated at the time of death unless the Beneficiary elects to reallocate
them. Full or partial Surrenders may be made at any time. In the event of a
complete Surrender, the remaining value will equal the Contract Value of the
proceeds left with us, minus any partial Surrenders. This option may not be
available under certain Contracts issued in connection with Qualified Plans.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
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SETTLEMENT PROVISIONS
You select an Annuity Commencement Date which will not be deferred beyond the
Valuation Day immediately following the later of the Annuitant's 90th birthday
or the end of the tenth Contract Year. You may elect a later Annuity
Commencement Date if we allow and subject to the laws and regulations then in
effect. If the Contract is sold as part of a Charitable Remainder Trust, the
Annuity Commencement Date may be deferred to the Annuitant's 100th birthday. The
Annuity Commencement Date may be changed from time to time, but ANY CHANGE MUST
BE WITHIN 30 DAYS PRIOR TO THE DATE ON WHICH ANNUITY PAYMENTS ARE SCHEDULED TO
BEGIN.
You also elect in writing an annuity payment option, which may be any of the
options described below or any annuity payment option then being offered by us.
The annuity payment option may not be changed on or after the Annuity
Commencement Date. The Contract contains the six annuity payment options
described below and the Annuity Proceeds Settlement Option.
For Qualified Contracts, the following annuity payment options are only
available if the guaranteed payment period is less than the life expectancy of
the Annuitant at the time the option becomes effective. The Annuity Proceeds
Settlement option is available for Qualified Contracts only if the guaranteed
payment period is less than the life expectancy of the Beneficiary at the time
the option becomes effective. Such life expectancies are computed on the basis
of the mortality table prescribed by the IRS, or if none is prescribed, the
mortality table in use by us. If you do not elect otherwise, fixed dollar amount
annuity payments will begin automatically on the Annuity Commencement Date,
under the Life Annuity Payment Option.
For Non-Qualified Contracts, if you do not elect otherwise, fixed dollar amount
annuity payments will automatically begin on the Annuity Commencement Date under
the annuity payment option Life Annuity with payments for a Period Certain of 10
years. For Qualified Contracts and Contracts issued in Texas, if you do not
elect otherwise, fixed dollar amount annuity payments will begin automatically
on the Annuity Commencement Date, under the Life Annuity Payment Option.
With the exception of the option Payments for a Period Certain, if the variable
dollar amount payment is selected, no Surrenders are permitted after annuity
payments begin.
ANNUITY PAYMENT OPTIONS
LIFE ANNUITY
where we make Annuity payments for as long as the Annuitant lives.
- Payments under this option STOP UPON THE DEATH OF THE ANNUITANT, even if the
Annuitant dies after one payment.
LIFE ANNUITY WITH CASH REFUND
where we make payments during the life of the Annuitant and when the Annuitant
dies, we pay the remaining value to the Beneficiary. The remaining value is
calculated at the time we receive Due Proof of Death by subtracting the annuity
payments already made from the Contract Value less any applicable Premium Taxes
applied to this annuity payment option.
- This option is only available if you select payments using a VARIABLE DOLLAR
AMOUNT PAYMENT OPTION WITH THE 5% AIR OR FIXED DOLLAR AMOUNT ANNUITY
PAYMENTS.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
where we make payments to you for the life of the Annuitant but you are at least
guaranteed payments for a time period you select which is a minimum of 5 years
and a maximum of 100 years minus your Annuitant's age.
- If the Annuitant dies prior to the end of the period selected, we will pay
your Beneficiary the present value of the remaining payments, either in a
lump sum payment or we will continue payments until the end of the period
selected.
JOINT AND LAST SURVIVOR ANNUITY
where we make payments during the lifetimes of the Annuitant and another
designated individual called the Joint Annuitant At the time of electing this
Annuity Option, the Contract Owner may elect reduced payments over the remaining
lifetime of the survivor.
- Payments under this option STOP UPON THE DEATH OF THE ANNUITANT AND JOINT
ANNUITANT, even if the Annuitant and Joint Annuitant die after one payment.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
where we make payments during the lifetime of the Annuitant and a Joint
Annuitant, and we guarantee that those payments for a time period you select
which is not less than 5 years and no more than 100 years minus the younger
Annuitant's age. At the time of electing this Annuity Option, the Contract Owner
may elect reduced payments over the remaining lifetime of the survivor.
- If the Annuitant and Joint Annuity die prior to the end of the period
selected, we will pay your Beneficiary the present value of the remaining
payments, either in a lump sum payment or We will continue payments until
the end of the period selected.
PAYMENTS FOR A PERIOD CERTAIN
where we agree to make payments for a specified time. The minimum period that
you can select is 10 years during the first two Contract years and 5 years after
the second Contract Anniversary. The maximum period that you can select is 100
years minus your Annuitant's age.
- If you select this option under a variable dollar amount payment, you may
Surrender your Annuity after annuity
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28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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payments have started and we will give you the present value of the remaining
payments less any applicable Contingent Deferred Sales Charge.
- If the Annuitant dies prior to the end of the period selected, we will pay
your Beneficiary the present value of the remaining payments, either in a
lump sum payment or we will continue payments until the end of the period
selected.
- For Contracts issued in the state of Oregon, Payments for a Period Certain
may be selected as follows: For fixed annuity payments, the minimum period
that you can select is 10 years at any time and 5 years on or after the 2nd
Contract Anniversary. For variable annuity payments, the minimum period that
you can select is 5 years on or after the 10th Contract Anniversary. Under
an Annuity payable with variable annuity payments, you may surrender the
Contract after payments have begun by submitting a written request to us.
The amount available to you is the Commuted Value.
WE MAY OFFER OTHER ANNUITY PAYMENT OPTIONS FROM TIME TO TIME.
ANNUITY PAYMENTS
When your decide to begin to take payments, we calculate your Contract Value
minus any Premium Tax which we must pay and, unless you instruct us otherwise,
we apply that amount to a variable annuity with the same Sub-Account values. You
may however, choose to have your Contract Value applied to a fixed annuity
instead.
IMPORTANT: YOU SHOULD CONSIDER THE QUESTION OF ALLOCATION OF CONTRACT VALUES
(LESS APPLICABLE PREMIUM TAXES) AMONG ACCOUNTS TO MAKE CERTAIN THAT ANNUITY
PAYMENTS ARE BASED ON THE INVESTMENT ALTERNATIVE BEST SUITED TO YOUR NEEDS FOR
RETIREMENT.
ANNUITY PAYMENTS -- The minimum Annuity payment is $50. No election may be made
which results in a first payment of less than $50. If at any time Annuity
payments are or become less than $50, we have the right to change the frequency
of payment to intervals so that payments will at least be $50. For Contracts
issued in the State of New York, the minimum monthly Annuity payment is $20. If
any amount due is less than the minimum amount per year, we make such other
settlement as may be equitable to the Payee.
All Annuity payments under any option will occur the same day of the month as
the Annuity Commencement Date, based on the payment frequency selected by you.
Available payment frequencies include monthly, quarterly, semi-annual and
annual. The payment frequency may be changed within 30 days prior to the
anniversary of your Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE -- You select the Annuity Commencement Date in your
application or order request. The Annuity Calculation Date will be no more than
five Valuation Days before the Annuity Commencement Date.
ANNUITY CALCULATION DATE -- On the Annuity Calculation Date, your Contract Value
less any applicable Premium Tax is applied to purchase Annuity Units of the
Sub-Accounts selected by you. The first Annuity payment is computed using the
value of these Annuity Units as of the Annuity Calculation Date.
INCOME PAYMENT DATES -- All Annuity payments after the first Annuity payment are
computed and payable as of the Income Payment Dates. These dates are the same
day of the month as the Annuity Commencement Date, based on the Annuity payment
frequency selected by you. They are also shown on the specification page of your
Contract. You may choose from monthly, quarterly, semi-annual and annual
payments. The Annuity payment frequency may not be changed once selected by you.
IN THE EVENT THAT YOU DO NOT SELECT A PAYMENT FREQUENCY, ANNUITY PAYMENTS WILL
BE MADE MONTHLY.
VARIABLE ANNUITY PAYMENTS
THE FIRST VARIABLE ANNUITY PAYMENT. -- Variable Annuity payments are periodic
payments we pay to your designated Payee, the amount of which varies from one
Income Payment Date to the next as a function of the net investment performance
of the Sub-Accounts selected by you. The dollar amount of the first Variable
Annuity payment depends on the annuity payment option chosen, the age of the
Annuitant, the gender of the Annuitant (if applicable), the amount of Contract
Value less applicable Premium Tax applied to purchase the Annuity payments, and
the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table using projection scale G projected to the year 2000 and an AIR
of not less than 3.0%.
The dollar amount of the first Variable Annuity payment attributable to each
Sub-Account is determined by dividing the dollar amount of the Contract Value
less applicable Premium Tax applied to that Sub-Account on the Annuity
Calculation Date by $1,000 and multiplying the result by the payment factor in
the Contract for the selected annuity payment option. The dollar value of the
first Variable Annuity payment is the sum of the first Variable Annuity payments
attributable to each Sub-Account.
ANNUITY UNITS -- The number of Annuity Units attributable to a Sub-Account is
derived by dividing the first Variable Annuity payment attributable to that
Sub-Account by the Annuity Unit value for that Sub-Account for the Valuation
Period ending on the Annuity Calculation Date or during which the Annuity
Calculation Date falls if the Valuation Period does not end on such date. The
number of Annuity Units attributable to each Sub-Account under a Contract
remains fixed unless there is a transfer of Annuity Units between Sub-Accounts.
SUBSEQUENT VARIABLE ANNUITY PAYMENTS -- The dollar amount of each subsequent
Variable Annuity payment attributable to each Sub-Account is calculated on the
Income Payment Date. It is determined by multiplying (a) by (b), where:
- - is the number of Annuity Units of each Sub-Account credited under the Contract
and
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
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- - is the Annuity Unit value (described below) for that Sub-Account.
The total subsequent Variable Annuity payments equal the sum of the amounts
attributable to each Sub-Account.
When an Income Payment Date falls on a day that is not a Valuation Day, the
Income Payment is computed as of the prior Valuation Day. If the date of the
month elected does not occur in a given month, i.e., the 29th, 30th, or 31st of
a month, the payment will be computed as of the last Valuation Day of the month.
The Annuity Unit value of each Sub-Account for any Valuation Period is equal to
(a) multiplied by (b) multiplied by (c) where:
- - is the Net Investment Factor for the Valuation Period for which the Annuity
Unit value is being calculated;
- - is the Annuity Unit value for the preceding Valuation Period; and
- - is the Annuity Unit Factor
The Annuity Unit Factor neutralizes the AIR percentage (3%, 5%, or 6%). The
daily Annuity Unit Factor corresponding to the AIR percentages of 3%, 5%, and 6%
are 0.999919, 0.999866, and 0.999840, respectively.
THE ASSUMED INVESTMENT RETURN (AIR) -- The Annuity Unit value will increase or
decrease from one Income Payment Date to the next in direct proportion to the
net investment return of the Sub-Account(s) supporting the Variable Annuity
payments, less an adjustment to neutralize the selected AIR. Dividing what would
otherwise be the Annuity Unit value by the AIR factor is necessary in order to
adjust the change in the Annuity Unit value (resulting from the Net Investment
Factor) so that the Annuity Unit value only changes to the extent that the Net
Investment Factor represents a rate of return greater than or less than the AIR
selected by you. Without this adjustment, the Net Investment Factor would
decrease the Annuity Unit value to the extent that such value represented an
annualized rate of return of less than 0.0% and increase the Annuity Unit value
to the extent that such value represented an annualized rate of return of
greater than 0.0%.
The Contract permits Contract Owners to select one of three AIRs: 3%, 5% or 6%.
A higher AIR will result in a higher initial payment, a more slowly rising
series of subsequent payments when actual investment performance (minus any
deductions and expenses) exceeds the AIR, and a more rapid drop in subsequent
payments when actual investment performance (minus any deductions and expenses)
is less than the AIR. The 6% AIR is not available in the states of Oklahoma,
Oregon, New Jersey or Texas. The following examples may help clarify the impact
of selecting one AIR over another:
- - If you select a 3% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 3% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 3% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 3%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
- - If you select a 5% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 5% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 5% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 5%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
- - If you select a 6% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 6% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 6% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 6%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
LEVEL VARIABLE ANNUITY PAYMENTS WOULD BE PRODUCED IF THE INVESTMENT RATE RETURNS
REMAINED CONSTANT AND EQUAL TO THE AIR. IN FACT, PAYMENTS WILL VARY UP OR DOWN
AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE AIR.
EXCHANGE (TRANSFER) OF ANNUITY UNITS -- After the Annuity Calculation Date, you
may exchange (i.e., transfer) the dollar value of a designated number of Annuity
Units of a particular Sub-Account for an equivalent dollar amount of Annuity
Units of another Sub-Account. On the date of the transfer, the dollar amount of
a Variable Annuity payment generated from the Annuity Units of either
Sub-Account would be the same. Transfers are executed as of the day Hartford
receives a written request for a transfer. For guidelines refer to Sub-Account
Value Transfers Before and After the Annuity Commencement Date.
FIXED DOLLAR ANNUITY -- Fixed Annuity payments are determined at annuitization
by multiplying the Contract Value (less applicable Premium Taxes) by a rate to
be determined by Hartford which is no less than the rate specified in the Fixed
Annuity option tables in the Contract. The Annuity payment will remain level for
the duration of the Annuity. Any Fixed Annuity allocation may not be changed.
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30 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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OTHER INFORMATION
ASSIGNMENT -- Ownership of this Contract is generally assignable. However, if
the Contracts are issued pursuant to some form of Qualified Plan, it is possible
that the ownership of the Contracts may not be transferred or assigned depending
on the type of tax-qualified retirement plan involved. An assignment of a
Non-Qualified Contract may subject the Contract Values or assignment proceeds to
income taxes and certain penalty taxes.
CONTRACT MODIFICATION -- The Annuitant may not be changed; however, the
Contingent Annuitant may be changed at any time prior to the Annuity
Commencement Date by sending us written notice. We may modify the Contract, but
no modification will effect the amount or term of any Contract unless a
modification is required to conform the Contract to applicable Federal or State
law. No modification will effect the method by which Contract Values are
determined.
FEDERAL TAX CONSIDERATIONS
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What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
Since federal tax law is complex, the tax consequences of purchasing this
contract will vary depending on your situation. You may need tax or legal advice
to help you determine whether purchasing this contract is right for you.
Our general discussion of the tax treatment of this contract is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed description of all federal income tax consequences regarding the
purchase of this contract cannot be made in the prospectus. We also do not
discuss state, municipal or other tax laws that may apply to this contract. For
detailed information, you should consult with a qualified tax adviser familiar
with your situation.
B. TAXATION OF HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under subchapter M of Chapter 1 of the Code.
Investment income and any realized capital gains on the assets of the Separate
Account are reinvested and are taken into account in determining the value of
the Accumulation and Annuity Units (See "Value of Accumulation Units"). As a
result, such investment income and realized capital gains are automatically
applied to increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER THAN
QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC.
Code Section 72 contains provisions for contract owners which are not natural
persons. Non-natural persons include corporations, trusts, limited liability
companies, partnerships and other types of legal entities. The tax rules for
contracts owned by non-natural persons are different from the rules for
contracts owned by individuals. For example, the annual net increase in the
value of the contract is currently includible in the gross income of a
non-natural person, unless the non-natural person holds the contract as an agent
for a natural person. There are additional exceptions from current inclusion
for:
- - certain annuities held by structured settlement companies,
- - certain annuities held by an employer with respect to a terminated qualified
retirement plan and
- - certain immediate annuities.
A non-natural person which is a tax-exempt entity for federal tax purposes will
not be subject to income tax as a result of this provision.
If the contract owner is a non-natural person, the primary annuitant is treated
as the contract owner in applying mandatory distribution rules. These rules
require that certain distributions be made upon the death of the contract owner.
A change in the primary annuitant is also treated as the death of the contract
owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract until an
amount is received or deemed received, e.g., in the form of a lump sum payment
(full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are summarized
briefly below. Also summarized are special rules affecting distributions from
Contracts obtained in a tax-free exchange for other annuity contracts or life
insurance contracts which were purchased prior to August 14, 1982.
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."
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 31
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iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a partial surrender) is deemed to come first from any
such "income on the contract" and then from "investment in the contract,"
and for these purposes such "income on the contract" shall be computed by
reference to any aggregation rule in subparagraph 2.c. below. As a result,
any such amount received or deemed received (1) shall be includable in
gross income to the extent that such amount does not exceed any such
"income on the contract," and (2) shall not be includable in gross income
to the extent that such amount does exceed any such "income on the
contract." If at the time that any amount is received or deemed received
there is no "income on the contract" (e.g., because the gross value of the
Contract does not exceed the "investment in the contract" and no
aggregation rule applies), then such amount received or deemed received
will not be includable in gross income, and will simply reduce the
"investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not
apply, however, to certain transfers of property between spouses or incident
to divorce.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the
Annuity Commencement Date, any additional payments (including surrenders)
will be entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the
contract as of the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and
shall be fully includable in gross income. However, upon a full surrender
after such date, only the excess of the amount received (after any
surrender charge) over the remaining "investment in the contract" shall be
includable in gross income (except to the extent that the aggregation
rule referred to in the next subparagraph c. may apply).
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same Contract Owner within the same calendar year (other than
certain contracts held in connection with a tax-qualified retirement
arrangement) will be treated as one annuity Contract for the purpose of
determining the taxation of distributions prior to the Annuity Commencement
Date. An annuity contract received in a tax-free exchange for another annuity
contract or life insurance contract may be treated as a new Contract for this
purpose. Hartford believes that for any annuity subject to such aggregation, the
values under the Contracts and the investment in the contracts will be added
together to determine the taxation under subparagraph 2.a., above, of amounts
received or deemed received prior to the Annuity Commencement Date. Withdrawals
will first be treated as withdrawals of income until all of the income from all
such Contracts is withdrawn. As of the date of this Prospectus, there are no
regulations interpreting this provision.
d. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract (before or
after the Annuity Commencement Date), the Code applies a penalty tax equal
to ten percent of the portion of the amount includable in gross income,
unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has attained the
age of 59 1/2.
2. Distributions made on or after the death of the holder or where the
holder is not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of substantially equal
periodic payments (not less frequently than annually) for the life (or
life expectancy) of the recipient (or the joint lives or life
expectancies of 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.).
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32 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED PRIOR TO
AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life insurance or
annuity Contract purchased prior to August 14, 1982, then any amount received or
deemed received prior to the Annuity Commencement Date shall be deemed to come
(1) first from the amount of the "investment in the contract" prior to August
14, 1982 ("pre-8/14/82 investment") carried over from the prior Contract, (2)
then from the portion of the "income on the contract" (carried over to, as well
as accumulating in, the successor Contract) that is attributable to such
pre-8/14/82 investment, (3) then from the remaining "income on the contract" and
(4) last from the remaining "investment in the contract." As a result, to the
extent that such amount received or deemed received does not exceed such
pre-8/14/82 investment, such amount is not includable in gross income., In
addition, to the extent that such amount received or deemed received does not
exceed the sum of (a) such pre-8/14/82 investment and (b) the "income on the
contract" attributable thereto, such amount is not subject to the 10% penalty
tax. In all other respects, amounts received or deemed received from such post-
exchange Contracts are generally subject to the rules described in this
subparagraph 3.
f. REQUIRED DISTRIBUTIONS
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary provisions in ii
or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Contract has been distributed, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution being used as of the date of
such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract will be distributed within 5 years after
such death; and
3. If the Contract Owner is not an individual, then for purposes of 1. or
2. above, the primary annuitant under the Contract shall be treated as
the Contract Owner, and any change in the primary annuitant shall be
treated as the death of the Contract Owner. The primary annuitant is the
individual, the events in the life of whom are of primary importance in
affecting the timing or amount of the payout under the Contract.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in i. above is
payable to or for the benefit of a designated beneficiary, such beneficiary
may elect to have the portion distributed over a period that does not extend
beyond the life or life expectancy of the beneficiary. Distribution must
begin within a year of the Contract Owner's death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for the
benefit of his or her spouse, and the Annuitant or Contingent Annuitant is
living, such spouse shall be treated as the Contract Owner of such portion
for purposes of section i. above. This spousal continuation shall apply only
once for this contract.
3. DIVERSIFICATION REQUIREMENTS.
The Code requires that investments supporting your contract be adequately
diversified. Code Section 817 provides that a variable annuity contract will not
be treated as an annuity contract for any period during which the investments
made by the separate account or underlying fund are not adequately diversified.
If a contract is not treated as an annuity contract, the contract owner will be
subject to income tax on annual increases in cash value.
The Treasury Department's diversification regulations require, among other
things, that:
- - no more than 55% of the value of the total assets of the segregated asset
account underlying a variable contract is represented by any one investment,
- - no more than 70% is represented by any two investments,
- - no more than 80% is represented by any three investments and
- - no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all securities of
the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In the
case of government securities, each government agency or instrumentality is
treated as a separate issuer.
A separate account must be in compliance with the diversification standards on
the last day of each calendar quarter or within 30 days after the quarter ends.
If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the taxation of contract income on an ongoing basis. However, either the company
or the contract owner must agree to pay the tax due for the period during which
the diversification requirements were not met.
We monitor the diversification of investments in the separate accounts and test
for diversification as required by the Code. We intend to administer all
contracts subject to the diversification 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
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 33
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the separate account to be considered the owner of the assets for tax purposes.
The IRS has issued several rulings discussing investor control. These rulings
say that certain incidents of ownership by the contract owner, such as the
ability to select and control investments in a separate account, will cause the
contract owner to be treated as the owner of the assets for tax purposes.
In its explanation of the diversification regulations, the Treasury Department
recognized that the temporary regulations "do not provide guidance concerning
the circumstances in which investor control of the investments of a segregated
asset account may cause the investor, rather than the insurance company, to be
treated as the owner of the assets in the account." The explanation further
indicates that "the temporary regulations provide that in appropriate cases a
segregated asset account may include multiple sub-accounts, but do not specify
the extent to which policyholders may direct their investments to particular
sub-accounts without being treated as the owners of the underlying assets.
Guidance on this and other issues will be provided in regulations or revenue
rulings under Section 817(d), relating to the definition of variable contract."
The final regulations issued under Section 817 did not provide guidance
regarding investor control, and as of the date of this prospectus, guidance has
yet to be issued. We do not know if additional guidance will be issued. If
guidance is issued, we do not know if it will have a retroactive effect.
Due to the lack of specific guidance on investor control, there is some
uncertainty about when a contract owner is considered the owner of the assets
for tax purposes. We reserve the right to modify the contract, as necessary, to
prevent you from being considered the owner of assets in the separate account.
D. FEDERAL INCOME TAX WITHHOLDING
Any portion of a distribution that is (or is deemed to be) current taxable
income to the Contract Owner will be subject to federal income tax withholding
and reporting under the Code. Generally, however, a Contract Owner may elect not
to have income taxes withheld or to have income taxes withheld at a different
rate by filing a completed election form with us. Election forms will be
provided at the time distributions are requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I for information relative to the types of plans
for which it may be used and the general explanation of the tax features of such
plans.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to annuity purchasers that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal income tax and withholding on annuity distributions at a 30% rate,
unless a lower treaty rate applies. In addition, purchasers may be subject to
state premium tax, other state and/or municipal taxes, and taxes that may be
imposed by the purchaser's country of citizenship or residence. Prospective
purchasers are advised to consult with a qualified tax adviser regarding U.S.,
state, and foreign taxation with respect to an annuity purchase.
G. GENERATION-SKIPPING TRANSFERS
Under certain circumstances, the Internal Revenue Code may impose a
"generation-skipping transfer tax" when all or part of an annuity is transferred
to, or a death benefit is paid to, an individual two or more generations younger
than the owner. Federal tax law may require us to deduct the tax from your
contract, or from any applicable payment, and pay it directly to the Internal
Revenue Service.
MISCELLANEOUS
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HOW CONTRACTS ARE SOLD
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is an affiliate of Hartford. Both HSD and Hartford are ultimately controlled by
The Hartford Financial Services Group, Inc. The principal business address of
HSD is the same as that of Hartford.
The securities will be sold by 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 this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training,
<PAGE>
34 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
marketing or other services provided. HSD, its affiliates or Hartford may also
make compensation arrangements with certain broker-dealers or financial
institutions based on total sales by the broker-dealer or financial institution
of insurance products. These payments, which may be different for different
broker-dealers or financial institutions, will be made by HSD, its affiliates or
Hartford out of their own assets and will not effect the amounts paid by the
policyholders or contract owners to purchase, hold or Surrender variable
insurance products.
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the contract with
an additional 5.0% of the Premium Payment. This additional percentage of Premium
Payment in no way affects present or future charges, rights, benefits or current
values of other Contract Owners. The following class of individuals are eligible
for this feature: (1) current or retired officers, directors, trustees and
employees (and their families) of the ultimate parent and affiliates of
Hartford; and (2) employees and registered representatives (and their families)
of registered broker-dealers (and their financial institutions) that have a
sales agreement with Hartford and its principal underwriter to sell the
Contracts.
LEGAL MATTERS
There are no material legal proceedings pending to which the Separate Account is
a party.
Counsel with respect to federal laws and regulations applicable to the issue and
sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
Senior Vice President, General Counsel and Corporate Secretary, Hartford Life
and Annuity Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.
EXPERTS
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
MORE INFORMATION
You may call your Representative if you have any questions or write or call us
at the address below:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: 1-800-862-6668 (Contract Owners)
1-800-862-4397 (Account Executive)
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION
<S> <C>
- ----------------------------------------------------------------------
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY
- ----------------------------------------------------------------------
SAFEKEEPING OF ASSETS
- ----------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS
- ----------------------------------------------------------------------
DISTRIBUTION OF CONTRACTS
- ----------------------------------------------------------------------
CALCULATION OF YIELD AND RETURN
- ----------------------------------------------------------------------
PERFORMANCE COMPARISONS
- ----------------------------------------------------------------------
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
36 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS
This summary does not attempt to provide more than general information about the
federal income tax rules associated with use of a Contract by a tax-qualified
retirement plan. Because of the complexity of the federal tax rules, owners,
participants and beneficiaries are encouraged to consult their own tax advisors
as to specific tax consequences.
The federal tax rules applicable to owners of Contracts under tax-qualified
retirement plans vary according to the type of plan as well as the terms and
conditions of the plan itself. Contract owners, plan participants and
beneficiaries are cautioned that the rights and benefits of any person may be
controlled by the terms and conditions of the tax-qualified retirement plan
itself, regardless of the terms and conditions of a Contract. We are not bound
by the terms and conditions of such plans to the extent such terms conflict with
a Contract, unless we specifically consent to be bound.
Some tax-qualified retirement plans are subject to distribution and other
requirements that are not incorporated into our administrative procedures.
Contract owners, participants and beneficiaries are responsible for determining
that contributions, distributions and other transactions comply with applicable
law. Tax penalties may apply to transactions with respect to tax-qualified
retirement plans if applicable federal income tax rules and restrictions are not
carefully observed.
We do not currently offer the Contracts in connection with all of the types of
tax-qualified retirement plans discussed below and may not offer the Contracts
for all types of tax-qualified retirement plans in the future.
1. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS -- Eligible employers can
establish certain tax-qualified pension and profit-sharing plans under section
401 of the Code. Rules under section 401(k) of the Code govern certain "cash or
deferred arrangements" under such plans. Rules under section 408(k) govern
"simplified employee pensions". Tax-qualified pension and profit-sharing plans
are subject to limitations on the amount that may be contributed, the persons
who may be eligible to participate and the time when distributions must
commence. Employers intending to use the Contracts in connection with
tax-qualified pension or profit-sharing plans should seek competent tax and
other legal advice.
2. TAX SHELTERED ANNUITIES UNDER SECTION 403(b) -- Public schools and certain
types of charitable, educational and scientific organizations, as specified in
section 501(c)(3) of the Code, can purchase tax-sheltered annuity contracts for
their employees. Tax-deferred contributions can be made to tax-sheltered annuity
contracts under section 403(b) of the Code, subject to certain limitations.
Generally, such contributions may not exceed the lesser of $10,500 (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,
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 37
- --------------------------------------------------------------------------------
amounts under the plan will be subject to the claims of the employer's general
creditors.
In general, distributions from an eligible Deferred Compensation Plan are
prohibited under section 457 of the Code unless made after the participating
employee:
- - attains age 70 1/2,
- - separates from service,
- - dies, or
- - suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Deferred Compensation
Plan under section 457 of the Code cannot be transferred or rolled over on a
tax-deferred basis except for certain transfers to other Deferred Compensation
Plans under section 457 in limited cases.
4. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS") UNDER SECTION 408
TRADITIONAL IRAS -- Eligible individuals can establish individual retirement
programs under section 408 of the Code through the purchase of an IRA. Section
408 imposes limits with respect to IRAs, including limits on the amount that may
be contributed to an IRA, the amount of such contributions that may be deducted
from taxable income, the persons who may be eligible to contribute to an IRA,
and the time when distributions commence from an IRA. Distributions from certain
tax-qualified retirement plans may be "rolled-over" to an IRA on a tax-deferred
basis.
SIMPLE IRAS -- Eligible employees may establish SIMPLE IRAs in connection with a
SIMPLE IRA plan of an employer under section 408(p) of the Code. Special
rollover rules apply to SIMPLE IRAs. Amounts can be rolled over from one SIMPLE
IRA to another SIMPLE IRA. However, amounts can be rolled over from a SIMPLE IRA
to a Traditional IRA only after two years have expired since the employee first
commenced participation in the employer's SIMPLE IRA plan. Amounts cannot be
rolled over to a SIMPLE IRA from a qualified plan or a Traditional IRA. Hartford
is a non-designated financial institution for purposes of the SIMPLE IRA rules.
ROTH IRAS -- Eligible individuals may establish Roth IRAs under section 408A of
the Code. Contributions to a Roth IRA are not deductible. Subject to special
limitations, a Traditional IRA may be converted into a Roth IRA or a
distribution from a Traditional IRA may be rolled over to a Roth IRA. However, a
conversion or a rollover from a Traditional IRA to a Roth IRA is not excludable
from gross income. If certain conditions are met, qualified distributions from a
Roth IRA are tax-free.
5. FEDERAL TAX PENALTIES AND WITHHOLDING -- Distributions from tax-qualified
retirement plans are generally taxed as ordinary income under section 72 of the
Code. Under these rules, a portion of each distribution may be excludable from
income. The excludable amount is the portion of the distribution that bears the
same ratio as the after-tax contributions bear to the expected return.
(a) PENALTY TAX ON EARLY DISTRIBUTIONS Section 72(t) of the Code imposes an
additional penalty tax equal to 10% of the taxable portion of a distribution
from certain tax-qualified retirement plans. However, the 10% penalty tax
does not apply to a distributions that is:
- - Made on or after the date on which the employee reaches age 59 1/2;
- - Made to a beneficiary (or to the estate of the employee) on or after the death
of the employee;
- - Attributable to the employee's becoming disabled (as defined in the Code);
- - Part of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the employee or the
joint lives (or joint life expectancies) of the employee and his or her
designated beneficiary;
- - Except in the case of an IRA, made to an employee after separation from
service after reaching age 55; or
- - Not greater than the amount allowable as a deduction to the employee for
eligible medical expenses during the taxable year.
IN ADDITION, THE 10% PENALTY TAX DOES NOT APPLY TO A DISTRIBUTION FROM AN IRA
THAT IS:
- - Made after separation from employment to an unemployed IRA owner for health
insurance premiums, if certain conditions are met;
- - Not in excess of the amount of certain qualifying higher education expenses,
as defined by section 72(t)(7) of the Code; or
- - A qualified first-time homebuyer distribution meeting the requirements
specified at section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that the 10%
penalty tax is increased to 25% with respect to non-exempt early distributions
made from your SIMPLE IRA during the first two years following the date you
first commenced participation in any SIMPLE IRA plan of your employer.
(b) MINIMUM DISTRIBUTION PENALTY TAX If the amount distributed is less than the
minimum required distribution for the year, the Participant is subject to a
50% penalty tax on the amount that was not properly distributed.
An individual's interest in a tax-qualified retirement plan generally must be
distributed, or begin to be distributed, not later than the Required Beginning
Date. Generally, the Required Beginning Date is April 1 of the calendar year
following the later of:
- - the calendar year in which the individual attains age 70 1/2; or
- - the calendar year in which the individual retires from service with the
employer sponsoring the plan.
<PAGE>
38 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
The Required Beginning Date for an individual who is a five (5) percent owner
(as defined in the Code), or who is the owner of an IRA, is April 1 of the
calendar year following the calendar year in which the individual attains age
70 1/2.
The entire interest of the Participant must be distributed beginning no later
than the Required Beginning Date over:
- - the life of the Participant or the lives of the Participant and the
Participant's designated beneficiary, or
- - over a period not extending beyond the life expectancy of the Participant or
the joint life expectancy of the Participant and the Participant's designated
beneficiary.
Each annual distribution must equal or exceed a "minimum distribution amount"
which is determined by dividing the account balance by the applicable life
expectancy. This account balance is generally based upon the account value as of
the close of business on the last day of the previous calendar year. In
addition, minimum distribution incidental benefit rules may require a larger
annual distribution.
If an individual dies before reaching his or her Required Beginning Date, the
individual's entire interest must generally be distributed within five years of
the individual's death. However, this rule will be deemed satisfied, if
distributions begin before the close of the calendar year following the
individual's death to a designated beneficiary and distribution is over the life
of such designated beneficiary (or over a period not extending beyond the life
expectancy of the beneficiary). If the beneficiary is the individual's surviving
spouse, distributions may be delayed until the individual would have attained
age 70 1/2.
If an individual dies after reaching his or her Required Beginning Date or after
distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect at
the time of the individual's death.
(c) WITHHOLDING In general, regular wage withholding rules apply to
distributions from IRAs and plans described in section 457 of the Code.
Periodic distributions from other tax-qualified retirement plans that are
made for a specified period of 10 or more years or for the life or life
expectancy of the participant (or the joint lives or life expectancies of
the participant and beneficiary) are generally subject to federal income tax
withholding as if the recipient were married claiming three exemptions. The
recipient of periodic distributions may generally elect not to have
withholding apply or to have income taxes withheld at a different rate by
providing a completed election form.
Mandatory federal income tax withholding at a flat rate of 20% will generally
apply to other distributions from such other tax-qualified retirement plans
unless such distributions are:
- - the non-taxable portion of the distribution;
- - required minimum distributions; or
- - direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
Certain states require withholding of state taxes when federal income tax is
withheld.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 39
- --------------------------------------------------------------------------------
APPENDIX II -- OPTIONAL DEATH BENEFIT -- EXAMPLES
EXAMPLE 1
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $108,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
- --------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$108,000 Contract Value prior to Surrender equals
.09259 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 9,722 to be deducted from the Interest Accumulation Value equals
$ 95,278 the new Interest Accumulation Value
</TABLE>
EXAMPLE 2
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $92,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
- --------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$ 92,000 Contract Value prior to Surrender equals
.10870 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 11,413 to be deducted from the Interest Accumulation Value equals
$ 93,587 the New Interest Accumulation Value
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
This form must be completed for all tax sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The variable annuity Contract which you have recently purchased is subject to
certain restrictions imposed by the Tax Reform Act of 1986. Contributions to the
Contract after December 31, 1988 and any increases in cash value after
December 31, 1988 may not be distributed to you unless you have:
- - attained age 59 1/2,
- - separated from service,
- - died, or
- - become disabled.
Distributions of post December 31, 1988 contributions (excluding any income
thereon) may also be made if you have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made prior to age 59 1/2
because of financial hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than your annuity. Please refer to your Plan.
Please complete the following and return to:
Hartford Life and Annuity Insurance Company
Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Name of Contract Owner/Participant _____________________________________________
Address ________________________________________________________________________
City or Plan/School District ___________________________________________________
Date: __________________________________________________________________________
Contract No.: __________________________________________________________________
Signature: _____________________________________________________________________
<PAGE>
To obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Please send a Statement of Additional Information for Series II of 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: May 1, 2000
Date of Statement of Additional Information: May 1, 2000
333-69491
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
DESCRIPTION OF HARTFORD LIFE AND
ANNUITY INSURANCE COMPANY..............................................................................
SAFEKEEPING OF ASSETS.....................................................................................
INDEPENDENT PUBLIC ACCOUNTANTS............................................................................
DISTRIBUTION OF CONTRACTS.................................................................................
CALCULATION OF YIELD AND RETURN...........................................................................
PERFORMANCE COMPARISONS...................................................................................
FINANCIAL STATEMENTS......................................................................................
</TABLE>
<PAGE>
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.
<TABLE>
<CAPTION>
HARTFORD'S RATINGS
- ------------------------------------------- ---------------------- -------------- ------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
- ------------------------------------------- ---------------------- -------------- ------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 1/1/99 A+ Financial performance
- ------------------------------------------- ---------------------- -------------- ------------------------------------
Standard & Poor's 8/1/99 AA Insurer financial strength
- ------------------------------------------- ---------------------- -------------- ------------------------------------
Duff & Phelps 7/1/99 AA+ Claims paying ability
- ------------------------------------------- ---------------------- -------------- ------------------------------------
</TABLE>
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. The assets are
kept physically segregated and are held separate and apart from Hartford's
general corporate assets. Records are maintained of all purchases and
redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
<PAGE>
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is an affiliate of Hartford. Both HSD and Hartford are ultimately controlled by
The Hartford Financial Services Group, Inc. The principal business address of
HSD is the same as that of Hartford.
The securities will be sold by 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.
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
<PAGE>
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 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
<PAGE>
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:
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1)
TO THE POWER OF 6 - 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 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 since the inception of the Separate
Account for one year, five years, and ten years or some other relevant periods
if a Sub-Account has not been in existence for at least ten years.
The following are the standardized average annual total return quotations for
the Sub-
<PAGE>
Accounts.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
SEPARATE SINCE INCEPTION
SUB-ACCOUNT ACCOUNT 1 YEAR 5 YEAR 10 YEAR OF SEPARATE
INCEPTION DATE ACCOUNT
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Money Market 11/8/94 -6.68% 0.08% N/A -0.20%
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
North American Government 11/8/94 -8.04% -0.33% N/A -0.64%
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 Opportunities 11/8/94 43.65% 29.16% N/A 28.02%
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
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 Debt 6/16/97 17.59% N/A N/A -10.78%
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
Emerging Markets Equity 10/1/96 82.97% N/A N/A 4.80%
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
Fixed Income 1/2/97 -12.99% N/A N/A -1.05%
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
Active International Allocation 9/20/99 N/A N/A N/A 7.18%
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
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 Optional Death
Benefit charges. Performance would have been lower had the Optional Death
Benefit been available and been chosen.
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated since the
inception
<PAGE>
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 DATE OF THE SEPARATE ACCOUNT FOR YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
FUND SINCE INCEPTION
SUB-ACCOUNT INCEPTION DATE 1 YEAR 5 YEAR 10 YEAR OF FUND
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Money Market 11/8/94 3.32% 3.80% N/A 3.80%
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
North American Government 11/8/94 1.96% 3.40% N/A 3.39%
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 Opportunities 11/8/94 53.65% 31.51% N/A 30.60%
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
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 Debt 6/16/97 27.59% N/A N/A -4.01%
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
Emerging Markets Equity 10/1/96 92.97% N/A N/A 10.68%
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
Fixed Income 1/2/97 -2.99% N/A N/A 3.83%
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
Active International Allocation 9/20/99 N/A N/A N/A 17.18%
- -------------------------------- --------------- -------------- --------------- ---------------- ------------------
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.
<PAGE>
Performance figures above do not reflect any deductions for Optional Death
Benefit charges. Performance would have been lower had the Optional Death
Benefit been available and been chosen.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. The total return and yield may also be used to compare
the performance of the Sub-Accounts against certain widely acknowledged outside
standards or indices for stock and bond market performance. Index performance is
not representative of the performance of the Sub-Account to which it is compared
and is not adjusted for commissions and other costs. Portfolio holdings of the
Sub-Account will differ from those of the index to which it is compared.
Performance comparison indices include the following:
The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics, is a
commonly used measure of the rate of inflation. The index shows the average
change in the cost of selected consumer goods and services and does not
represent a return on an investment vehicle.
The Dow Jones Industrial Average is an unmanaged list of 30 common stocks
frequently used as a general measure of stock market performance. Its
performance figures reflect changes of market prices and reinvestment of all
distributions.
Lehman Brothers Corporate Bond Index is an unmanaged list of publicly issued,
fixed-rate, non-convertible investment-grade domestic corporate debt securities
frequently used as a general measure of the performance of fixed-income
securities. The average quality of bonds included in the index may be higher
than the average quality of those bonds in which a Fund customarily invests. The
index does not include bonds in certain of the lower rating classifications in
which a Fund may invest. The performance figures of the index reflect changes in
market prices and reinvestment of all interest payments.
The Lehman Brothers Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Lehman Brothers Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency. The index does not include bonds in
<PAGE>
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.
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
<PAGE>
Index assumes reinvestment of all distributions and reflects changes in
market prices but does not take into account brokerage commissions or other
fees.
<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>
1999
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
----------------------------------------------
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored $ 4,982 $ 35 $ (2) $ 5,015
-- Guaranteed and sponsored -- asset-backed 75,615 -- -- 75,615
States, municipalities and political subdivisions 10,402 415 -- 10,817
International governments 7,466 568 -- 8,034
Public utilities 94,475 1,330 (39) 95,766
All other corporate -- excluding asset-backed 607,679 8,473 (792) 615,360
All other corporate -- asset-backed 505,900 -- -- 505,900
Short-term investments 343,783 -- -- 343,783
Certificates of deposit 130,216 84 -- 130,300
Parents, subsidiaries and affiliates 117,057 -- -- 117,057
----------------------------------------------
TOTAL BONDS AND SHORT-TERM INVESTMENTS $1,897,575 $10,905 $(833) $1,907,647
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------
Common stock -- unaffiliated $ 4,933 $ 290 $ (50) $ 5,173
Common stock -- affiliated 35,384 1,914 (1,821) 35,477
--------------------------------------------
TOTAL COMMON STOCKS $40,317 $2,204 $(1,871) $40,650
--------------------------------------------
</TABLE>
The amortized cost and estimated fair value of bonds and short-term investments
as of December 31, 1999 by estimated maturity year are shown below. Asset-backed
securities, including mortgage-backed securities and collaterialized mortgage
obligations, are distributed to maturity year based on the Company's estimates
of the rate of
F-10
<PAGE>
future prepayments of principal over the remaining lives of the securities.
Expected maturities differ from contractual maturities due to call or prepayment
provisions.
<TABLE>
<CAPTION>
Amortized Estimated
Maturity Cost Fair Value
<S> <C> <C>
--------------------------
One year or less $ 545,290 $ 543,397
Over one year through five years 692,881 690,476
Over five years through ten years 370,835 369,548
Over ten years 84,914 84,619
--------------------------
TOTAL $1,693,920 $1,688,040
--------------------------
</TABLE>
Bonds with a carrying value of $10,457 were on deposit as of December 31, 1999
with various regulatory authorities as required.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS-BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1999 1998
------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
------------------------------------------------------
ASSETS
Bonds and short-term investments $1,694 $1,688 $1,898 $1,908
Common stocks 42 42 41 41
Policy loans 59 59 47 47
Mortgage loans 64 64 60 60
Other invested assets 3 3 2 2
LIABILITIES
Deposit funds and other benefits $2,051 $2,017 $2,078 $2,053
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments: fair value of bonds, short-term
investments, common stock, and other invested assets approximate those
quotations published by the NAIC; policy loans and mortgage loans carrying
amounts approximates fair value; and fair value of liabilities on deposit funds
and other benefits is determined by forecasting future cash flows and
discounting the forecasted cash flows at current market rates.
4. REINSURANCE:
The Company cedes insurance to other insurers in order to limit its maximum
losses. Such transfer does not relieve the Company of its primary liability to
the policyholder. Failure of reinsurers to honor their obligations could result
in losses to the Company. The Company reduces this risk by evaluating the
financial condition of reinsurers and monitoring for possible concentrations of
credit risk.
The Company cedes significant portions of its variable annuity business written
since 1994 to RGA Reinsurance Company ("RGA"). Certain core annuity products
were excluded from this reinsurance arrangement beginning in the second quarter
of 1999 and, as such, the amounts ceded to RGA have declined significantly.
In 1995, The Hartford was "spun-off" from ITT Industries, Inc. and became its
own, autonomous entity. In conjunction with this spin-off, the assets and
liabilities of Lyndon Insurance Company (Lyndon) were merged into the Company.
The statutory net assets contributed to the Company as a result of this
transaction were approximately $112 million and were reflected as an increase in
Gross Paid-In and Contributed Surplus at December 31, 1995. This amount was
approximately $41 million lower than the value of net assets contributed on a
GAAP basis.
The majority of the business written in Lyndon was assumed from an unaffiliated
insurer. In 1998, this unaffiliated insurer recaptured the inforce blocks of
business it had been ceding to the Company through Lyndon. In conjunction with
this commutation transaction, the Company transferred statutory basis reserves
of $26,404. Additionally, the Company received fair value consideration for the
bonds it transferred which exceeded the statutory statement value of these
assets by $25,622. As a result of this activity, the Company recognized a
pre-tax gain from this transaction of $52,026 in its 1998 Statements of
Operations.
There were no material reinsurance recoverables from reinsurers outstanding as
of and for the years ended, December 31, 1999 and 1998.
F-11
<PAGE>
The effect of reinsurance as of and for the years ended December 31, is
summarized as follows:
<TABLE>
<CAPTION>
1999 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 784,502 $ 53 $ (192,934) $ 591,621
Policy and Contract Claim
Liabilities $ 7,827 $ 203 $ (353) $ 7,677
Premium and Annuity Considerations $ 674,219 $ 1,261 $ (53,691) $ 621,789
Annuity and Other Fund Deposits $6,195,917 $ -- $(3,204,554) $2,991,363
Death, Annuity, Disability and
Other Benefits $ 65,251 $ 1,104 $ (12,713) $ 53,642
Surrenders $2,541,449 $ -- $(1,290,636) $1,250,813
</TABLE>
<TABLE>
<CAPTION>
1998 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 713,375 $ 50 $ (134,285) $ 579,140
Policy and Contract Claim
Liabilities $ 5,895 $ 85 $ (313) $ 5,667
Premium and Annuity Considerations $ 483,328 $24,954 $ (38,939) $ 469,343
Annuity and Other Fund Deposits $6,461,470 $ -- $(4,410,219) $2,051,251
Death, Annuity, Disability and
Other Benefits $ 64,331 $ 1,574 $ (16,401) $ 49,504
Surrenders $1,481,797 $ -- $ (742,134) $ 739,663
</TABLE>
<TABLE>
<CAPTION>
1997 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Premium and Annuity Considerations $ 266,427 $51,630 $ (21,412) $ 296,645
Annuity and Other Fund Deposits $6,515,347 $ -- $(4,534,101) $1,981,246
Death, Annuity, Disability and
Other Benefits $ 79,779 $ 839 $ (7,126) $ 73,492
Surrenders $ 882,094 $ -- $ (427,677) $ 454,417
</TABLE>
5. RELATED PARTY TRANSACTIONS:
Transactions between the Company and its affiliates, relate principally to tax
settlements, reinsurance, insurance coverages, rental and service fees, capital
contributions and payments of dividends. In addition, certain affiliated
insurance companies purchased group annuity contracts from the Company to fund
pension costs and claim annuities to settle casualty claims. Substantially all
general insurance expenses related to the Company, including rent and benefit
plan expenses, are initially paid by The Hartford. Direct expenses are allocated
using specific identification and indirect expenses are allocated using other
applicable methods. Indirect expenses include those for corporate areas which,
depending on type, are allocated based on either a percentage of direct expenses
or on utilization.
The Company has also invested in bonds of its affiliates, Hartford Financial
Services Corporation and HL Investment Advisors, Inc., and common stock of its
subsidiary, Hartford Life, LTD.
For additional information, see Notes 4, 6, and 8.
6. FEDERAL INCOME TAXES:
The Company and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. Federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were filing separate Federal, state and local
income tax returns.
As long as The Hartford continues to own at least 80% of the combined voting
power and 80% of the value of the outstanding capital stock of HLI, the Company
will be included for Federal income tax purposes in the affiliated group of
which The Hartford is the common parent. The Hartford and its non-life
subsidiaries filed a single consolidated Federal income tax return for 1998 and
1997 and intend to file a separate consolidated Federal income tax return for
1999. The life insurance companies filed a separate consolidated Federal income
tax return for 1998 and 1997 and intend to file a separate consolidated Federal
income tax return for 1999. Federal income taxes (received) paid by the Company
for operations and capital gains (losses) were $(8,815), $25,780, and $(14,499)
in 1999, 1998 and 1997, respectively. The effective tax rate was (73)%, 27%, and
(28)% in 1999, 1998 and 1997, respectively.
F-12
<PAGE>
The following schedule provides a reconciliation of the tax provision (including
realized capital gains(losses)) at the U.S. Federal Statutory rate to Federal
income tax (benefit) expense (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
------------------
Tax provision at U.S. Federal Statutory rate $ 5 $48 $ 20
Tax deferred acquisition costs 31 25 25
Statutory to tax reserve differences (7) 8 1
Investments (31) (60) (61)
Other (8) 15 (1)
------------------
FEDERAL INCOME TAX (BENEFIT) EXPENSE $(10) $36 $(16)
------------------
</TABLE>
7. CAPITAL AND SURPLUS AND SHAREHOLDER DIVIDEND RESTRICTIONS:
The maximum amount of dividends which can be paid to shareholders by Connecticut
domiciled insurance companies, without prior approval, is generally restricted
to the greater of 10% of surplus as of the preceding December 31st or the net
gain from operations for the previous year. Dividends are paid as determined by
the Board of Directors and are not cumulative. No dividends were paid in 1999,
1998 or 1997. The amount available for dividend in 2000 is approximately
$60,855.
8. PENSION, RETIREMENT, AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:
All employees that work for The Hartford's life insurance companies are included
in The Hartford's non-contributory defined benefit pension plans. These plans
provide pension benefits that are based on years of service and the employee's
compensation during the last ten years of employment. The Hartford's funding
policy is to contribute annually an amount between the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974,
as amended, and the maximum amount that can be deducted for U.S. Federal income
tax purposes. Generally, pension costs are funded through the purchase of group
pension contracts sold by affiliates. The costs that were allocated to the
Company for pension related expenses were $762, $1,045 and $840 for 1999, 1998
and 1997, respectively.
Employees of The Hartford's life insurance companies are also provided, through
The Hartford, certain health care and life insurance benefits for eligible
retired employees. The contribution for health care benefits depends on the
retiree's date of retirement and years of service. In addition, this benefit
plan has a defined dollar cap, which limits average company contributions. The
Hartford has prefunded a portion of the health care and life insurance
obligations through trust funds where such prefunding can be accomplished on a
tax effective basis. Postretirement health care and life insurance benefits
expense allocated to the Company was not material to the results of operations
for 1999, 1998 or 1997.
The assumed rate in the per capita cost of health care (the health care trend
rate) was 7.1% for 1999, decreasing ratably to 5.0% in the year 2003. Increasing
the health care trend rates by one percent per year would have an immaterial
impact on the accumulated postretirement benefit obligation and the annual
expense. To the extent that the actual experience differs from the inherent
assumptions, the effect will be amortized over the average future service of
covered employees.
Substantially all of The Hartford's life insurance companies' employees are
eligible to participate in The Hartford's Investment and Savings Plan. Under
this plan, designated contributions, which may be invested in Class A Common
Stock of HLI or certain other investments, are matched to a limit of 3% of
compensation.
9. SEPARATE ACCOUNTS:
The Company maintains separate account assets totaling $44.9 billion and $32.9
billion as of December 31, 1999 and 1998, respectively. Separate account assets
are segregated from other investments and reported at fair value. Separate
account liabilities are determined in accordance with prescribed actuarial
methodologies, which approximate the market value less applicable surrender
charges. The resulting surplus is recorded in the general account statement of
operations as a component of Net Transfers to Separate Accounts. The Company's
separate accounts are non-guaranteed, wherein the policyholder assumes
substantially all the investment risk and rewards. Investment income (including
investment gains and losses) and interest credited to policyholders on separate
account assets are not separately reflected in the statutory statements of
operations.
Separate account management fees, net of minimum guarantees, were $493 million,
$363 million, and $252 million in 1999, 1998 and 1997, respectively, and are
recorded as a component of fee income on the Company's statutory basis
Statements of Operations.
F-13
<PAGE>
10. COMMITMENTS AND CONTINGENT LIABILITIES:
(A) LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for alleged economic and punitive damages
have been asserted. Some of these cases have been filed as purported class
actions and some cases have been filed in certain jurisdictions that permit
punitive damage awards disproportionate to the actual damages incurred. Although
there can be no assurances, at the present time, the Company does not anticipate
that the ultimate liability, arising from such pending or threatened litigation,
will have a material adverse effect on the statutory capital and surplus of the
Company.
(B) GUARANTY FUNDS
Under insurance guaranty fund laws in each state, the District of Columbia and
Puerto Rico, insurers licensed to do business can be assessed by state insurance
guaranty associations for certain obligations of insolvent insurance companies
to policyholders and claimants. Recent regulatory actions against certain large
life insurers encountering financial difficulty have prompted various state
insurance guaranty associations to begin assessing life insurance companies for
the deemed losses. Most of these laws do provide, however, that an assessment
may be excused or deferred if it would threaten an insurer's solvency and
further provide annual limits on such assessments. Part of the assessments paid
by the Company pursuant to these laws may be used as credits for a portion of
the associated premium taxes. The Company paid guaranty fund assessments of
approximately $523, $1,043 and $1,544 in 1999, 1998, and 1997, respectively, of
which $318, $995, and $548 in 1999, 1998 and 1997, respectively were estimated
to be creditable against premium taxes.
(C) TAX MATTERS
The Company's Federal income tax returns are routinely audited by the Internal
Revenue Service ("IRS"). The Company's 1997 and 1996 Federal income tax returns
are currently under audit by the IRS. As of March 31, 2000, the audit was in its
initial stage and no material issues had been raised.
F-14
<PAGE>
PART C
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
(b) (1) Resolution of the Board of Directors of Hartford Life and Annuity
Insurance Company ("Hartford") authorizes the establishment of the
Separate Account.(1)
(2) Not applicable.
(3) (a) Principal Underwriter Agreement.(2)
(3) (b) Form of Dealer Agreement.(2)
(4) Form of Individual Flexible Premium Variable Annuity Contract.(3)
(5) Form of Application.(3)
(6) (a) Certificate of Incorporation of Hartford.(2)
(6) (b) Bylaws of Hartford.(1)
(7) Not applicable.
(8) Not applicable.
(9) Opinion and Consent of Lynda Godkin, Senior Vice President,
General Counsel and Corporate Secretary.
- ----------------------
(1) Incorporated by reference to Post-Effective Amendment No. 2, to
the Registration Statement File No. 33-80732, dated May 1, 1995.
(2) Incorporated by reference to Post-Effective Amendment No. 3,
to the Registration Statement File No. 33-80732, dated April 29,
1996.
(3) Incorporated by reference to the initial filing to the
Registration Statement File No. 333-69491, filed on December 22,
1998.
<PAGE>
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(11) No financial statements are omitted.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
Item 25. Directors and Officers of the Depositor
- --------------------------------------------------------------------------------
NAME POSITION WITH HARTFORD
- --------------------------------------------------------------------------------
David A. Carlson Vice President
- --------------------------------------------------------------------------------
Peter W. Cummins Senior Vice President
- --------------------------------------------------------------------------------
Bruce W. Ferris Vice President
- --------------------------------------------------------------------------------
Timothy M. Fitch Vice President & Actuary
- --------------------------------------------------------------------------------
Mary Jane B. Fortin Vice President & Chief Accounting Officer
- --------------------------------------------------------------------------------
David T. Foy Senior Vice President, Chief Financial Officer &
Treasurer, Director*
- --------------------------------------------------------------------------------
Lynda Godkin Senior Vice President, General Counsel, and Corporate
Secretary, Director*
- --------------------------------------------------------------------------------
Lois W. Grady Senior Vice President
- --------------------------------------------------------------------------------
Stephen T. Joyce Senior Vice President
- --------------------------------------------------------------------------------
Michael D. Keeler Vice President
- --------------------------------------------------------------------------------
Robert A. Kerzner Senior Vice President
- --------------------------------------------------------------------------------
Thomas M. Marra President, Director*
- --------------------------------------------------------------------------------
Steven L. Matthiesen Vice President
- --------------------------------------------------------------------------------
Deanne Osgood Vice President
- --------------------------------------------------------------------------------
Craig R. Raymond Senior Vice President and Chief Actuary
- --------------------------------------------------------------------------------
Lowndes A. Smith Chief Executive Officer, Director*
- --------------------------------------------------------------------------------
David M. Znamierowski Senior Vice President & Chief Investment Officer,
Director*
- --------------------------------------------------------------------------------
-2-
<PAGE>
Unless otherwise indicated, the principal business address of each of the
above individuals is P.O. Box 2999, Hartford, CT 06104-2999.
*Denotes Board of Directors.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Filed herewith as Exhibit 16.
Item 27. Number of Contract Owners
As of January 31, 2000, there were 32,160 Contract Owners.
Item 28. Indemnification
<PAGE>
Sections 33-770 to 33-778, inclusive, of the Connecticut General
Statutes ("CGS") provide that a corporation may provide indemnification
of or advance expenses to a director, officer, employee or agent.
Reference is hereby made to Section 33-771(e) of CGS regarding
indemnification of directors and Section 33-776(d) of CGS regarding
indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide, in general, that Connecticut
corporations incorporated prior to January 1, 1997 shall, except to the
extent that their certificate of incorporation expressly provides
otherwise, indemnify their directors, officers, employees and agents
against "liability" (defined as the obligation to pay a judgment,
settlement, penalty, fine, including an excise tax assessed with
respect to an employee benefit plan, or reasonable expenses incurred
with respect to a proceeding) when (1) a determination is made pursuant
to Section 33-775 that the party seeking indemnification has met the
standard of conduct set forth in Section 33-771 or (2) a court has
determined that indemnification is appropriate pursuant to Section
33-774. Under Section 33-775, the determination of and the
authorization for indemnification are made (a) by the disinterested
directors, as defined in Section 33-770(3); (b) by special counsel; (c)
by the shareholders; or (d) in the case of indemnification of an
officer, agent or employee of the corporation, by the general counsel
of the corporation or such other officer(s) as the board of directors
may specify. Also, Section 33-772 provides that a corporation shall
indemnify an individual who was wholly successful on the merits or
otherwise against reasonable expenses incurred by him in connection
with a proceeding to which he was a party because he was a director of
the corporation. In the case of a proceeding by or in the right of the
corporation or with respect to conduct for which the director, officer,
agent or employee was adjudged liable on the basis that he received a
financial benefit to which he was not entitled, indemnification is
limited to reasonable expenses incurred in connection with the
proceeding against the corporation to which the individual was named a
party.
Under the Depositor's bylaws, the Depositor must indemnify both
directors and officers of the Depositor for (1) any claims and
liabilities to which they become subject by reason of being or having
been directors or officers of the Depositor and (2) legal and other
expenses incurred in defending against such claims, in each case, to
the extent such is consistent with statutory provisions.
Section 33-777 of CGS specifically authorizes a corporation to procure
indemnification insurance on behalf of an individual who was a
director, officer, employer or agent of the corporation. Consistent
with the statute, the directors and officers of the Depositor and
Hartford Securities Distribution Company, Inc. ("HSD") are covered
under a directors and
<PAGE>
officers liability insurance policy issued to The Hartford Financial
Services Group, Inc. and its subsidiaries.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
<PAGE>
Item 29. Principal Underwriters
(a) HSD acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - Separate Account One
Hartford Life Insurance Company - Separate Account Two
Hartford Life Insurance Company - Separate Account Two
(DC Variable Account I)
Hartford Life Insurance Company - Separate Account Two
(DC Variable Account II)
Hartford Life Insurance Company - Separate Account Two
(QP Variable Account)
Hartford Life Insurance Company - Separate Account Two
(Variable Account "A")
Hartford Life Insurance Company - Separate Account Two
(NQ Variable Account)
Hartford Life Insurance Company - Putnam Capital Manager Trust
Separate Account
Hartford Life Insurance Company - Separate Account Three
Hartford Life Insurance Company - Separate Account Five
Hartford Life Insurance Company - Separate Account Seven
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
-3-
<PAGE>
Hartford Life and Annuity Insurance Company - Separate Account Five
Hartford Life and Annuity Insurance Company - Separate Account Six
Hartford Life and Annuity Insurance Company - Separate Account Seven
Hart Life Insurance Company - Separate Account One
Hart Life Insurance Company - Separate Account Two
American Maturity Life Insurance Company - Separate Account AMLVA
Servus Life Insurance Company - Separate Account One
Servus Life Insurance Company - Separate Account Two
(b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
------------------ ----------------------
David A. Carlson Vice President
Peter W. Cummins Senior Vice President
David T. Foy Treasurer
Lynda Godkin Senior Vice President, General Counsel
and Corporate Secretary
George R. Jay Controller
Robert A. Kerzner Executive Vice President
Thomas M. Marra Executive Vice President, Director
Paul E. Olson Supervising Registered Principal
Lowndes A. Smith President and Chief Executive Officer,
Director
Unless otherwise indicated, the principal business address of each the
above individuals is P.O. Box 2999, Hartford, Connecticut 06104-2999.
Item 30. Location of Accounts and Records
All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder are maintained by Hartford at 200 Hopmeadow Street,
Simsbury, Connecticut 06089.
Item 31. Management Services
All management contracts are discussed in Part A and Part B of this
Registration Statement.
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective amendment to
this
-4-
<PAGE>
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.
-5-
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to
be signed on its behalf, in the Town of Simsbury, and State of Connecticut on
this 7th day of April, 2000.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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*
Lynda Godkin, Senior Vice President, General
Counsel and Corporate Secretary, Director*
Thomas M. Marra, President, *By: /s/ Marianne O'Doherty
Director* -----------------------
Lowndes A. Smith, Chief Marianne O'Doherty
Executive Officer, Director* Attorney-in-Fact
David M. Znamierowski, Senior Vice President
And Chief Investment Officer, Director* Date: April 7, 2000
<PAGE>
EXHIBIT INDEX
(9) Opinion and Consent of Lynda Godkin, Senior Vice President, General
Counsel and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(15) Power of Attorney.
(16) Organizational Chart.
<PAGE>
[LOGO]
[HARTFORD LIFE]
April 6, 2000
LYNDA GODKIN
SENIOR VICE PRESIDENT, GENERAL COUNSEL &
CORPORATE SECRETARY
Board of Directors
Hartford Life and Annuity Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SEPARATE ACCOUNT THREE
FILE NO. 333-69491
Dear Sir/Madam:
I have acted as General Counsel to Hartford Life and Annuity Insurance
Company (the "Company"), a Connecticut insurance company, and Hartford Life
and Annuity Insurance Company Separate Account Three (the "Account") in
Connecticut with the registration of an indefinite amount of securities in
the form of flexible premium variable annuity insurance contracts (the
"Contracts") with the Securities and Exchange Commission under the Securities
Act of 1933, as amended. I have examined such documents (including the Form
N-4 Registration Statement) and reviewed such questions of law as I
considered necessary and appropriate, and on the basis of such examination
and review, it is my opinion that:
1. The Company is a corporation duly organized and validly existing as a stock
life insurance company under the laws of the State of Connecticut and is
duly authorized by the Insurance Department of the State of Connecticut
to issue the Contracts.
2. The Account is a duly authorized and existing separate account established
pursuant to the provisions of Section 38a-433 of the Connecticut Statutes.
3. To the extent so provided under the Contracts, that portion of the assets
of the Account equal to the reserves and other contract liabilities with
respect to the Account will not be chargeable with liabilities arising out
of any other business that the Company may conduct.
4. The Contracts, when issued as contemplated by the Form N-4 registration
statement, will constitute legal, validly issued and binding obligations of
the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form N-4
Registration Statement for the Contracts and the Account.
Sincerely yours,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this Registration Statement File No. 333-69491 for Hartford Life and Annuity
Insurance Company Separate Account Three on Form N-4.
Hartford, Connecticut /s/ Arthur Andersen LLP
April 7, 2000
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
POWER OF ATTORNEY
David T. Foy
Lynda Godkin
Thomas M. Marra
Lowndes A. Smith
David M. Znamierowski
do hereby jointly and severally authorize Lynda Godkin, Christine Repasy,
Marianne O'Doherty, Thomas S. Clark and Marta Czekajewski to sign as their agent
any Registration Statement, pre-effective amendment, post-effective amendment
and any application for exemptive relief of the Hartford Life and Annuity
Insurance Company under the Securities Act of 1933 and/or the Investment Company
Act of 1940, and do hereby ratify such signatures heretofore made by such
persons.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
/s/ David T. Foy
- -------------------------------- Dated as of January 15, 2000
David T. Foy
/s/ Lynda Godkin
- -------------------------------- Dated as of January 15, 2000
Lynda Godkin
/s/ Thomas M. Marra
- -------------------------------- Dated as of January 15, 2000
Thomas M. Marra
/s/ Lowndes A. Smith
- -------------------------------- Dated as of January 15, 2000
Lowndes A. Smith
/s/ David M. Znamierowski
- -------------------------------- Dated as of January 15, 2000
David M. Znamierowski
<PAGE>
ORGANIZATIONAL CHART
<TABLE>
<CAPTION>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
---------------------------------------------
NUTMEG INSURANCE COMPANY |
(CONNECTICUT) THE HARTFORD INVESTMENT
| MANAGEMENT COMPANY
HARTFORD FIRE INSURANCE COMPANY (DELAWARE)
(CONNECTICUT) |
| |
HARTFORD ACCIDENT AND INDEMNITY COMPANY HARTFORD INVESTMENT
(CONNECTICUT) SERVICES, INC.
| (CONNECTICUT)
HARTFORD LIFE, INC.
(DELAWARE)
|
HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY
(CONNECTICUT)
|
|
|
-------------------------------------------------------------------------------------------------------------------------
| | | | | | | | |
HARTFORD LIFE | | | | | | PLANCO PLANCO
INTERNATIONAL, LTD.| | | | | | FINANCIAL INCORPORATED
(CONNECTICUT) | | | | | | SERVICES, (PENNSYLVANIA)
| | | | | | INCORPORATED
| | | | | | (PENNSYLVANIA)
| | | | | |
| HART LIFE HARTFORD FINANCIAL HARTFORD LIFE HARTFORD AMERICAN
| INSURANCE SERVICES LIFE INSURANCE COMPANY FINANCIAL MATURITY LIFE
| COMPANY INSURANCE COMPANY (CONNECTICUT) SERVICES, LLC INSURANCE COMPANY
| (CONNECTICUT) (CONNECTICUT) | (DELAWARE) (CONNECTICUT)
| | | |
| ------------------------------------- | AML FINANCIAL, INC.
| | | | | (CONNECTICUT)
|SERVUS LIFE HARTFORD HARTFORD |
| INSURANCE INTERNATIONAL LIFE AND |
| COMPANY LIFE REASSURANCE ANNUITY INSURANCE |
|(CONNECTICUT) CORPORATION COMPANY |
| (CONNECTICUT) (CONNECTICUT) |
| | |
| | |
| HARTFORD |
| LIFE, LTD. |
| (BERMUDA) |
| |
| |
----------| -----------------------------------------------------------------------
| | | | |
INTERNATIONAL HL INVESTMENT HARTFORD HARTFORD SECURITIES HARTFORD-COMPREHENSIVE
CORPORATE ADVISORS, LLC EQUITY SALES DISTRIBUTION EMPLOYEE
MARKETING GROUP, INC. (CONNECTICUT) COMPANY, INC. COMPANY, INC. BENEFIT SERVICE
(CONNECTICUT) | (CONNECTICUT) (CONNECTICUT) COMPANY
| | (CONNECTICUT)
| |
THE EVERGREEN HARTFORD INVESTMENT
GROUP, INC. FINANCIAL SERVICES
(NEW YORK) COMPANY
(DELAWARE)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
NUTMEG INSURANCE COMPANY
(CONNECTICUT)
|
HARTFORD FIRE INSURANCE COMPANY
(CONNECTICUT)
|
----------------------------------------------------------------------------------------------------------------------------
| | |
| | Hartford Accidental and Indemnity Company
| | (Connecticut)
| | |
| | Hartford Life, Inc
| | (Delaware)
| | |
| | Hartford Life and Accident Insurance Company
| | (Connecticut)
| | |
| | HARTFORD LIFE
| | -------INTERNATIONAL LTD.
| | | (CONNECTICUT)
| | | |
| | | ITT HARTFORD
| | | ----SUDAMERICANA
| | | | HOLDING S.A.
| | | | (ARGENTINA)
| | | |------------------------------------------------------
| | | | | |
| | | | ITT HARTFORD GALICIA INSTITUTO DE
| | | | SEGUROS VIDA COMPANIA SALTA COMPANIA DE
| | | |------DE VIDA S.A. DE SEGUROS S.A. SEGUROS DE VIDA S.A.
| | | | (URUGUAY) (ARGENTINA) (ARGENTINA)
| | | |
| | ICATU | | HARTFORD
| | HARTFORD | |---SEGUROS DE VIDA S.A.
| | SEGUROS S.A.----------| | (ARGENTINA)
| | (BRAZIL) |
| | | |
| | | | HARTFORD
| | -- ----------| |-------SEGUROS DE
| | | | | RETIRO S.A.
| | | | | (ARGENTINA)
|-----------|----------------|-------------------|--------------------------------------------------------------------------
| | | | |
| | | ICATU HARTFORD | CONSULTORA DE CAPITALES
| | | FUNDO DE PENSAO | S.A. SOCIEDAD GERENTE
| | | (BRAZIL) |----DE FONDOS COMUNES
| | | | | DE ENVERSION
| | | | | (ARGENTINA)
| | | ICATU HARTFORD |
| | | CAPITALIZACAO S.A. | CLARIDAD
| | | (BRAZIL) | ADMINISTRADORA DE
| | | | |---FONDOS DE JUBILACIONES
| | | BRAZILCAP | Y PENSIONES S.A.
| | | CAPITALIZACAO S.A. | (ARGENTINA)
| | | (BRAZIL) |
| | | |
| | -------------------------- |
| |--------------- | |
| | | |
HARTFORD FIRE HARTFORD FIRE | |------- SEGPOOL S.A.
INTERNATIONAL------------INTERNATIONAL, LTD. | | (ARGENTINA)
(GERMANY) GMBH (CONNECTICUT) | |
(WEST GERMANY) | |
| |
ICATU HARTFORD | | THESIS S.A.
ADMINISTRACAO | |-------- (ARGENTINA)
DE BENEFICIOS LTDA-- | |
(BRAZIL) |
|
|
|
|--------- U.O.R., S.A.
(ARGENTINA)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
NUTMEG INSURANCE COMPANY
(CONNECTICUT)
|
HARTFORD FIRE INSURANCE COMPANY
(CONNECTICUT)
|
- --------------------------------------------------------------------------------------------------------------------------------|
| |
THE HARTFORD INTERNATIONAL |
|-----------------------------------------------------------------------FINANCIAL SERVICES GROUP, INC. |
| | | (DELAWARE) |
| | | ----------------------|----------------- |
| | | | | | | |
ZWOLSCHE | | ITT HARTFORD LONDON AND | HARTFORD |
ALGEMEENE N.V. | | INTERNATIONAL, LTD. EDINBURGH | EUROPE, INC. |
(NETHERLANDS) | | (U.K.) INSURANCE GROUP, LTD.| (DELAWARE) |
| | | (U.K.) | |
| | | | | |
| | | ------------- | |
| | | | | |
| ITT ASSURANCES HARTFORD INTERNATIONAL | LONDON AND -THE HARTFORD |
| S.A. INSURANCE CO., N.V. |--- EDINBURGH INTERNATIONAL |
| ZWOLSCHE ALGEMEENE (FRANCE) (BELGIUM) | INSURANCE CO., LTD. FINANCIAL |
|----SCHADEVERZEKERING | | (U.K.) SERVICES |
--------| N.V.----------------------------------- | | | GROUP CIA |
| | (NETHERLANDS) | | | | DE SEGUROS Y |
Z.A. | | | | EXCESS INSURANCE REASEGUROS S.A.|
- --VERZEKERINGEN | | | | COMPANY LTD. (SPAIN) |
| N.V. | ZWOLSCHE ALGEMEENE | | | (U.K.) |
| (BELGIUM) |------HERVERZEKERING B.V. | | | |
| | -----| (NETHERLANDS) | | | LONDON AND |
| | | | | | |--- EDINBURGH LIFE |
| Z.A. LUX S.A. | | | | ASSURANCE CO., LTD. |
| (LUXEMBURG) | ZWOLSCHE ALGEMEENE | | | (U.K.) |
| |--LEVENS-VERZEKERING N.V.------------ | | | |
| | (NETHERLANDS) | | | | |
- ----------------|------------------------------------|------------|------|--------------|---------------------------------------|
| | | | | | |
| -------- | | | | |
| | | | | | | |
| ZWOLSCHE | ZWOLSCHE ALGEMEENE ZWOLSCHE ALGEMEENE | | | |
| ALGEMEENE |-----HYPOTHEKEN N.V. BELEGGINGEN III B.V. | | | |
| EUROPA B.V. | (NETHERLANDS) (NETHERLANDS) | | | |
| (NETHERLANDS) | ---------- | | |
- --------| | | | | |
| EXPLOITATIEMAAT- BELEGGINGSMAAT- | | |
|----- SCHAPPIJ SCHAPPIJ | | |
| BUIZERDLAAN B.V. BUIZERDLAAN B.V. | | |
| (NETHERLANDS) (NETHERLANDS) | | |
| | | |
| | | -----
| HOLLAND | |-------------------------- |
|---- BELEGGINGSGROEP B.V. | | | |
(NETHERLANDS) | |----------------- | |
| -------| | | |
| | | | | |
| | | | | |
F.A. KNIGHT | MACALISTER & LONDON AND | HARTFORD FIRE
& SON N.V. | DUNDAS, LTD. EDINBURGH | INTERNATIONAL
(BELGIUM) | (SCOTLAND) TRUSTEES, LTD. | SERVICIOS
| (U.K.) | (SPAIN)
------------------------- -----------
| | |
FENCOURT QUOTEL LONDON AND
PRINTERS, LTD. INSURANCE EDINBURGH
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