<PAGE>
As filed with the Securities and Exchange Commission on April 18, 2000.
File No. Initial
811-08580
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
-----
Post-Effective Amendment No. [ ]
-----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 20 [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
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.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states
that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
registration shall become effective on such date as the Commission,
acting pursuant to Section 8(a), may determine.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(A)
N-4 ITEM NO. PROSPECTUS HEADING
- ------------------------------------- -------------------------------------
1. Cover Page Cover Page; Hartford Life
Insurance Company
2. Definitions Definitions
3. Synopsis or Highlights Fee Table; Highlights
4. Condensed Financial Information Accumulation Unit Values;
Performance Related
Information
5. General Description of Registrant, General Contract
Depositor, and Portfolio Companies Information
6. Deductions Charges and Fees
7. General Description of The Contract
Annuity Contracts
8. Annuity Period Annuity Payouts
9. Death Benefit Death Benefit
10. Purchases and Contract Value Purchase and Contract Value
11. Redemptions Surrenders
12. Taxes Federal Tax Considerations
13. Legal Proceedings Legal Matters and Experts
<PAGE>
14. Table of Contents of the Statement Table of Contents of the
of Additional Information Statement of Additional
Information
15. Cover Page Part B; Statement of
Additional Information
16. Table of Contents Tables of Contents
17. General Information and Description of Hartford Life
History Insurance Company
18. Services Independent Public
Accountants
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Calculation of Yield and
Data Return
22. Annuity Payments None
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
Common Control with the Depositor Under Common Control with
Depositor or Registrant the Depositor or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts and
Records Records
31. Management Services Management Services
32. Undertakings Undertakings
<PAGE>
PART A
<PAGE>
<TABLE>
<S> <C>
[PRODUCT NAME]
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
[PRODUCT NAME]. Please read it carefully.
[PRODUCT NAME] is a contract between you and Hartford Life and Annuity Insurance
Company where you agree to make at least one Premium Payment to us and we agree
to make a series of Annuity Payouts at a later date. This Annuity is a flexible
premium, tax-deferred, variable annuity offered to both individuals and groups.
It is:
x Flexible, because you may add Premium Payments at any time.
x Tax-deferred, which means you don't pay taxes until you take money out or
until we start to make Annuity Payouts.
x Variable, because the value of your Annuity will fluctuate with the
performance of the underlying portfolios.
- --------------------------------------------------------------------------------
At the time you purchase your Annuity, you allocate your Premium Payment to
"Sub-Accounts". These are subdivisions of our Separate Account, an account that
keeps your Annuity assets separate from our company assets. The Sub-Accounts
then purchase shares of mutual funds set up exclusively for variable annuity or
variable life insurance products. These 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
- - 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)
<PAGE>
- - HIGH YIELD SUB-ACCOUNT which purchases shares of High Yield Portfolio of The
Universal Institutional Funds, Inc.
- - MID-CAP VALUE SUB-ACCOUNT which purchases shares of Mid-Cap Value Portfolio of
The Universal Institutional Funds, Inc.
- - EMERGING MARKETS DEBT SUB-ACCOUNT which purchases shares of Emerging Markets
Debt Portfolio of The Universal Institutional Funds, Inc.
- - EMERGING MARKETS EQUITY SUB-ACCOUNT which purchases shares of Emerging Markets
Equity Portfolio of The Universal Institutional Funds, Inc.
- - FIXED INCOME SUB-ACCOUNT which purchases shares of Fixed Income Portfolio of
The Universal Institutional Funds, Inc.
- - ACTIVE INTERNATIONAL ALLOCATION SUB-ACCOUNT which purchases shares of Active
International Allocation Portfolio of The Universal Institutional Funds, Inc.
- - STRATEGIC STOCK SUB-ACCOUNT which purchases shares of Strategic Stock
Portfolio of the Van Kampen Life Investment Trust
- - ENTERPRISE SUB-ACCOUNT which purchases shares of Enterprise Portfolio of the
Van Kampen Life Investment Trust
You may also allocate some or all of your Premium Payment to the "Fixed
Account", which pays an interest rate guaranteed for a certain time period from
the time the Premium Payment is made. Premium Payments allocated to the Fixed
Account are not segregated from our company assets like the assets of the
Separate Account.
If you decide to buy this Annuity, you should keep this prospectus for your
records. You can also call us at 1-800-862-6668 to get a Statement of Additional
Information, free of charge. The Statement of Additional Information contains
more information about this Annuity and, like this prospectus, is filed with the
Securities and Exchange Commission ("SEC"). We have included the Table of
Contents for the Statement of Additional Information at the end of this
prospectus.
Although we file the prospectus and the Statement of Additional Information with
the SEC, the SEC doesn't approve or disapprove these securities or determine if
the information is truthful or complete. Anyone who represents that the SEC does
these things may be guilty of a criminal offense. This Prospectus and the
Statement of Additional Information can also be obtained from the SEC's website
(HTTP://WWW.SEC.GOV).
This Annuity IS NOT:
- A bank deposit or obligation
- Federally insured
- Endorsed by any bank or governmental agency
This Annuity may not be available for sale in all states.
- --------------------------------------------------------------------------------
PROSPECTUS DATED: JULY 14, 2000
STATEMENT OF ADDITIONAL INFORMATION DATED: JULY 14, 2000
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
- ----------------------------------------------------------------------
DEFINITIONS 4
- ----------------------------------------------------------------------
FEE TABLE 6
- ----------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES 7
- ----------------------------------------------------------------------
HIGHLIGHTS 11
- ----------------------------------------------------------------------
GENERAL CONTRACT INFORMATION 12
- ----------------------------------------------------------------------
Hartford Life and Annuity Insurance Company 12
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Separate Account 12
- ----------------------------------------------------------------------
THE PORTFOLIOS 13
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The Investment Advisers 14
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PERFORMANCE RELATED INFORMATION 16
- ----------------------------------------------------------------------
THE FIXED ACCOUNT 16
- ----------------------------------------------------------------------
THE CONTRACT 17
- ----------------------------------------------------------------------
Purchases and Contract Value 17
- ----------------------------------------------------------------------
Charges and Fees 19
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Death Benefit 21
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Surrenders 23
- ----------------------------------------------------------------------
ANNUITY PAYOUTS 25
- ----------------------------------------------------------------------
OTHER PROGRAMS AVAILABLE 27
- ----------------------------------------------------------------------
OTHER INFORMATION 27
- ----------------------------------------------------------------------
Legal Matters and Experts 28
- ----------------------------------------------------------------------
More Information 28
- ----------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS 28
- ----------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION 32
- ----------------------------------------------------------------------
APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT
PLANS 33
- ----------------------------------------------------------------------
APPENDIX II -- OPTIONAL DEATH BENEFIT -- EXAMPLES 36
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
DEFINITIONS
These terms are capitalized when used throughout this prospectus. Please refer
to these defined terms if you have any questions as you read your prospectus.
ACCOUNT: Any of the Sub-Accounts or Fixed Account.
ACCUMULATION UNITS: If you allocate your Premium Payment to any of the
Sub-Accounts, we will convert those payments into Accumulation Units in the
selected Sub-Accounts. Accumulation Units are valued at the end of each
Valuation Day and are used to calculate the value of your Contract prior to
Annuitization.
ACCUMULATION UNIT VALUE: The daily price of Accumulation Units on any Valuation
Day.
ADMINISTRATIVE OFFICE OF THE COMPANY: Our location and overnight mailing address
is: 200 Hopmeadow Street, Simsbury, Connecticut 06089. Our standard mailing
address is: Investment Product Services, P.O. Box 5085, Hartford, Connecticut
06102-5085.
ANNIVERSARY VALUE: The value equal to the Contract Value as of a Contract
Anniversary, increased by the dollar amount of any Premium Payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary.
ANNUAL MAINTENANCE FEE: An annual $30 charge deducted on a Contract Anniversary
or upon full Surrender if the Contract Value at either of those times is less
than $50,000. The charge is deducted proportionately from each Account in which
you are invested.
ANNUAL WITHDRAWAL AMOUNT: This is the amount you can Surrender per Contract Year
without paying a Contingent Deferred Sales Charge. This amount is
non-cumulative, meaning that it cannot be carried over from one year to the
next.
ANNUITANT: The person on whose life the Contract is based. The Annuitant may not
be changed after your Contract is issued.
ANNUITY CALCULATION DATE: The date we calculate the first Annuity Payout.
ANNUITY PAYOUT: The money we pay out after the Annuity Commencement Date for the
duration and frequency you select.
ANNUITY PAYOUT OPTION: Any of the options available for payout after the Annuity
Commencement Date or death of the Contract Owner or Annuitant.
ANNUITY UNIT: The unit of measure we use to calculate the value of your Annuity
Payouts under a variable dollar amount Annuity Payout Option.
ANNUITY UNIT VALUE: The daily price of Annuity Units on any Valuation Day.
BENEFICIARY: The person(s) entitled to receive a Death Benefit upon the death of
the Contract Owner or Annuitant.
CHARITABLE REMAINDER TRUST: An irrevocable trust, where an individual donor
makes a gift to the trust, and in return receives an income tax deduction. In
addition, the individual donor has the right to receive a percentage of the
trust earnings for a specified period of time.
CODE: The Internal Revenue Code of 1986, as amended.
COMMUTED VALUE: The present value of any remaining guaranteed Annuity Payouts.
CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before the Annuity Commencement Date. You must name
a Contingent Annuitant before the original Annuitant's death.
CONTINGENT DEFERRED SALES CHARGE: The deferred sales charge that may apply when
you make a full or partial Surrender.
CONTRACT: The individual Annuity Contract and any endorsements or riders. Group
participants and some individuals will receive a certificate rather than a
Contract.
CONTRACT ANNIVERSARY: The anniversary of the date we issued your Contract. If
the Contract Anniversary falls on a Non-Valuation Day, then the Contract
Anniversary will be the next Valuation Day.
CONTRACT VALUE: The total value of the Accounts on any Valuation Day.
CONTRACT YEAR: Any 12 month period between Contract Anniversaries, beginning
with the date the Contract was issued.
DEATH BENEFIT: The amount payable after the Contract Owner or the Annuitant
dies.
DOLLAR COST AVERAGING: A program that allows you to systematically make
transfers between Accounts available in your Contract.
FIXED ACCOUNT: Part of our General Account, where you may allocate all or a
portion of your Contract Value. In your Contract, this is defined as the "Fixed
Account".
GENERAL ACCOUNT: The General Account includes our company assets and any money
you have invested in the Fixed Account.
HARTFORD, WE OR OUR: Hartford Life and Annuity Insurance Company. Only Hartford
is a capitalized term in the prospectus.
JOINT ANNUITANT: The person on whose life Annuity Payouts are based if the
Annuitant dies after Annuitization. You may name a Joint Annuitant only if your
Annuity Payout Option provides for a survivor. The Joint Annuitant may not be
changed.
MAXIMUM ANNIVERSARY VALUE: This is the highest Anniversary Value prior to the
deceased's 81st birthday or the date of death, if earlier.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
- --------------------------------------------------------------------------------
NET INVESTMENT FACTOR: This is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next, and is also used to calculate
your Annuity Payout amount.
NON-VALUATION DAY: Any day the New York Stock Exchange is not open for trading.
PAYEE: The person or party you designate to receive Annuity Payouts.
PREMIUM PAYMENT: Money sent to us to be invested in your Annuity.
PREMIUM TAX: A tax charged by a state or municipality on Premium Payments.
REQUIRED MINIMUM DISTRIBUTION: A federal requirement that individuals age 70 1/2
and older must take a distribution from their tax-qualified retirement account
by December 31, each year. For employer sponsored Qualified Contracts, the
individual must begin taking distributions at the age of 70 1/2 or upon
retirement, whichever comes later.
SUB-ACCOUNT VALUE: The value on or before the Annuity Calculation Date, which is
determined on any day by multiplying the number of Accumulation Units by the
Accumulation Unit Value for that Sub-Account.
SURRENDER: A complete or partial withdrawal from your Contract.
SURRENDER VALUE: The amount we pay you if you terminate your Contract before the
Annuity Commencement Date. The Surrender Value is equal to the Contract Value
minus any applicable charges.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. Values
of the Separate Account are determined as of the close of the New York Stock
Exchange, generally 4:00 p.m. Eastern Time.
VALUATION PERIOD: The time span between the close of trading on the New York
Stock Exchange from one Valuation Day to the next.
<PAGE>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
SALES LOAD 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
Sub-Account Value)
Mortality and Expense Risk Charge 1.35%
- ---------------------------------------------------------------------
Administrative Fees 0.15%
- ---------------------------------------------------------------------
Total Separate Account Annual Expenses 1.50%
- ---------------------------------------------------------------------
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 1.65%
- ---------------------------------------------------------------------
</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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
As of the Fund's Year End
(As a percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES EXPENSES EXPENSES
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT
SERIES:
Money Market Portfolio 0.50% 0.04% 0.54%
- -----------------------------------------------------------------------------------------------------
North American Government Securities Portfolio (1) 0.65% 0.36% 1.01%
- -----------------------------------------------------------------------------------------------------
Diversified Income Portfolio 0.40% 0.08% 0.48%
- -----------------------------------------------------------------------------------------------------
Balanced Growth Portfolio 0.60% 0.04% 0.64%
- -----------------------------------------------------------------------------------------------------
Utilities Portfolio 0.65% 0.05% 0.70%
- -----------------------------------------------------------------------------------------------------
Dividend Growth Portfolio 0.58% 0.02% 0.60%
- -----------------------------------------------------------------------------------------------------
Value-Added Market Portfolio 0.50% 0.05% 0.55%
- -----------------------------------------------------------------------------------------------------
Growth Portfolio 0.80% 0.10% 0.90%
- -----------------------------------------------------------------------------------------------------
American Opportunities Portfolio 0.62% 0.04% 0.66%
- -----------------------------------------------------------------------------------------------------
Mid-Cap Equity Portfolio (formerly Mid-Cap Growth) (2) 0.75% 0.17% 0.92%
- -----------------------------------------------------------------------------------------------------
Global Equity Portfolio 1.00% 0.08% 1.08%
- -----------------------------------------------------------------------------------------------------
Developing Growth Portfolio 0.50% 0.08% 0.58%
- -----------------------------------------------------------------------------------------------------
Emerging Markets Portfolio (1) 1.25% 0.59% 1.84%
- -----------------------------------------------------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.:
High Yield Portfolio (3) 0.50% 0.61% 1.11%
- -----------------------------------------------------------------------------------------------------
Mid-Cap Value Portfolio (3) 0.75% 0.62% 1.37%
- -----------------------------------------------------------------------------------------------------
Emerging Markets Debt Portfolio (3) 0.80% 0.98% 1.78%
- -----------------------------------------------------------------------------------------------------
Emerging Markets Equity Portfolio (3) 1.25% 1.37% 2.62%
- -----------------------------------------------------------------------------------------------------
Fixed Income Portfolio (3) 0.40% 0.56% 0.96%
- -----------------------------------------------------------------------------------------------------
Active International Allocation Portfolio (3) 0.80% 1.83% 2.63%
- -----------------------------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST:
Strategic Stock Portfolio (4) 0.50% 0.41% 0.91%
- -----------------------------------------------------------------------------------------------------
Enterprise Portfolio (4) 0.50% 0.12% 0.62%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Closed to new investments or transfers of existing Contract Values.
(2) With respect to the Mid-Cap Equity Portfolio, the expense information shown
in the table above has been restated to reflect the current fees. Prior to
December 31, 1999, the investment adviser, Morgan Stanley Dean Witter
Advisors Inc., assumed all expenses of the Portfolio and waived the
compensation provided for the Portfolio in its management agreement with the
Fund.
(3) With respect to the High Yield, Mid-Cap Value, Emerging Markets Debt,
Emerging Markets Equity, Active International Allocation and Fixed Income
Portfolios, the investment advisers have voluntarily agreed to waive their
investment advisory fees and to reimburse certain expenses of the Portfolios
if such fees would cause their respective "Total Fund Operating Expenses" to
exceed certain limits. The annual expense ratios for the Active
International Allocation Portfolio are annualized estimates. Including these
<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
reductions, it is estimated that "Management Fees", Other Expenses and
"Total Fund Operating Expenses" for the Portfolios would have been as
follows:
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
PORTFOLIO FEES EXPENSES EXPENSES
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
High Yield 0.19% 0.61% 0.80%
- ------------------------------------------------------------------------------------------------
Mid-Cap Value 0.43% 0.62% 1.05%
- ------------------------------------------------------------------------------------------------
Emerging Markets Debt 0.45% 0.98% 1.43%
- ------------------------------------------------------------------------------------------------
Emerging Markets Equity 0.42% 1.37% 1.79%
- ------------------------------------------------------------------------------------------------
Fixed Income 0.14% 0.56% 0.70%
- ------------------------------------------------------------------------------------------------
Active International Allocation 0.00% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------
</TABLE>
(4) With respect to the Strategic Stock Portfolio and the Enterprise Portfolio,
the investment adviser, Van Kampen Asset Management Inc. has voluntarily
agreed to waive its investment advisory fees and to reimburse the Portfolios
if such fees would cause their respective "Total Fund Operating Expenses" to
exceed those set forth in the table above. Including the aforementioned
reductions, it is estimated that "Management Fees", "Other Expenses" and
"Total Fund Operating Expenses" for the Portfolios would be:
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
PORTFOLIO FEES EXPENSES EXPENSES
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Strategic Stock 0.24% 0.41% 0.65%
- ------------------------------------------------------------------------------------------------
Enterprise 0.47% 0.13% 0.60%
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
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 $76 $112 $149 $234 $20 $ 63 $108 $234
- --------------------------------------------------------------------------------------------------------------------
North American Government
Securities (1) $81 $126 $173 $283 $25 $ 77 $132 $282
- --------------------------------------------------------------------------------------------------------------------
Diversified Income $75 $111 $146 $228 $19 $ 61 $105 $227
- --------------------------------------------------------------------------------------------------------------------
Balanced Growth $77 $115 $154 $245 $21 $ 66 $113 $244
- --------------------------------------------------------------------------------------------------------------------
Utilities $77 $117 $157 $251 $22 $ 68 $116 $251
- --------------------------------------------------------------------------------------------------------------------
Dividend Growth $76 $114 $152 $241 $21 $ 65 $111 $240
- --------------------------------------------------------------------------------------------------------------------
Value-Added Market $76 $113 $149 $236 $20 $ 63 $109 $235
- --------------------------------------------------------------------------------------------------------------------
Growth $79 $123 $167 $272 $24 $ 74 $127 $271
- --------------------------------------------------------------------------------------------------------------------
American Opportunities $77 $116 $155 $247 $21 $ 66 $114 $246
- --------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity $80 $124 $168 $274 $24 $ 74 $128 $273
- --------------------------------------------------------------------------------------------------------------------
Global Equity $81 $129 $177 $290 $25 $ 79 $136 $290
- --------------------------------------------------------------------------------------------------------------------
Developing Growth $76 $114 $151 $239 $20 $ 64 $110 $238
- --------------------------------------------------------------------------------------------------------------------
Emerging Markets (1) $89 $151 $214 $364 $33 $102 $174 $363
- --------------------------------------------------------------------------------------------------------------------
High Yield $82 $129 $178 $293 $26 $ 80 $137 $293
- --------------------------------------------------------------------------------------------------------------------
Mid-Cap Value $84 $137 $191 $319 $28 $ 88 $151 $318
- --------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt $88 $149 $211 $358 $33 $101 $171 $358
- --------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity $97 $173 $251 $434 $41 $126 $212 $433
- --------------------------------------------------------------------------------------------------------------------
Fixed Income $80 $125 $170 $278 $24 $ 76 $130 $277
- --------------------------------------------------------------------------------------------------------------------
Active International
Allocation $97 $174 N/A N/A $41 $126 N/A N/A
- --------------------------------------------------------------------------------------------------------------------
Strategic Stock $79 $124 $168 $273 $24 $ 74 $127 $272
- --------------------------------------------------------------------------------------------------------------------
Enterprise $77 $115 $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>
10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
EXAMPLE
THE FOLLOWING EXAMPLE ASSUMES THAT 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 $77 $117 $157 $250 $21 $ 67 $116 $249
- --------------------------------------------------------------------------------------------------------------------
North American Government
Securities (1) $82 $131 $181 $298 $26 $ 82 $140 $298
- --------------------------------------------------------------------------------------------------------------------
Diversified Income $77 $115 $153 $244 $21 $ 65 $113 $243
- --------------------------------------------------------------------------------------------------------------------
Balanced Growth $78 $120 $162 $261 $22 $ 70 $121 $260
- --------------------------------------------------------------------------------------------------------------------
Utilities $79 $122 $165 $267 $23 $ 72 $124 $266
- --------------------------------------------------------------------------------------------------------------------
Dividend Growth $78 $119 $160 $257 $22 $ 69 $119 $256
- --------------------------------------------------------------------------------------------------------------------
Value-Added Market $77 $117 $157 $251 $22 $ 68 $116 $251
- --------------------------------------------------------------------------------------------------------------------
Growth $81 $128 $175 $287 $25 $ 78 $134 $287
- --------------------------------------------------------------------------------------------------------------------
American Opportunities $78 $121 $163 $263 $23 $ 71 $122 $262
- --------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity $81 $128 $176 $289 $25 $ 79 $135 $289
- --------------------------------------------------------------------------------------------------------------------
Global Equity $83 $133 $184 $305 $27 $ 84 $144 $305
- --------------------------------------------------------------------------------------------------------------------
Developing Growth $78 $118 $159 $254 $22 $ 69 $118 $254
- --------------------------------------------------------------------------------------------------------------------
Emerging Markets (1) $91 $155 $221 $378 $35 $107 $181 $377
- --------------------------------------------------------------------------------------------------------------------
High Yield $83 $134 $186 $308 $27 $ 85 $145 $308
- --------------------------------------------------------------------------------------------------------------------
Mid-Cap Value $86 $141 $199 $334 $30 $ 93 $158 $333
- --------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt $90 $153 $219 $372 $34 $105 $178 $372
- --------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity $99 $178 $258 $447 $43 $130 $219 $446
- --------------------------------------------------------------------------------------------------------------------
Fixed Income $82 $129 $178 $293 $26 $ 80 $137 $293
- --------------------------------------------------------------------------------------------------------------------
Active International
Allocation $99 $178 N/A N/A $43 $131 N/A N/A
- --------------------------------------------------------------------------------------------------------------------
Strategic Stock $81 $128 $176 $288 $25 $ 79 $135 $288
- --------------------------------------------------------------------------------------------------------------------
Enterprise $78 $119 $161 $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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
HIGHLIGHTS
HOW DO I PURCHASE THIS ANNUITY?
You must complete our application or order request and submit it to us for
approval with your first Premium Payment. Your first Premium Payment must be at
least $1,000 and subsequent Premium Payments must be at least $500, unless you
take advantage of our Automatic Additions Program or are part of certain
retirement plans.
- For a limited time, usually within ten days after you receive your Contract,
you may cancel your Annuity without paying a Contingent Deferred Sales
Charge. You may bear the investment risk for your Premium Payment prior to
our receipt of your request for cancellation.
WHAT TYPE OF SALES CHARGE WILL I PAY?
You don't pay a sales charge when you purchase your Annuity. We may charge you a
Contingent Deferred Sales Charge when you partially or fully Surrender your
Annuity. The Contingent Deferred Sales Charge will depend on the amount you
choose to Surrender and the length of time the Premium Payment you made has been
in your Annuity. The percentage used to calculate the Contingent Deferred Sales
Charge is equal to:
<TABLE>
<CAPTION>
NUMBER OF YEARS FROM CONTINGENT DEFERRED
PREMIUM PAYMENT SALES CHARGE
<S> <C>
- -----------------------------------------
1 7%
- -----------------------------------------
2 6%
- -----------------------------------------
3 6%
- -----------------------------------------
4 5%
- -----------------------------------------
5 4%
- -----------------------------------------
6 3%
- -----------------------------------------
7 2%
- -----------------------------------------
8 or more 0%
- -----------------------------------------
</TABLE>
You won't be charged a Contingent Deferred Sales Charge on:
x The Annual Withdrawal Amount
x Premium Payments or earnings that have been in your Annuity for more than
seven years.
x Distributions made due to death
x Most payments we make to you as part of your Annuity Payout
IS THERE AN ANNUAL MAINTENANCE FEE?
We deduct this $30.00 fee each year on your Contract Anniversary or when you
fully Surrender your 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 other 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 1.35% 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 of .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
Fund Operating Expenses table for more complete information and the Portfolios'
prospectuses accompanying this prospectus.
If you elect the Optional Death Benefit, we will subtract an additional charge
on a daily basis which is equal to an annual charge of .15% of your Contract
Value invested in the Funds.
CAN I TAKE OUT ANY OF MY MONEY?
You may Surrender all or part of the amounts you have invested at any time
before we start making Annuity Payouts, or after Annuity Payouts begin under the
Payment for a Designated Period Annuity Payout Option.
- You may have to pay income tax on the money you take out and, if you
Surrender before you are age 59 1/2, you may have to pay an income tax
penalty.
- You may have to pay a Contingent Deferred Sales Charge on the money you
Surrender.
WILL HARTFORD PAY A DEATH BENEFIT?
Your Contract has a Death Benefit which is equal to the amount payable under the
standard Death Benefit or the Interest Accumulation Death Benefit ("Optional
Death Benefit"). We pay the Death Benefit if the Contract Owner, joint owner or
Annuitant, die before we begin to make annuity payments. The Death Benefit
amount will remain invested in the Sub-Accounts according to your last
instructions and will fluctuate with the performance of the underlying Funds. We
calculate the Death Benefit as of the date we receive a certified death
certificate or other legal document acceptable to us.
If you do not elect the Optional Death Benefit, the Death Benefit will be the
greater of:
- - The total Premium Payments you have made to us minus any amounts you have
Surrendered;
- - The Contract Value of your annuity, or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, Premium Payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death, whichever is earlier. The Anniversary
Value is equal to the Contract Value as of a Contract Anniversary, increased by
the dollar amount of any Premium Payments made since that anniversary and
reduced by the dollar amount of any partial Surrenders since that anniversary.
The Maximum Anniversary Value is equal to the greatest Anniversary Value
attained from this series of calculations.
<PAGE>
12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
If you elect the Optional Death Benefit, the Death Benefit will be the greater
of:
- - The total Premium Payments you have made to us minus any Surrenders;
- - The Contract Value of your annuity;
- - Your Maximum Anniversary Value or
- - Your Interest Accumulation Value.
Assuming you have not taken any Surrenders, your Interest Accumulation Value is
calculated by accumulating interest on your Premium Payments at a rate of 5% per
year up to the deceased's 81st birthday or date of death, whichever is earlier.
If you have taken any Surrenders, the 5% will be accumulated on your Premium
Payments, but we will make an adjustment for any of the Surrenders. This
adjustment will reduce the Death Benefit under the Optional Death Benefit
proportionally for the Surrenders. The Death Benefit under the Optional Death
Benefit is limited to a maximum of 200% of Premium Payments, less proportional
adjustments for any Surrenders. 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 on a daily basis which is equal to an annual
charge of .15% of your Contract Value invested in the Portfolios.
The Optional Death Benefit may not be available if the Contract Owner or
Annuitant is age 75 or older. For Contracts issued in the state of Washington,
the Optional Death Benefit is not available.
WHAT ANNUITY PAYOUT OPTIONS ARE AVAILABLE?
When it comes time for us to make payouts, you may choose one of the following
Annuity Payout Options: Life Annuity, Life Annuity with Cash Refund, Life
Annuity with Payments for a Period Certain, Joint and Last Survivor Life
Annuity, Joint and Last Survivor Life Annuity with Payments for a Period Certain
and Payments for a Period Certain. We may make other Annuity Payout Options
available at any time.
You must begin to take payments before the Annuitant's 90th birthday or the end
of the 10th Contract Year, whichever comes later, unless you elect a later date
to begin receiving payments subject to the laws and regulations then in effect
and our approval. If you do not tell us what Annuity Payout Option you want
before that time, we will 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.
GENERAL CONTRACT INFORMATION
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut. Our offices are
located in Simsbury, Connecticut; however, our mailing address is P.O. Box 2999,
Hartford, Connecticut 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>
SEPARATE ACCOUNT
The Separate Account is where we set aside and invest the assets of some of our
annuity contracts, including this Contract. The Separate Account was established
on June 22, 1994 and is registered as a unit investment trust under the
Investment Company Act of 1940. This registration does not involve supervision
by the SEC of the management or the investment practices of the Separate Account
or Hartford. The Separate Account meets the definition of "Separate Account"
under federal securities law. This Separate Account holds only assets for
variable annuity contracts. The Separate Account:
- - Holds assets for your benefit and the benefit of other Contract Owners, and
the persons entitled to the payouts described in the Contract.
- - Is not subject to the liabilities arising out of any other business Hartford
may conduct.
- - Is not affected by the rate of return of Hartford's General Account or by the
investment performance of any of Hartford's other Separate Accounts.
- - May be subject to liabilities from a Sub-Account of the Separate Account that
holds assets of other variable annuity contracts offered by the Separate
Account, which are not described in this Prospectus.
- - Is credited with income and gains, and takes losses, whether or not realized,
from the assets it holds.
We do not guarantee the investment results of the separate account. There is no
assurance that the value of your annuity will equal the total of the payments
you make to us.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
THE PORTFOLIOS
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.
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.
<PAGE>
14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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.
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.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
With regard to the Growth Portfolio, Morgan Stanley Dean Witter Investment
Management Inc. ("MSDW Investment Management"),* under a Sub-Advisory Agreement
with MSDW Advisors, provides the Growth Portfolio with investment advice and
portfolio management, subject to the overall supervision of MSDW Advisors. MSDW
Investment Management, like MSDW Advisors, is a wholly-owned subsidiary of MSDW.
MSDW Investment Management's address is 1221 Avenue of the Americas, New York,
New York 10020.
In addition to acting as the Sub-Adviser for the Growth Portfolio, MSDW
Investment Management, pursuant to an Investment Advisory Agreement with The
Universal Institutional Funds, Inc., is the investment adviser for the Emerging
Markets Debt Portfolio, Emerging Markets Equity Portfolio and Active
International Allocation Portfolio. As the investment adviser, MSDW Investment
Management, provides investment advice and portfolio management services for the
Emerging Markets Debt, Emerging Markets Equity and Active International
Allocation Portfolios, subject to the supervision of The Universal Institutional
Fund's Board of Directors.
The investment adviser for the High Yield Portfolio, Fixed Income Portfolio, and
the Mid Cap Value Portfolio is Miller Anderson & Sherrerd, LLP ("MAS"). MAS is a
Pennsylvania limited liability partnership founded in 1969 with its principal
offices at One Tower Bridge, West Conshohocken, Pennsylvania 19428. MAS provides
investment advisory services to employee benefit plans, endowment portfolios,
foundations and other institutional investors and has served as an investment
adviser to several open-end investment companies. MAS is an indirect wholly-
owned subsidiary of MSDW.
The Investment Adviser with respect to the Strategic Stock Portfolio and the
Enterprise Portfolio is Van Kampen Asset Management Inc., a wholly owned
subsidiary of Van Kampen Investments Inc. Van Kampen Investments Inc. is an
indirect wholly owned subsidiary of MSDW. Van Kampen Investments Inc. is a
diversified asset management company with more than two million retail investor
accounts, extensive capabilities for managing institutional portfolios, and more
than $90 billion under management or supervision as of December 31, 1999. Van
Kampen Investments Inc.'s more than 50 open-end and 39 closed-end funds and more
than 2,700 unit investment trusts are professionally distributed by leading
authorized dealers nationwide.
MIXED AND SHARED FUNDING -- Shares of the Portfolios may be sold to our other
separate accounts and our insurance company affiliates or other unaffiliated
insurance companies to serve as the underlying investment for both variable
annuity contracts and variable life insurance policies, a practice known as
"mixed and shared funding." As a result, there is a possibility that a material
conflict may arise between the interests of Contract Owners, and of owners of
other contracts whose contract values are allocated to one or more of these
other separate accounts investing in any one of the Portfolios. In the event of
any such material conflicts, we will consider what action may be appropriate,
including removing the Fund from the Separate Account or replacing the Fund with
another underlying fund. There are certain risks associated with mixed and
shared funding, as disclosed in the Portfolios' prospectus.
VOTING RIGHTS -- We are the legal owners of all Fund shares held in the Separate
Account and we have the right to vote at the Fund's shareholder meetings. To the
extent required by federal securities laws or regulations, we will:
- - Notify you of any Fund shareholders' meeting if the shares held for your
Contract may be voted.
- - Send proxy materials and a form of instructions that you can use to tell us
how to vote the Fund shares held for your Contract.
- - Arrange for the handling and tallying of proxies received from Contract
Owners.
- - Vote all Fund shares attributable to your Contract according to instructions
received from you, and
- - Vote all Fund shares for which no voting instructions are received in the same
proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present interpretation,
change to permit us to vote Fund shares on our own, we may decide to do so. You
may attend any Shareholder Meeting at which shares held for your Contract may be
voted. After we begin to make Annuity Payouts to you, the number of votes you
have will decrease.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF PORTFOLIOS -- We reserve the right,
subject to any applicable law, to make certain changes to the Portfolios offered
under your contract. We may, in our sole discretion, establish new Portfolios.
New Portfolios will be made available to existing Contract Owners as we
determine appropriate. We may also close one or more Portfolios to additional
Payments or transfers from existing Sub-Accounts.
We reserve the right to eliminate the shares of any of the Portfolios for any
reason and to substitute shares of another registered investment company for the
shares of any Fund already purchased or to be purchased in the future by the
Separate Account. To the extent required by the Investment Company Act of 1940
(the "1940 Act"), substitutions of shares attributable to your interest in a
Fund will not be made until we have the approval of the Commission and we have
notified you of the change.
In the event of any substitution or change, we may, by appropriate endorsement,
make any changes in the Contract necessary or appropriate to reflect the
substitution or change. If we decide that it is in the best interest of 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.
* 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.
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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.
PERFORMANCE RELATED INFORMATION
- --------------------------------------------------------------------------------
The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
When a Sub-Account advertises its STANDARDIZED TOTAL RETURN, it will usually be
calculated since the inception of the Separate Account for one year, five years,
and ten years or some other relevant periods if the Sub-Account has not been in
existence for at least ten years. Total return is measured by comparing the
value of an investment in the Sub-Account at the beginning of the relevant
period to the value of the investment at the end of the period.
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. No
yield disclosure for periods prior to the date of the Separate Account will be
used without the yield disclosure for periods as of the date of the inception of
the Separate Account.
If applicable, the Sub-Accounts may advertise YIELD IN ADDITION TO TOTAL RETURN.
The yield will be computed in the following manner: The net investment income
per unit earned during a
recent one month period is divided by the unit value on the last day of the
period. This figure includes the recurring charges at the Separate Account level
including the Annual Maintenance Fee.
The Money Market 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 include the recurring charges at the Separate Account
level including the Annual Maintenance Fee.
We may provide information on various topics to Contract Owners and prospective
Contract Owners in advertising, sales literature or other materials. These
topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as systematic investing, Dollar Cost Averaging
and asset allocation), the advantages and disadvantages of investing in
tax-deferred and taxable instruments, customer profiles and hypothetical
purchase scenarios, financial management and tax and retirement planning, and
other investment alternatives, including comparisons between the Contract and
the characteristics of and market for such alternatives.
THE FIXED ACCOUNT
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION YOU SHOULD KNOW: THIS PORTION OF THE PROSPECTUS RELATING
TO THE FIXED ACCOUNT IS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 ("1933
ACT") AND THE FIXED ACCOUNT IS NOT REGISTERED AS AN INVESTMENT COMPANY UNDER THE
1940 ACT. THE FIXED ACCOUNT OR ANY OF ITS INTERESTS ARE NOT SUBJECT TO THE
PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT, AND THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURE REGARDING THE
FIXED ACCOUNT. THE FOLLOWING DISCLOSURE ABOUT THE FIXED ACCOUNT MAY BE SUBJECT
TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS
REGARDING THE ACCURACY AND COMPLETENESS OF DISCLOSURE.
Premium Payments and Contract Values allocated to the Fixed Account become a
part of our General Account assets. We invest the assets of the General Account
according to the laws governing the investments of insurance company General
Accounts.
Currently, we guarantee that we will credit interest at a rate of not less than
3% per year, compounded annually, to amounts you allocate to the Fixed Account.
We reserve the right to change the rate subject only to applicable state
insurance law. We may credit interest at a rate in excess of 3% per year. We
will periodically publish the Fixed Account interest rates currently in effect.
There is no specific formula for determining interest rates. Some of the factors
that we may consider in determining whether to credit excess interest are;
general economic trends, rates of return currently available and anticipated on
our investments, regulatory and tax requirements and competitive factors. We
will account for any deductions, Surrenders or transfers from the Fixed Account
on a "first-in first-out" basis.
IMPORTANT: ANY INTEREST CREDITED TO AMOUNTS YOU ALLOCATE TO THE FIXED
ACCUMULATION FEATURE IN EXCESS OF 3% PER YEAR WILL BE DETERMINED AT OUR SOLE
DISCRETION. YOU ASSUME THE RISK THAT INTEREST CREDITED TO THE FIXED ACCOUNT MAY
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
- --------------------------------------------------------------------------------
NOT EXCEED THE MINIMUM GUARANTEE OF 3% FOR ANY GIVEN YEAR.
From time to time, we may credit increased interest rates under certain programs
established in our sole discretion.
DOLLAR COST AVERAGING PLUS ("DCA") PROGRAMS -- Currently, you may enroll in a
special pre-authorized transfer program known as our DCA Plus Program (the
"Program"). Under this Program, Contract Owners who enroll may allocate a
minimum of $5,000 of their Premium Payment into the Program (we may allow a
lower minimum Premium Payment for qualified plan transfers or rollovers,
including IRAs) and pre-authorize transfers to any of the Sub-Accounts under
either the 6-Month Transfer Program or 12-Month Transfer Program. The 6-Month
Transfer Program and the 12-Month Transfer Program will generally have different
credited interest rates. Under the 6-Month Transfer Program, the interest rate
can accrue up to 6 months and all Premium Payments and accrued interest must be
transferred from the Program to the selected Sub-Accounts in 3 to 6 months.
Under the 12-Month Transfer Program, the interest rate can accrue up to 12
months and all Premium Payments and accrued interest must be transferred to the
selected Sub-Accounts in 7 to 12 months. This will be accomplished by monthly
transfers for the period selected and a final transfer of the entire amount
remaining in the Program.
The pre-authorized transfers will begin within 15 days of receipt of the Program
payment provided we receive complete enrollment instructions. If we do not
receive complete Program enrollment instructions within 15 days of receipt of
the initial Program payment, the Program will be voided and the entire balance
in the Program will be transferred to the Accounts designated by you. If you do
not designate an Account, you will receive the Fixed Account's current effective
interest rate. Any subsequent payments we receive within the Program period
selected will be allocated to the Sub-Accounts over the remainder of that
Program transfer period.
You may elect to terminate the pre-authorized transfers by calling or writing us
of your intent to cancel enrollment in the Program. Upon cancellation, you will
no longer receive the Program interest rate and unless we receive instructions
to the contrary, the amounts remaining in the Program may accrue the interest
rate currently in effect for the Fixed Account.
We reserve the right to discontinue, modify or amend the Program or any other
interest rate program we establish. Any change to the Program will not affect
Contract Owners currently enrolled in the Program.
You may only have one DCA program in place at one time. The Fixed Accumulation
and Dollar Cost Averaging Plus Program are not available in Oregon.
THE CONTRACT
- --------------------------------------------------------------------------------
PURCHASES AND CONTRACT VALUE
WHAT TYPES OF CONTRACTS ARE AVAILABLE?
The Contract is an individual or group tax-deferred variable annuity contract.
It is designed for retirement planning purposes and may be purchased by any
individual, group or trust, including:
- - Any trustee or custodian for a retirement plan qualified under
Sections 401(a) or 403(a) of the Code;
- - Annuity purchase plans adopted by public school systems and certain tax-exempt
organizations according to Section 403(b) of the Code;
- - Individual Retirement Annuities adopted according to Section 408 of the Code;
- - Employee pension plans established for employees by a state, a political
subdivision of a state, or an agency of either a state or a political
subdivision of a state, and
- - Certain eligible deferred compensation plans as defined in Section 457 of the
Code.
The examples above represent Qualified Contracts, as defined by the Code. In
addition, individuals and trusts can also purchase Contracts that are not part
of a tax qualified retirement plan. These are known as Non-Qualified Contracts.
If you are purchasing the Contract for use in an IRA or other qualified
retirement plan, you should consider other features of the Contract besides tax
deferral, since any investment vehicle used within an IRA or other qualified
plan receives tax deferred treatment under the Code.
HOW DO I PURCHASE A CONTRACT?
You may purchase a Contract by completing and submitting an application or an
order request along with an initial Premium Payment. For most Contracts, the
minimum Premium Payment is $1,000. For additional Premium Payments, the minimum
Premium Payment is $500. Under certain situations, we may allow smaller Premium
Payments, for example, if you enroll in our Automatic Additions Program or are
part of certain tax qualified retirement plans. Prior approval is required for
Premium Payments of $1,000,000 or more. 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.
You and your Annuitant must not be older than age 85 on the date that your
Contract is issued. You must be of legal age in the state where the Contract is
being purchased or a guardian must act on your behalf.
<PAGE>
18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
HOW ARE PREMIUM PAYMENTS APPLIED TO MY CONTRACT?
Your initial Premium Payment will be invested within two Valuation Days of our
receipt of a properly completed application or an order request and the Premium
Payment. If we receive your subsequent Premium Payment before the close of the
New York Stock Exchange, it will be priced on the same Valuation Day. If we
receive your Premium Payment after the close of the New York Stock Exchange, it
will be invested on the next Valuation Day. If we receive your subsequent
Premium Payment on a Non-Valuation Day, the amount will be invested on the next
Valuation Day. Unless we receive new instructions, we will invest the Premium
Payment based on your last allocation instructions. We will send you a
confirmation when we invest your Premium Payment.
If the request or other information accompanying the Premium Payment is
incomplete when received, we will hold the money in a non-interest bearing
account for up to five Valuation Days while we try to obtain complete
information. If we cannot obtain the information within five Valuation Days, we
will either return the Premium Payment and explain why the Premium Payment could
not be processed or keep the Premium Payment if you authorize us to keep it
until you provide the necessary information.
CAN I CANCEL MY CONTRACT AFTER I PURCHASE IT?
We want you to be satisfied with the Contract you have purchased. We urge you to
closely examine its provisions. If for any reason you are not satisfied with
your Contract, simply return it within ten days after you receive it with a
written request for cancellation that indicates your tax-withholding
instructions. In some states, you may be allowed more time to cancel your
Contract. We will not deduct any Contingent Deferred Sales Charges during this
time. We may require additional information, including a signature guarantee,
before we can cancel your Contract.
You bear the investment risk from the time the Contract is issued until we
receive your complete cancellation request.
The amount we pay you upon cancellation depends on the requirements of the state
where you purchased your Contract, the method of purchase, the type of Contract
you purchased and your age.
HOW IS THE VALUE OF MY CONTRACT CALCULATED BEFORE THE ANNUITY COMMENCEMENT DATE?
The Contract Value is the sum of all Accounts. There are two things that affect
your Sub-Account value: (1) the number of Accumulation Units and (2) the
Accumulation Unit Value. The Sub-Account value is determined by multiplying the
number of Accumulation Units by the Accumulation Unit Value. Therefore, on any
Valuation Day your Contract Value reflects the investment performance of the
Sub-Accounts and will fluctuate with the performance of the underlying
Portfolios.
When Premium Payments are credited to your Sub-Accounts, they are converted into
Accumulation Units by dividing the amount of your Premium Payments, minus any
Premium Taxes, by the Accumulation Unit Value for that day. The more Premium
Payments you put into your Contract, the more Accumulation Units you will own.
You decrease the number of Accumulation Units you have by requesting Surrenders,
transferring money out of an Account, settling a Death Benefit claim or by
annuitizing your Contract.
To determine the current Accumulation Unit Value, we take the prior Valuation
Day's Accumulation Unit Value and multiply it by the Net Investment Factor for
the current Valuation Day.
The Net Investment Factor is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next. The Net Investment Factor for
each Sub-Account equals:
- - The net asset value per share of each Fund held in the Sub-Account at the end
of the current Valuation Day divided by
- - The net asset value per share of each Fund held in the Sub-Account at the end
of the prior Valuation Day; minus
- - The daily mortality and expense risk charge adjusted for the number of days in
the period, and any other applicable charge, including any Optional Death
Benefit Charge.
We will send you a statement in each calendar quarter, which tells you how many
Accumulation Units you have, their value and your total Contract Value.
CAN I TRANSFER FROM ONE SUB-ACCOUNT TO ANOTHER?
TRANSFERS BETWEEN SUB-ACCOUNTS -- You may transfer from one Sub-Account to
another before and after the Annuity Commencement Date at no extra charge. Your
transfer request will be processed on the day that it is received as long as it
is received on a Valuation Day before the close of the New York Stock Exchange.
Otherwise, your request will be processed on the following Valuation Day. We
will send you a confirmation when we process your transfer. You are responsible
for verifying transfer confirmations and promptly advising us of any errors
within 30 days of receiving the confirmation.
SUB-ACCOUNT TRANSFER RESTRICTIONS -- We reserve the right to limit the number of
transfers to 12 per Contract Year, with no transfers occurring on consecutive
Valuation Days. We also have the right to restrict transfers if we believe that
the transfers could have an adverse effect on other Contract Owners. In all
states except Florida, Maryland and Oregon, we may:
- - Require a minimum time period between each transfer,
- - Limit the dollar amount that may be transferred on any one Valuation Day, and
- - Not accept transfer requests from an agent acting under a power of attorney
for more than one Contract Owner.
We also have a restriction in place that involves individuals who act under a
power of attorney for multiple Contract Owners. If the value of the Contract
Owners' Accounts add up to more than $2 million, we will not accept transfer
instructions from the power of attorney unless the power of attorney has entered
into a Third Party Transfer Services Agreement with us.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
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Some states may have different restrictions.
FIXED ACCOUNT TRANSFERS -- During each Contract Year, you may make transfers out
of the Fixed Account to Sub-Accounts. All transfer allocations must be in whole
numbers (e.g., 1%). You may transfer either:
- - 30% of your total amount in the Fixed Account, or
- - An amount equal to the largest previous transfer.
These transfer limits do not include transfers done through Dollar Cost
Averaging or the DCA Plus Program.
If your interest rate renews at a rate at least 1% lower than your prior
interest rate, you may transfer an amount equal to up to 100% of the amount to
be invested at the renewal rate. You must make this transfer request within 60
days of being notified of the renewal rate.
FIXED ACCOUNT TRANSFER RESTRICTIONS -- We reserve the right to defer transfers
from the Fixed Account for up to 6 months from the date of your request. After
any transfer, you must wait six months before moving Sub-Account Values back to
the Fixed Account.
TELEPHONE AND INTERNET TRANSFERS -- In most states, you can make transfers:
- - By calling us at (860) 862-6668.
- - Electronically, when available, by the Internet through our website at
http://online.hartfordlife.com
Transfer instructions received by telephone on any Valuation Day before the
close of the New York Stock Exchange will be carried out that day. Otherwise,
the instructions will be carried out at the close of the New York Stock Exchange
on the next Valuation Day.
Transfer instructions you send electronically are considered to be received by
Hartford at the time and date stated on the electronic acknowledgement Hartford
returns to you. If the time and date indicated on the acknowledgement is before
the close of the New York Stock Exchange on a Valuation Day, the instructions
will be carried out that day. Otherwise, the instructions will be carried out at
the close of the New York Stock Exchange the next Valuation Day. If you do not
receive an electronic acknowledgement, you should telephone us as soon as
possible.
We will send you a confirmation when we process your transfer. You are
responsible for verifying transfer confirmations and promptly advising us of any
errors within 30 days of receiving the confirmation.
Telephone or Internet transfer requests may currently only be cancelled by
calling us at (860) 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.
POWER OF ATTORNEY -- You may authorize another person to make transfers on your
behalf by submitting a completed Power of Attorney form. Once we have the
completed form on file, we will accept transfer instructions, subject to our
transfer restrictions, from your designated third party until we receive new
instructions in writing from you. You will not be able to make transfers or
other changes to your Contract if you have authorized someone else to act under
a Power of Attorney.
CHARGES AND FEES
There are 6 charges and fees associated with the Contract; and the Optional
Death Benefit Charge:
1. THE CONTINGENT DEFERRED SALES CHARGE
The Contingent Deferred Sales Charge covers some of the expenses relating to the
sale and distribution of the Contract, including commissions paid to registered
representatives and the cost of preparing sales literature and other promotional
activities.
We may assess a Contingent Deferred Sales Charge when you request a full or
partial Surrender. The Contingent Deferred Sales Charge is based on the amount
you choose to Surrender and how long your Premium Payments have been in the
Contract. Each Premium Payment has its own Contingent Deferred Sales Charge
schedule. Premium Payments are Surrendered in the order in which they were
received. The longer you leave your Premium Payments in the Contract, the lower
the Contingent Deferred Sales Charge will be when you Surrender. The amount
assessed a Contingent Deferred Sales Charge will not exceed your total Premium
Payments.
The percentage used to calculate the Contingent Deferred Sales Charge is equal
to:
<TABLE>
<CAPTION>
NUMBER OF YEARS FROM CONTINGENT DEFERRED
PREMIUM PAYMENT SALES CHARGE
<S> <C>
- -----------------------------------------
1 7%
- -----------------------------------------
2 6%
- -----------------------------------------
3 6%
- -----------------------------------------
4 5%
- -----------------------------------------
5 4%
- -----------------------------------------
6 3%
- -----------------------------------------
7 2%
- -----------------------------------------
8 or more 0%
- -----------------------------------------
</TABLE>
For example, you made an initial Premium Payment of $10,000 five years ago and
an additional Premium Payment of $20,000 one year ago. If you request a partial
withdrawal of $15,000 and
<PAGE>
20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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.
- - Your CDSC is $435.00
If you have any questions about these charges, please contact your financial
adviser or Hartford.
THE FOLLOWING SURRENDERS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE:
- - ANNUAL WITHDRAWAL AMOUNT -- During the first seven years from each Premium
Payment, you may, each Contract Year, take partial Surrenders up to 15% of the
total Premium Payments. If you do not take 15% one year, you may not take more
than 15% the next year. These amounts are different for Contracts issued to a
Charitable Remainder Trust.
UNDER THE FOLLOWING SITUATIONS, THE CONTINGENT DEFERRED SALES CHARGE IS WAIVED:
- - Upon eligible confinement as described in the Waiver of Sales Charge Rider.
For Contracts purchased on or after September 29, 1997, we will waive any
Contingent Deferred Sales Charge applicable to a partial or full Surrender if
you, the joint owner or the Annuitant, is confined for at least 180 calendar
days to a: (a) facility recognized as a general hospital by the proper
authority of the state in which it is located; or (b) facility recognized as a
general hospital by the Joint Commission on the Accreditation of Hospitals; or
(c) facility certified as a hospital or long-term care facility; or
(d) nursing home licensed by the state in which it is located and offers the
services of a registered nurse 24 hours a day. If you, the joint owner or the
Annuitant is confined when you purchase the Contract, this waiver is not
available. For it to apply, you must: (a) have owned the Contract continuously
since it was issued, (b) provide written proof of confinement satisfactory to
us, and (c) request the Surrender within 90 calendar days of the last day of
confinement. This waiver may not be available in all states. Please contact
your Registered Representative or us to determine if it is available for you.
- - For Required Minimum Distributions. This allows Annuitants who are age 70 1/2
or older, with a Contract held under an Individual Retirement Account or
403(b) plan, to Surrender an amount equal to the Required Minimum Distribution
for the Contract without a Contingent Deferred Sales Charge. All requests for
Required Minimum Distributions must be in writing.
- - On or after the Annuitant's 90th birthday.
THE FOLLOWING SITUATIONS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE:
- - Upon death of the Annuitant or Contract Owner. No Contingent Deferred Sales
Charge will be deducted if the Annuitant or Contract Owner dies, unless the
Contract Owner is not a natural person (e.g., a trust).
- - Upon Annuitization. The Contingent Deferred Sales Charge is not deducted when
you annuitize the Contract. We will charge a Contingent Deferred Sales Charge
if the Contract is fully Surrendered during the Contingent Deferred Sales
Charge period under an Annuity Payout Option which allows Surrenders.
- - Upon cancellation during the Right to Cancel Period
- - SURRENDER ORDER -- During the first seven Contract Years all Surrenders in
excess of the Annual Withdrawal Amount will be taken first from Premium
Payments, then from earnings. Surrenders from Premium Payments in excess of
the Annual Withdrawal Amount will be subject to a Contingent Deferred Sales
Charge.
- - After the Seventh Contract Year, all Surrenders in excess of the Annual
Withdrawal Amount will be taken first from earnings, then from Premium
Payments held in your Contract for more than seven years and then from Premium
Payments invested for less than seven years. Only Premium Payments invested
for less than seven years are subject to a Contingent Deferred Sales Charge.
2. MORTALITY AND EXPENSE RISK CHARGE
For assuming mortality and expense risks under the Contract, we deduct a daily
charge at an annual rate of 1.35% of Sub-Account Value (estimated at .90% for
mortality and .45% for expenses). The mortality and expense risk charge is
broken into charges for mortality risks and for an expense risk:
- - MORTALITY RISK -- There are two types of mortality risks that we assume, those
made while your Premium Payments are accumulating and those made once Annuity
Payouts have begun.
During the period your Premium Payments are accumulating, we are required to
cover any difference between the Death Benefit paid and the Surrender Value.
These differences may occur during periods of declining value or in periods
where the Contingent Deferred Sales Charges would have been applicable. The risk
that we bear during this period is that actual mortality rates, in aggregate,
may exceed expected mortality rates.
Once Annuity Payouts have begun, we may be required to make Annuity Payouts as
long as the Annuitant is living, regardless of how long the Annuitant lives. We
would be required to make these payments if the Payout Option chosen is the Life
Annuity, Life Annuity With Payments for a Period Certain or Joint and Last
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
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Survivor Life Annuity Payout Option. The risk that we bear during this period is
that the actual mortality rates, in aggregate, may be lower than the expected
mortality rates.
- - EXPENSE RISK -- We also bear an expense risk that the Contingent Deferred
Sales Charges and the Annual Maintenance Fee collected before the Annuity
Commencement Date may not be enough to cover the actual cost of selling,
distributing and administering the Contract.
Although variable Annuity Payouts will fluctuate with the performance of the
underlying Fund selected, your Annuity Payouts will NOT be affected by (a) the
actual mortality experience of our Annuitants, or (b) our actual expenses if
they are greater than the deductions stated in the Contract. Because we cannot
be certain how long our Annuitants will live, we charge this percentage fee
based on the mortality tables currently in use. The mortality and expense risk
charge enables us to keep our commitments and to pay you as planned.
3. ANNUAL MAINTENANCE FEE
The Annual Maintenance Fee is a flat fee that is deducted from your Contract
Value to reimburse us for expenses relating to the administrative maintenance of
the Contract and the Accounts. The annual $30 charge is deducted on a Contract
Anniversary or when the Contract is fully Surrendered if the Contract Value at
either of those times is less than $50,000. The charge is deducted
proportionately from each Account in which you are invested.
WHEN IS THE ANNUAL MAINTENANCE FEE WAIVED?
We will waive the Annual Maintenance Fee if your Contract Value is $50,000 or
more on your Contract Anniversary or when you fully Surrender your Contract. In
addition, we will waive one Annual Maintenance Fee for Contract Owners who own
more than one Contract with a combined Contract Value between $50,000 and
$100,000. If you have multiple Contracts with a combined Contract Value of
$100,000 or greater, we will waive the Annual Maintenance Fee on all Contracts.
However, we reserve the right to limit the number of waivers to a total of six
Contracts. We also reserve the right to waive the Annual Maintenance Fee under
certain other conditions.
4. ADMINISTRATIVE CHARGE
For administration, we apply a daily charge at the rate of .15% per year against
all Contract Values held in the Separate Account during both the accumulation
and annuity phases of the Contract. There is not necessarily a relationship
between the amount of administrative charge imposed on a given Contract and the
amount of expenses that may be attributable to that Contract; expenses may be
more or less than the charge.
You should refer to the Trust prospectus for a description of deductions and
expenses paid out of the assets of the Trust's portfolios.
5. PREMIUM TAXES
We deduct Premium Taxes, if required, by a state or other government agency.
Some states collect the taxes when Premium Payments are made; others collect at
Annuitization. Since we pay Premium Taxes when they are required by applicable
law, we may deduct them from your Contract when we pay the taxes, upon
Surrender, or on the Annuity Commencement Date. The Premium Tax rate varies by
state or municipality. Currently, the maximum rate charged by any state is 3.5%
and 4% in Puerto Rico.
6. CHARGES AGAINST THE PORTFOLIOS
The Separate Account purchases shares of the Portfolios at net asset value. The
net asset value of the Portfolio reflects investment advisory fees and
administrative expenses already deducted from the assets of the Portfolios.
These charges are described in the Portfolios' prospectuses accompanying this
prospectus.
OPTIONAL DEATH BENEFIT CHARGE -- If you elect the Optional Death Benefit, we
will subtract an additional charge on a daily basis which is equal to an annual
charge of .15% of your Contract Value invested in the Funds.
WE MAY OFFER, IN OUR DISCRETION, REDUCED FEES AND CHARGES INCLUDING, BUT NOT
LIMITED TO CONTINGENT DEFERRED SALES CHARGES, THE MORTALITY AND EXPENSE RISK
CHARGE, AND THE ANNUAL MAINTENANCE FEE, FOR CERTAIN CONTRACTS (INCLUDING
EMPLOYER SPONSORED SAVINGS PLANS) WHICH MAY RESULT IN DECREASED COSTS AND
EXPENSES. REDUCTIONS IN THESE FEES AND CHARGES WILL NOT BE UNFAIRLY
DISCRIMINATORY AGAINST ANY CONTRACT OWNER.
DEATH BENEFIT
WHAT IS THE DEATH BENEFIT AND HOW IS IT CALCULATED?
Your Contract has a Death Benefit which is equal to the amounts payable under
the standard Death Benefit or the Optional Death Benefit. We pay the Death
Benefit if the Contract Owner, joint owner or Annuitant die before we begin to
make annuity payments. The Death Benefit amount will remain invested in the
Sub-Accounts according to your last instructions and will fluctuate with the
performance of the underlying Funds. We calculate the Death Benefit as of the
date we receive a certified death certificate or other legal document acceptable
to us.
If you do not elect the Optional Death Benefit, the Death Benefit will be the
greater of:
- - The total Premium Payments you have made to us minus any amounts you have
Surrendered;
- - The Contract Value of your annuity; or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, Premium Payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death, whichever is earlier. The Anniversary
Value is equal to the Contract Value as of a Contract Anniversary, increased by
the dollar amount of any Premium Payments made since that anniversary and
reduced by the dollar amount of any partial Surrenders since that anniversary.
The
<PAGE>
22 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Maximum Anniversary Value is equal to the greatest Anniversary Value attained
from this series of calculations.
The Maximum Anniversary Value is only calculated until the earlier of the
Contract Owner or Annuitant's 81st birthday or death.
You may also elect the Optional Death Benefit for an additional fee. The
Optional Death Benefit adds the Interest Accumulation Value to the Death Benefit
calculation.
If you elect the Optional Death Benefit, the Death Benefit prior to the
deceased's date of death or the deceased's 81st birthday, whichever is earlier,
will be the greater of:
- - The total Premium Payments you have made to us minus any amounts you have
Surrendered;
- - The Contract Value of your annuity;
- - Your Maximum Anniversary Value; or
- - The Interest Accumulation Value on the date the Optional Death Benefit is
added to your contract.
The Interest Accumulation Value prior to the deceased's date of death or 81st
birthday, whichever is earlier is equal to:
- - Your Contract Value on the date the Optional Death Benefit is added;
- - Plus any Premium Payments made after the date the Optional Death Benefit is
added;
- - Minus any proportional adjustments for any partial Surrenders taken after the
Optional Death Benefit is added;
- - Compounded daily at an annual rate of 5.0%.
On or after the deceased's 81st birthday or date of death, the Interest
Accumulation Value will not continue to compound, but will be adjusted to add
any Premium Payments or subtract any proportional adjustments for any partial
Surrenders.
The Optional Death Benefit is limited to a maximum of 200% of the Contract Value
on the date the Optional Death Benefit was added, plus 200% of any Premium
Payments made since the addition of the Optional Death Benefit minus any
proportional adjustments for any Surrenders from that date.
If you elect the Optional Death Benefit, we will deduct an additional charge on
a daily basis that is equal to an annual charge of .15% of your Contract Value
invested in the Portfolios. 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.
HOW IS THE DEATH BENEFIT PAID?
The Death Benefit may be taken in one lump sum or under any of the Annuity
Payout Options then being offered by us. On the date we receive complete
instructions from the Beneficiary, we will compute the Death Benefit amount to
be paid out or applied to a selected Annuity Payout Option. When there is more
than one Beneficiary, we will calculate the Death Benefit amount for each
Beneficiary's portion of the proceeds and then pay it out or apply it to a
selected Annuity Payout Option according to each Beneficiary's instructions. If
we receive the complete instructions on a Non-Valuation Day, computations will
take place on the next Valuation Day.
The Beneficiary may elect under the Annuity Payout Option "Death Benefit
Remaining with the Company" to leave proceeds from the Death Benefit with us for
up to five years from the date of the Contract Owner's death if the Contract
Owner died before the Annuity Commencement Date. Once we receive a certified
death certificate or other legal documents acceptable to us, the Beneficiary
can: (a) make Sub-Account transfers and (b) take Surrenders without paying
Contingent Deferred Sales Charges.
REQUIRED DISTRIBUTIONS -- If the Contract Owner dies before the Annuity
Commencement Date, the Death Benefit must be distributed within five years after
death. The Beneficiary can choose any Annuity Payout Option that results in
complete Annuity Payout within five years.
If the Contract Owner dies on or after the Annuity Commencement Date under an
Annuity Payout Option with a Death Benefit, any remaining value must be
distributed at least as rapidly as under the payment method being used as of the
Contract Owner's death.
If the Contract Owner is not an individual (e.g. a trust), then the original
Annuitant will be treated as the Contract Owner in the situations described
above and any change in the original Annuitant will be treated as the death of
the Contract Owner.
WHAT SHOULD THE BENEFICIARY CONSIDER?
ALTERNATIVES TO THE REQUIRED DISTRIBUTIONS -- The selection of an Annuity Payout
Option and the timing of the selection will have an impact on the tax treatment
of the Death Benefit. To receive favorable tax treatment, the Annuity Payout
Option selected: (a) cannot extend beyond the Beneficiary's life or life
expectancy, and (b) must begin within one year of the date of death.
If these conditions are NOT met, the Death Benefit will be treated as a lump sum
payment for tax purposes. This sum will be taxable in the year in which it is
considered received.
SPOUSAL CONTRACT CONTINUATION -- If the Beneficiary is the Contract Owner's
spouse, the Beneficiary may elect to continue the Contract as the contract
owner, receive the death benefit in one lump sum payment or elect an Annuity
Payout Option. If you elect the Optional Death Benefit for an additional charge
and 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 if the
Spouse had elected to receive the Death Benefit. This spousal continuation is
available only once for each Contract.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
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WHO WILL RECEIVE THE DEATH BENEFIT?
The distribution of the Death Benefit is based on whether death is before, on or
after the Annuity Commencement Date.
IF DEATH OCCURS BEFORE THE ANNUITY COMMENCEMENT DATE:
<TABLE>
IF THE DECEASED IS THE . . . AND . . . AND . . . THEN THE . . .
<S> <C> <C> <C>
Contract Owner There is a surviving joint The Annuitant Joint Contract Owner
Contract Owner is living or deceased receives the Death
Benefit.
Contract Owner There is no surviving The Annuitant Designated Beneficiary
joint Contract Owner is living or deceased receives the Death
Benefit.
Contract Owner There is no surviving The Annuitant Contract Owner's estate
joint Contract Owner and is living or deceased receives the Death
the Beneficiary Benefit.
predeceases the Contract
Owner
Annuitant The Contract Owner is There is no named Death Benefit is paid to
living Contingent Annuitant the Contract Owner and not
the designated
Beneficiary.
Annuitant The Contract Owner is The Contingent Annuitant Contingent Annuitant
living is living becomes the Annuitant, and
the Contract continues.
</TABLE>
IF DEATH OCCURS ON OR AFTER THE ANNUITY COMMENCEMENT DATE:
<TABLE>
IF THE DECEASED IS THE . . . AND . . . THEN THE . . .
<S> <C> <C>
Contract Owner The Annuitant is living Designated Beneficiary becomes the
Contract Owner
Annuitant The Contract Owner is living Contract Owner receives the Death
Benefit.
Annuitant The Annuitant is also the Contract Owner Designated Beneficiary receives the
Death Benefit.
</TABLE>
THESE ARE THE MOST COMMON DEATH BENEFIT SCENARIOS, HOWEVER, THERE ARE OTHERS.
SOME OF THE ANNUITY PAYOUT OPTIONS MAY NOT RESULT IN A DEATH BENEFIT PAYOUT. IF
YOU HAVE QUESTIONS ABOUT THESE AND ANY OTHER SCENARIOS, PLEASE CONTACT YOUR
REGISTERED REPRESENTATIVE OR US.
SURRENDERS
WHAT KINDS OF SURRENDERS ARE AVAILABLE?
FULL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE -- When you Surrender your
Contract before the Annuity Commencement Date, the Surrender Value of the
Contract will be made in a lump sum payment. The Surrender Value is the Contract
Value minus any applicable Premium Taxes, Contingent Deferred Sales Charges and
the Annual Maintenance Fee. The Surrender Value may be more or less than the
amount of the Premium Payments made to a Contract.
PARTIAL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE -- You may request a
partial Surrender of Contract Values at any time before the Annuity Commencement
Date. There are two restrictions:
- - The partial Surrender amount must be at least equal to $100, our current
minimum for partial Surrenders, and
- - The Contract must have a minimum Contract Value of $500 after the Surrender.
We reserve the right to close your Contract and pay the full Surrender Value
if the Contract Value is under the minimum after the Surrender. If your
Contract was issued in Texas, a remaining value of $500 is not required to
continue the Contract if Premium Payments were made in the last two Contract
Years.
FULL SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- You may Surrender your
Contract on or after the Annuity Commencement Date only if you selected the
Payments for a Period Certain Annuity Payout Option. Under this option, we pay
you the Commuted Value of your Contract minus any applicable Contingent Deferred
Sales Charges. The Commuted Value is determined on the day we receive your
written request for Surrender.
PARTIAL SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- Partial Surrenders are
permitted after the Annuity
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24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Commencement Date if you select the Life Annuity with Payments for a Period
Certain, Joint and Last Survivor Life Annuity with Payments for a Period Certain
or the Payments for a Period Certain Annuity Payout Option. You may take partial
Surrenders of amounts equal to the Commuted Value of the payments that we would
have made during the "Period Certain" or the number of years you select under
the Annuity Payout Option that we guarantee to make Annuity Payouts.
To qualify for partial Surrenders under these Annuity Payout Options you must
elect a variable dollar amount Annuity Payout and you must make the Surrender
request during the Period Certain.
Hartford will deduct any applicable Contingent Deferred Sales Charges.
If you elect to take the entire Commuted Value of the Annuity Payouts we would
have made during the Period Certain, Hartford will not make any Annuity Payouts
during the remaining Period Certain. If you elect to take only some of the
Commuted Value of the Annuity Payouts we would have made during the Period
Certain, Hartford will reduce the remaining Annuity Payouts during the remaining
Period Certain. Annuity Payouts that are to be made after the Period Certain is
over will not change.
Please check with your tax adviser because there could be adverse tax
consequences for partial Surrenders after the Annuity Commencement Date.
HOW DO I REQUEST A SURRENDER?
Requests for full Surrenders must be in writing. Requests for partial Surrenders
can be made in writing or by telephone. We will send your money within seven
days of receiving complete instructions. However, we may postpone payment of
Surrenders whenever: (a) the New York Stock Exchange is closed, (b) trading on
the New York Stock Exchange is restricted by the SEC, (c) the SEC permits and
orders postponement or (d) the SEC determines that an emergency exists to
restrict valuation.
WRITTEN REQUESTS -- To request a full or partial Surrender, complete a Surrender
Form or send us a letter, signed by you, stating:
- - the dollar amount that you want to receive, either before or after we withhold
taxes and deduct for any applicable charges,
- - your tax withholding amount or percentage, if any, and
- - your mailing address.
If there are joint Contract Owners, both must authorize all Surrenders. For a
partial Surrender, specify the Accounts that you want your Surrender to come
from, otherwise, the Surrender will be taken in proportion to the value in each
Account.
TELEPHONE REQUESTS -- To request a partial Surrender by telephone, we must have
received your completed Telephone Redemption Program Enrollment Form. If there
are joint Contract Owners, both must sign this form. By signing the form, you
authorize us to accept telephone instructions for partial Surrenders from either
Contract Owner. Telephone authorization will remain in effect until we receive a
written cancellation notice from you or your joint Contract Owner, we
discontinue the program; or you are no longer the owner of the Contract. There
are some restrictions on telephone surrenders, please call us with any
questions.
We may record telephone calls and use other procedures to verify information and
confirm that instructions are genuine. We will not be liable for losses or
expenses arising from telephone instructions reasonably believed to be genuine.
WE MAY MODIFY THE REQUIREMENTS FOR TELEPHONE REDEMPTIONS AT ANY TIME.
Telephone Surrender instructions received before the close of the New York Stock
Exchange will be processed on that Valuation Day. Otherwise, your request will
be processed on the next Valuation Day.
COMPLETING A POWER OF ATTORNEY FORM FOR ANOTHER PERSON TO ACT ON YOUR BEHALF MAY
PREVENT YOU FROM MAKING SURRENDERS VIA TELEPHONE.
WHAT SHOULD BE CONSIDERED ABOUT TAXES?
There are certain tax consequences associated with Surrenders:
PRIOR TO AGE 59 1/2 -- If you make a Surrender prior to age 59 1/2, there may be
adverse tax consequences including a 10% federal income tax penalty on the
taxable portion of the Surrender payment. Surrendering before age 59 1/2 may
also affect the continuing tax-qualified status of some Contracts.
WE DO NOT MONITOR SURRENDER REQUESTS. TO DETERMINE WHETHER A SURRENDER IS
PERMISSIBLE, WITH OR WITHOUT FEDERAL INCOME TAX PENALTY, PLEASE CONSULT YOUR
PERSONAL TAX ADVISER.
MORE THAN ONE CONTRACT ISSUED IN THE SAME CALENDAR YEAR -- If you own more than
one contract issued by us or our affiliates in the same calendar year, then
these contracts may be treated as one contract for the purpose of determining
the taxation of distributions prior to the Annuity Commencement Date. Please
consult your tax adviser for additional information.
INTERNAL REVENUE CODE SECTION 403(b) ANNUITIES -- As of December 31, 1988, all
section 403(b) annuities have limits on full and partial Surrenders.
Contributions to your Contract made after December 31, 1988 and any increases in
cash value after December 31, 1988 may not be distributed unless you are: (a)
age 59 1/2, (b) no longer employed, (c) deceased, (d) disabled, or
(e) experiencing a financial hardship (cash value increases may not be
distributed for hardships prior to age 59 1/2). Distributions prior to age
59 1/2 due to financial hardship; unemployment or retirement may still be
subject to a penalty tax of 10%.
WE ENCOURAGE YOU TO CONSULT WITH YOUR QUALIFIED TAX ADVISER BEFORE MAKING ANY
SURRENDERS. PLEASE SEE THE "FEDERAL TAX CONSIDERATIONS" SECTION FOR MORE
INFORMATION.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
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ANNUITY PAYOUTS
THIS SECTION DESCRIBES WHAT HAPPENS WHEN WE BEGIN TO MAKE REGULAR ANNUITY
PAYOUTS FROM YOUR CONTRACT. YOU, AS THE CONTRACT OWNER, SHOULD ANSWER FIVE
QUESTIONS:
- - When do you want Annuity Payouts to begin?
- - Which Annuity Payout Option do you want to use?
- - How often do you want to receive Annuity Payouts?
- - What is the Assumed Investment Return?
- - Do you want fixed dollar amount or variable dollar amount Annuity Payouts?
Please check with your financial adviser to select the Annuity Payout Option
that best meets your income needs.
1. WHEN DO YOU WANT ANNUITY PAYOUTS TO BEGIN?
You select an Annuity Commencement Date when you purchase your Contract or at
any time before you begin receiving Annuity Payouts. You may change the Annuity
Commencement Date by notifying us within thirty days prior to the date. The
Annuity Commencement Date cannot be deferred beyond the 15th day of the month of
the Annuitant's 90th birthday. If this Contract is issued to the trustee of a
Charitable Remainder Trust, the Annuity Commencement Date may be deferred to the
Annuitant's 100th birthday.
The Annuity Calculation Date is when the amount of your Annuity Payout is
determined. This occurs within five Valuation Days before your selected Annuity
Commencement Date.
All Annuity Payouts, regardless of frequency, will occur on the same day of the
month as the Annuity Commencement Date. After the initial payout, if an Annuity
Payout date falls on a Non-Valuation Day, the Annuity Payout is computed on the
prior Valuation Day. If the Annuity Payout date does not occur in a given month
due to a leap year or months with only 28 days (i.e. the 31st), the Annuity
Payout will be computed on the last Valuation Day of the month.
2. WHICH ANNUITY PAYOUT OPTION DO YOU WANT TO USE?
Your Contract contains the Annuity Payout Options described below. The Annuity
Proceeds Settlement Option is an option that can be elected by the Beneficiary
after the death of the Contract Owner and is described in the "Death Benefit"
section. We may at times offer other Annuity Payout Options. Once we begin to
make annuity payouts, the annuity payout option cannot be changed.
LIFE ANNUITY
We make Annuity Payouts as long as the Annuitant is living. When the Annuitant
dies, we stop making Annuity Payouts. A Payee would receive only one Annuity
Payout if the Annuitant dies after the first payout, two Annuity Payouts if the
Annuitant dies after the second payout, and so forth.
LIFE ANNUITY WITH A CASH REFUND
We will make Annuity Payouts as long as the Annuitant is living. When the
Annuitant dies, if the Annuity Payouts already made are less than the Contract
Value minus any Premium Tax, the remaining value will be paid to the
Beneficiary. The remaining value is equal to the Contract Value minus any
Premium Tax minus the Annuity Payouts already made. This option is only
available for Annuity Payouts using the 5% Assumed Investment Return.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
We will make Annuity Payouts as long as the Annuitant is living, but we at least
guarantee to make Annuity Payouts for a time period you select, between 5 years
and 100 years minus the Annuitant's age. If the Annuitant dies before the
guaranteed number of years have passed, then the Beneficiary may elect to
(a) continue Annuity Payouts for the remainder of the guaranteed number of years
or (b) receive the Commuted Value in one sum.
For Qualified Contracts, the guaranteed number of years must be less than the
life expectancy of the Annuitant at the time the Annuity Payouts begin. We
compute life expectancy using the IRS mortality tables.
JOINT AND LAST SURVIVOR LIFE ANNUITY
We will make Annuity Payouts as long as the Annuitant and Joint Annuitant are
living. When one Annuitant dies, we continue to make Annuity Payouts to the
other Annuitant until that second Annuitant dies. When choosing this option, you
must decide what will happen to the Annuity Payouts; either fixed or variable,
after the first Annuitant dies. You must select Annuity Payouts that:
- - Remain the same at 100%, or
- - Decrease to 66.67%, or
- - Decrease to 50%.
For variable-dollar amount Annuity Payouts, these percentages represent Annuity
Units; for fixed-dollar amount Annuity Payouts, they represent actual dollar
amounts. The percentage will also impact the Annuity Payout amount we pay while
both Annuitants are living. If you pick a lower percentage, your original
Annuity Payouts will be higher while both Annuitants are alive.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
We will make Annuity Payouts as long as either the Annuitant or Joint Annuitant
are living, but we at least guarantee to make Annuity Payouts for a time period
you select, between 5 years and 100 years minus the Annuitant's age. If the
Annuitant and the Joint Annuitant both die before the guaranteed number of years
have passed, then the Beneficiary has two options, (a) continue
<PAGE>
26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Annuity Payouts for the remainder of the guaranteed number of years or
(b) receive the Commuted Value in one sum.
When choosing this option, you must decide what will happen to the Annuity
Payouts after the first Annuitant dies. You must select Annuity Payouts that:
- - Remain the same at 100%, or
- - Decrease to 66.67%, or
- - Decrease to 50%.
For variable dollar amount Annuity Payouts, these percentages represent Annuity
Units. For fixed-dollar amount Annuity Payouts, these percentages represent
actual dollar amounts. The percentage will also impact the Annuity Payout amount
we pay while both Annuitants are living. If you pick a lower percentage, your
original Annuity Payouts will be higher while both Annuitants are alive.
PAYMENTS FOR A PERIOD CERTAIN -- We will make Annuity Payouts for the number of
years that you select. You can select between 5 years and 30 years.
IMPORTANT INFORMATION:
- - YOU CANNOT SURRENDER YOUR CONTRACT ONCE ANNUITY PAYOUTS BEGIN, UNLESS YOU HAVE
SELECTED THE PAYMENTS FOR A DESIGNATED PERIOD ANNUITY PAYOUT OPTION. A
CONTINGENT DEFERRED SALES CHARGE MAY BE DEDUCTED.
- - For Non-Qualified Contracts, if you do not elect an Annuity Payout Option,
fixed Annuity Payouts will automatically begin on the Annuity Commencement
Date under the Life Annuity with 120,180 or 240 Monthly Payments Certain
Annuity Payout Option with payouts for 120 months.
- - For Qualified Contracts and Contracts issued in Texas, if you do not elect an
Annuity Payout Option, fixed Annuity Payouts will begin automatically on the
Annuity Commencement Date, under the Life Annuity payout option.
3. HOW OFTEN DO YOU WANT THE PAYEE TO RECEIVE ANNUITY PAYOUTS?
In addition to selecting an Annuity Commencement Date and an Annuity Payout
Option, you must also decide how often you want the Payee to receive Annuity
Payouts. You may choose to receive Annuity Payouts:
- - monthly,
- - quarterly,
- - semi-annually, or
- - annually.
Once you select a frequency, it cannot be changed. If you do not make a
selection, the Payee will receive monthly Annuity Payouts. You must select a
frequency that results in an Annuity Payout of at least $50. If the amount falls
below $50, we have the right to change the frequency to bring the Annuity Payout
up to at least $50.
4. WHAT IS THE ASSUMED INVESTMENT RETURN?
The Assumed Investment Return ("AIR") is the investment return you select before
we start to make Annuity Payouts. It is a critical assumption for calculating
variable dollar amount Annuity Payouts. The first Annuity Payout will be based
upon the AIR. The remaining Annuity Payouts will fluctuate based on the
performance of the underlying Funds.
Subject to the approval of your State, you can select one of three AIRs: 3%, 5%
or 6%. The greater the AIR, the greater the initial Annuity Payout. A higher AIR
may result in smaller potential growth in the Annuity Payouts. On the other
hand, a lower AIR results in a lower initial Annuity Payout, but future Annuity
Payouts have the potential to be greater. The 6% AIR is not available in the
states of Oklahoma, Oregon, New Jersey or Texas.
For example, if the second monthly Annuity Payout is the same as the first, the
sub-accounts earned exactly the same return as the AIR. If the second monthly
Annuity Payout is more than the first, the sub-accounts earned more than the
AIR. If the second Annuity Payout is less than the first, the sub-account earned
less than the AIR.
Level variable dollar amount Annuity Payouts would be produced if the investment
returns remained constant and equal to the AIR. In fact, Annuity Payouts will
vary up or down as the investment rate varies up or down from the AIR.
5. DO YOU WANT ANNUITY PAYOUTS TO BE FIXED-DOLLAR AMOUNT OR VARIABLE-DOLLAR
AMOUNT?
You may choose an Annuity Payout Option with fixed-dollar amounts or
variable-dollar amounts, depending on your income needs.
FIXED-DOLLAR AMOUNT ANNUITY PAYOUTS -- Once a fixed-dollar amount Annuity Payout
begins, you cannot change your selection to receive variable-dollar amount
Annuity Payout. You will receive equal fixed-dollar amount Annuity Payouts
throughout the Annuity Payout period. Fixed-dollar amount Annuity Payout amounts
are determined by multiplying the Contract Value, minus any applicable Premium
Taxes, by an Annuity rate. The annuity rate is set by us and is not less than
the rate specified in the Fixed Annuity Payment tables in your Contract.
VARIABLE-DOLLAR AMOUNT ANNUITY PAYOUTS -- A variable-dollar amount Annuity
Payout is based on the investment performance of the Sub-Accounts. The
variable-dollar amount Annuity Payouts may fluctuate with the performance of the
underlying Portfolios. To begin making variable-dollar amount Annuity Payouts,
we convert the first Annuity Payout amount to a set number of Annuity Units and
then price those units to determine the Annuity Payout amount. The number of
Annuity Units that determines the Annuity Payout amount remains fixed unless you
transfer units between Sub-Accounts.
The dollar amount of the first variable Annuity Payout depends on:
- - the Annuity Payout Option chosen,
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
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- - the Annuitant's attained age and gender (if applicable), and,
- - the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table
- - the Assumed Investment Return
The total amount of the first variable-dollar amount Annuity Payout is
determined by dividing the Contract Value minus any applicable Premium Taxes, by
$1,000 and multiplying the result by the payment factor defined in the Contract
for the selected Annuity Payout Option.
The dollar amount of each subsequent variable-dollar amount Annuity Payout is
equal to the total of:
Annuity Units for each Sub-Account multiplied by Annuity Unit Value of each
Sub-Account.
The Annuity Unit Value of each Sub-Account for any Valuation Period is equal to
the Accumulation Unit Value Net Investment Factor for the current Valuation
Period multiplied by the Annuity Unit factor, multiplied by the Annuity Unit
Value for the preceding Valuation Period.
TRANSFER OF ANNUITY UNITS -- After the Annuity Calculation Date, you may
transfer dollar amounts of Annuity Units from one Sub-Account to another. On the
day you make a transfer, the dollar amounts are equal for both Sub-Accounts and
the number of Annuity Units will be different. We will transfer the dollar
amount of your Annuity Units the day we receive your written request if received
before the close of the New York Stock Exchange. Otherwise, the transfer will be
made on the next Valuation Day.
OTHER PROGRAMS AVAILABLE
- --------------------------------------------------------------------------------
AUTOMATIC ADDITIONS PROGRAM -- Automatic Additions is an eletrcnic transfer
program that allows you to have money automatically transferred from your
checking or savings account, and invested in your Contract. It is available for
Premium Payments made after your initial Premium Payment. The minimum amount for
each transfer is $50. You can elect to have transfers occur either monthly or
quarterly, and they can be made into any Account available in your Contract.
AUTOMATIC INCOME PROGRAM -- The Automatic Income Program allows you to Surrender
up to 10% of your total Premium Payments each Contract Year. We can Surrender
from the Accounts you select systematically on a monthly, quarterly, semiannual,
or annual basis. The Automatic Income Program may change based on your
instructions after your seventh Contract Year.
ASSET REBALANCER PROGRAM -- Asset Allocation is a program that allows you to
choose an allocation for your Sub-Accounts to help you reach your investment
goals. Some Contracts offer model allocations with pre-selected Sub-Accounts and
percentages that have been established for each type of investor -- ranging from
conservative to aggressive. Over time, Sub-Account performance may cause your
Contract's allocation percentages to change, but under the Asset Rebalancer
Program, your Sub-Account allocations are rebalanced to the percentages in the
current model you have chosen. You can transfer freely between allocation models
up to twelve times per year. You can also allocate a portion of your investment
to Sub-Accounts that may not be part of the model. You can only participate in
one asset allocation model at a time.
OTHER INFORMATION
- --------------------------------------------------------------------------------
ASSIGNMENT -- Ownership of this Contract is generally assignable. However, if
the Contract is issued to a tax qualified retirement plan, it is possible that
the ownership of the Contract may not be transferred or assigned. An assignment
of a Non-Qualified Contract may subject the Contract Values or Surrender Value
to income taxes and certain penalty taxes.
CONTRACT MODIFICATION -- The Annuitant may not be changed. However, if the
Annuitant is still living, the Contingent Annuitant may be changed at any time
prior to the Annuity Commencement Date by sending us written notice. We may
modify the Contract, but no modification will effect the amount or term of any
Contract unless a modification is required to conform the Contract to applicable
Federal or State law. No modification will effect the method by which Contract
Values are determined.
HOW CONTRACTS ARE SOLD -- Hartford Securities Distribution Company, Inc. ("HSD")
serves as Principal Underwriter for the securities issued with respect to the
Separate Account. HSD is registered with the Securities and Exchange Commission
under the Securities Exchange Act of 1934 as a Broker-Dealer and is a member of
the National Association of Securities Dealers, Inc. HSD is an affiliate of
ours. Both HSD and Hartford are ultimately controlled by The Hartford Financial
Services Group, Inc. The principal business address of HSD is the same as ours.
The securities will be sold by individuals who represent us as insurance agents
and who are registered representatives of Broker-Dealers that have entered into
distribution agreements with HSD.
Commissions will be paid by Hartford and will not be more than 7% of Premium
Payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on Premium Payments made by
policyholders
<PAGE>
28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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or Contract Owners. This compensation is usually paid from the sales charges
described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or Contract
Owners to purchase, hold or Surrender variable insurance products.
LEGAL MATTERS AND EXPERTS
There are no material legal proceedings pending to which the Separate Account is
a party.
Counsel with respect to federal laws and regulations applicable to the issue and
sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
Senior Vice President, General Counsel and Corporate Secretary, Hartford Life
and Annuity Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
MORE INFORMATION
You may call your Representative if you have any questions or write or call us
at the address below:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085.
Telephone: (800) 862-6668 (Contract Owners)
(800) 862-4397 (Account Executive)
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
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
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- - certain immediate annuities.
A non-natural person which is a tax-exempt entity for federal tax purposes will
not be subject to income tax as a result of this provision.
If the contract owner is a non-natural person, the primary annuitant is treated
as the contract owner in applying mandatory distribution rules. These rules
require that certain distributions be made upon the death of the contract owner.
A change in the primary annuitant is also treated as the death of the contract
owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract until an
amount is received or deemed received, e.g., in the form of a lump sum payment
(full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are summarized
briefly below. Also summarized are special rules affecting distributions from
Contracts obtained in a tax-free exchange for other annuity contracts or life
insurance contracts which were purchased prior to August 14, 1982.
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of the
Code.
ii. To the extent that the value of the Contract (ignoring any surrender
charges except on a full surrender) exceeds the "investment in the
contract," such excess constitutes the "income on the contract."
iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a partial surrender) is deemed to come first from any
such "income on the contract" and then from "investment in the contract,"
and for these purposes such "income on the contract" shall be computed by
reference to any aggregation rule in subparagraph 2.c. below. As a result,
any such amount received or deemed received (1) shall be includable in
gross income to the extent that such amount does not exceed any such
"income on the contract," and (2) shall not be includable in gross income
to the extent that such amount does exceed any such "income on the
contract." If at the time that any amount is received or deemed received
there is no "income on the contract" (e.g., because the gross value of the
Contract does not exceed the "investment in the contract" and no
aggregation rule applies), then such amount received or deemed received
will not be includable in gross income, and will simply reduce the
"investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not
apply, however, to certain transfers of property between spouses or incident
to divorce.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the
Annuity Commencement Date, any additional payments (including surrenders)
will be entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the
contract as of the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and
shall be fully includable in gross income. However, upon a full surrender
after such date, only the excess of the amount received (after any
surrender charge) over the remaining "investment in the 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.
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30 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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d. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract (before or
after the Annuity Commencement Date), the Code applies a penalty tax equal
to ten percent of the portion of the amount includable in gross income,
unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has attained the
age of 59 1/2.
2. Distributions made on or after the death of the holder or where the
holder is not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of substantially equal
periodic payments (not less frequently than annually) for the life (or
life expectancy) of the recipient (or the joint lives or life
expectancies of the recipient and the recipient's designated
Beneficiary).
5. Distributions of amounts which are allocable to the "investment in the
contract" prior to August 14, 1982 (see next subparagraph e.).
e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED PRIOR TO
AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life insurance or
annuity Contract purchased prior to August 14, 1982, then any amount received or
deemed received prior to the Annuity Commencement Date shall be deemed to come
(1) first from the amount of the "investment in the contract" prior to August
14, 1982 ("pre-8/14/82 investment") carried over from the prior Contract,
(2) then from the portion of the "income on the contract" (carried over to, as
well as accumulating in, the successor Contract) that is attributable to such
pre-8/14/82 investment, (3) then from the remaining "income on the contract" and
(4) last from the remaining "investment in the contract." As a result, to the
extent that such amount received or deemed received does not exceed such
pre-8/14/82 investment, such amount is not includable in gross income., In
addition, to the extent that such amount received or deemed received does not
exceed the sum of (a) such pre-8/14/82 investment and (b) the "income on the
contract" attributable thereto, such amount is not subject to the 10% penalty
tax. In all other respects, amounts received or deemed received from such post-
exchange Contracts are generally subject to the rules described in this
subparagraph 3.
f. REQUIRED DISTRIBUTIONS
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary provisions in ii
or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Contract has been distributed, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution being used as of the date of
such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract will be distributed within 5 years after
such death; and
3. If the Contract Owner is not an individual, then for purposes of 1. or
2. above, the primary annuitant under the Contract shall be treated as
the Contract Owner, and any change in the primary annuitant shall be
treated as the death of the Contract Owner. The primary annuitant is the
individual, the events in the life of whom are of primary importance in
affecting the timing or amount of the payout under the Contract.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in i. above is
payable to or for the benefit of a designated beneficiary, such beneficiary
may elect to have the portion distributed over a period that does not extend
beyond the life or life expectancy of the beneficiary. Distributions must be
made and payments must begin within a year of the Contract Owner's death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for the
benefit of his or her spouse, and the Annuitant or Contingent Annuitant is
living, such spouse shall be treated as the Contract Owner of such portion
for purposes of section i. above. This spousal continuation shall apply only
once for this contract.
3. DIVERSIFICATION REQUIREMENTS.
The Code requires that investments supporting your contract be adequately
diversified. Code Section 817 provides that a variable annuity contract will not
be treated as an annuity contract for any period during which the investments
made by the separate account or underlying 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,
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 31
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- - no more than 70% is represented by any two investments,
- - no more than 80% is represented by any three investments and
- - no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all securities of
the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In the
case of government securities, each government agency or instrumentality is
treated as a separate issuer.
A separate account must be in compliance with the diversification standards on
the last day of each calendar quarter or within 30 days after the quarter ends.
If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the taxation of contract income on an ongoing basis. However, either the company
or the contract owner must agree to pay the tax due for the period during which
the diversification requirements were not met.
We monitor the diversification of investments in the separate accounts and test
for diversification as required by the Code. We intend to administer all
contracts subject to the diversification requirements in a manner that will
maintain adequate diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT.
In order for a variable annuity contract to qualify for tax deferral, assets in
the separate accounts supporting the contract must be considered to be owned by
the insurance company and not by the contract owner. It is unclear under what
circumstances an investor is considered to have enough control over the assets
in the separate account to be considered the owner of the assets for tax
purposes.
The IRS has issued several rulings discussing investor control. These rulings
say that certain incidents of ownership by the contract owner, such as the
ability to select and control investments in a separate account, will cause the
contract owner to be treated as the owner of the assets for tax purposes.
In its explanation of the diversification regulations, the Treasury Department
recognized that the temporary regulations "do not provide guidance concerning
the circumstances in which investor control of the investments of a segregated
asset account may cause the investor, rather than the insurance company, to be
treated as the owner of the assets in the account." The explanation further
indicates that "the temporary regulations provide that in appropriate cases a
segregated asset account may include multiple sub-accounts, but do not specify
the extent to which policyholders may direct their investments to particular
sub-accounts without being treated as the owners of the underlying assets.
Guidance on this and other issues will be provided in regulations or revenue
rulings under Section 817(d), relating to the definition of variable contract."
The final regulations issued under Section 817 did not provide guidance
regarding investor control, and as of the date of this Prospectus, guidance has
yet to be issued. We do not know if additional guidance will be issued. If
guidance is issued, we do not know if it will have a retroactive effect.
Due to the lack of specific guidance on investor control, there is some
uncertainty about when a contract owner is considered the owner of the assets
for tax purposes. We reserve the right to modify the contract, as necessary, to
prevent you from being considered the owner of assets in the separate account.
D. FEDERAL INCOME TAX WITHHOLDING
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.
<PAGE>
32 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION
<S> <C>
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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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 33
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APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS
This summary does not attempt to provide more than general information about the
federal income tax rules associated with use of a Contract by a tax-qualified
retirement plan. Because of the complexity of the federal tax rules, owners,
participants and beneficiaries are encouraged to consult their own tax advisers
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>
34 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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amounts under the plan will be subject to the claims of the employer's general
creditors.
In general, distributions from an eligible Deferred Compensation Plan are
prohibited under section 457 of the Code unless made after the participating
employee:
- - attains age 70 1/2,
- - separates from service,
- - dies, or
- - suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Deferred Compensation
Plan under section 457 of the Code cannot be transferred or rolled over on a
tax-deferred basis except for certain transfers to other Deferred Compensation
Plans under section 457 in limited cases.
4. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS") UNDER SECTION 408
TRADITIONAL IRAS -- Eligible individuals can establish individual retirement
programs under section 408 of the Code through the purchase of an IRA. Section
408 imposes limits with respect to IRAs, including limits on the amount that may
be contributed to an IRA, the amount of such contributions that may be deducted
from taxable income, the persons who may be eligible to contribute to an IRA,
and the time when distributions commence from an IRA. Distributions from certain
tax-qualified retirement plans may be "rolled-over" to an IRA on a tax-deferred
basis.
SIMPLE IRAS -- Eligible employees may establish SIMPLE IRAs in connection with a
SIMPLE IRA plan of an employer under section 408(p) of the Code. Special
rollover rules apply to SIMPLE IRAs. Amounts can be rolled over from one SIMPLE
IRA to another SIMPLE IRA. However, amounts can be rolled over from a SIMPLE IRA
to a Traditional IRA only after two years have expired since the employee first
commenced participation in the employer's SIMPLE IRA plan. Amounts cannot be
rolled over to a SIMPLE IRA from a qualified plan or a Traditional IRA. Hartford
is a non-designated financial institution for purposes of the SIMPLE IRA rules.
ROTH IRAS -- Eligible individuals may establish Roth IRAs under section 408A of
the Code. Contributions to a Roth IRA are not deductible. Subject to special
limitations, a Traditional IRA may be converted into a Roth IRA or a
distribution from a Traditional IRA may be rolled over to a Roth IRA. However, a
conversion or a rollover from a Traditional IRA to a Roth IRA is not excludable
from gross income. If certain conditions are met, qualified distributions from a
Roth IRA are tax-free.
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 distribution 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 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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
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>
36 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 that you have recently purchased is subject to
certain restrictions imposed by the Tax Reform Act of 1986. Contributions to the
Contract after December 31, 1988 and any increases in cash value after
December 31, 1988 may not be distributed to you unless you have:
- - Attained age 59 1/2,
- - Separated from service,
- - Died, or
- - Become disabled.
Distributions of post December 31, 1988 contributions (excluding any income
thereon) may also be made if you have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made prior to age 59 1/2
because of financial hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than your annuity. Please refer to your Plan.
Please complete the following and return to:
Hartford Life and Annuity Insurance Company
Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Name of Contract Owner/Participant: ___________________________________________
Address: ______________________________________________________________________
City or Plan/School District: _________________________________________________
Date: _________________________________________________________________________
Contract No.: _________________________________________________________________
Signature: ____________________________________________________________________
<PAGE>
To obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Please send a Statement of Additional Information for [PRODUCT NAME] 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
[PRODUCT NAME]
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 Product Services, P.O. Box 5085, Hartford,
Connecticut 06102-5085.
Date of Prospectus: July 14, 2000
Date of Statement of Additional Information: July 14, 2000
33-80732
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
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......................................................
<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, Connecticut 06104-2999. We are ultimately
controlled by The Hartford Financial Services Group, Inc., one of the largest
financial service providers in the United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 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 registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as a Broker-Dealer and is a member of the
National Association of Securities Dealers, Inc. HSD is an affiliate of ours.
Both HSD and Hartford are ultimately controlled by The Hartford Financial
Services Group, Inc. The principal business address of HSD is the same as
ours. The securities will be sold by individuals who represent us as
insurance agents and who are registered representatives of Broker-Dealers
that have entered into distribution agreements with HSD.
Commissions will be paid by Hartford and will not be more than 7% of Premium
Payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a
schedule set forth by HSD and any applicable rules or regulations for
variable insurance compensation. Compensation is generally based on Premium
Payments made by policyholders or Contract Owners. This compensation is
usually paid from the sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance
products. These payments, which may be different for different
broker-dealers or financial institutions, will be made by HSD, its affiliates
or Hartford out of their own assets and will not effect the amounts paid by
the policyholders or Contract Owners to purchase, hold or Surrender variable
insurance products.
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the Contract
with an additional 5.0% of the Premium Payment. This additional percentage of
Premium Payment in no way affects present or future charges, rights, benefits
or current values of other Contract Owners. The following class of
individuals are eligible for this feature: (1) current or retired officers,
directors, trustees and employees (and their families) of the ultimate parent
and affiliates of Hartford; and (2) employees and registered representatives
(and their families) of registered broker-dealers (or their financial
institutions) that have a sales agreement with Hartford and its principal
underwriter to sell the Contracts.
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 commission paid to HSD in its role as Principal Underwriter has
been: 1999: $23,726,655; 1998: $11,655,729; and 1997: $17,944,107. HSD has
retained none of these commissions.
<PAGE>
CALCULATION OF YIELD AND RETURN
YIELD OF A MONEY MARKET SUB-ACCOUNT. As summarized in the Prospectus under
the heading "Performance Related Information," the yield of a Money Market
Sub-Account for a seven day period (the "base period") will be computed by
determining the "net change in value" of a hypothetical account having a
balance of one unit at the beginning of the period, dividing the net change
in account value by the value of the account at the beginning of the base
period to obtain the base period return, and multiplying the base period
return by 365/7 with the resulting yield figure carried to the nearest
hundredth of one percent. Net changes in value of a hypothetical account
will include net investment income of the account (accrued dividends as
declared by the underlying funds, less expense and Contract charges of the
account) for the period, but will not include realized gains or losses or
unrealized appreciation or depreciation on the underlying fund shares.
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from
the result, according to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
A Money Market Sub-Account's yield and effective yield will vary in response
to fluctuations in interest rates and in the expenses of the Sub-Account.
The current yield and effective yield reflect recurring charges on the
Separate Account level, including the maximum Annual Maintenance Fee.
YIELD AND EFFECTIVE YIELD FOR THE SEVEN DAY PERIOD ENDING DECEMBER 31, 1999.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
- -------------------------------------------------------------------------------
<S> <C> <C>
Money Market 4.02% 4.10%
- -------------------------------------------------------------------------------
</TABLE>
YIELD OF SUB-ACCOUNTS. As summarized in the Prospectus under the heading
"Performance Related Information," yields of Sub-Accounts will be computed by
annualizing a recent month's net investment income, divided by a Fund share's
net asset value on the last trading day of that month. Net changes in the
value of a hypothetical account will assume the change in the underlying
mutual fund's "net asset value per share" for the same period in addition to
the daily expense charge assessed, at the sub-account level for the
respective period. The Sub-Accounts' yields will vary from time to time
depending upon market conditions and, the composition of the underlying
funds' portfolios. Yield should also be considered relative to changes in the
value of the Sub-Accounts' shares and to the relative risks associated with
the investment objectives and policies of the underlying Fund.
<PAGE>
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL, INCLUDING
THE ANNUAL MAINTENANCE FEE.
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges
assessed against a Contract Owner's account over the base period. Yield
quotations based on a 30 day period were computed by dividing the dividends
and interest earned during the period by the maximum offering price per unit
on the last day of the period, according to the following formula:
Example:
6
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1) - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the
period that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the
period.
YIELD QUOTATION BASED ON A 30 DAY PERIOD ENDED DECEMBER 31, 1999.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SUB-ACCOUNT YIELD
- -------------------------------------------------------------------------------
<S> <C>
North American Government Securities 3.92%
- -------------------------------------------------------------------------------
Diversified Income 8.08%
- -------------------------------------------------------------------------------
High Yield 8.24%
- -------------------------------------------------------------------------------
Fixed Income 5.11%
- -------------------------------------------------------------------------------
</TABLE>
At any time in the future, yields and total return may be higher or lower
than past yields and there can be no assurance that any historical results
will continue.
CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the
heading "Performance Related Information", total return is a measure of the
change in value of an investment in a Sub-Account over the period covered.
The formula for total return used herein includes three steps: (1)
calculating the value of the hypothetical initial investment of $1,000 as of
the end of the period by multiplying the total number of units owned at the
end of the period by the unit value per unit on the last trading day of the
period; (2) assuming redemption at the end of the period and deducting any
applicable contingent deferred sales charge and (3) dividing this account
value for the hypothetical investor by the initial $1,000 investment and
annualizing the result for periods of less than one year. 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-Accounts.
<PAGE>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
SEPARATE SINCE INCEPTION
SUB-ACCOUNT ACCOUNT 1 YEAR 5 YEAR 10 YEAR OF SEPARATE
INCEPTION ACCOUNT
DATE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market 11/8/94 -5.68% 0.08% N/A -0.20%
- -----------------------------------------------------------------------------------------------------------------
North American Government
Securities 11/8/94 -7.04% -0.33% N/A -0.64%
- -----------------------------------------------------------------------------------------------------------------
Diversified Income 11/8/94 -12.20% 0.31% N/A 0.02%
- -----------------------------------------------------------------------------------------------------------------
Balanced Growth 11/8/94 -6.92% 9.79% N/A 9.26%
- -----------------------------------------------------------------------------------------------------------------
Utilities 11/8/94 32.72% 20.88% N/A 19.97%
- -----------------------------------------------------------------------------------------------------------------
Dividend Growth 11/8/94 -9.87% 17.47% N/A 16.58%
- -----------------------------------------------------------------------------------------------------------------
Value-Added Market 11/8/94 1.59% 14.61% N/A 13.57%
- -----------------------------------------------------------------------------------------------------------------
Growth 11/8/94 28.16% 17.60% N/A 16.82%
- -----------------------------------------------------------------------------------------------------------------
American Opportunities 11/8/94 44.65% 29.16% N/A 28.02%
- -----------------------------------------------------------------------------------------------------------------
Mid-Cap Equity 1/21/97 80.44% N/A N/A 27.88%
- -----------------------------------------------------------------------------------------------------------------
Global Equity 11/8/94 23.27% 11.55% N/A 10.65%
- -----------------------------------------------------------------------------------------------------------------
Developing Growth 11/8/94 80.85% 28.26% N/A 27.39%
- -----------------------------------------------------------------------------------------------------------------
Emerging Markets 11/8/94 71.99% 3.62% N/A 3.01%
- -----------------------------------------------------------------------------------------------------------------
High Yield 1/2/97 -3.38% N/A N/A 2.53%
- -----------------------------------------------------------------------------------------------------------------
Mid-Cap Value 1/2/97 9.44% N/A N/A 19.98%
- -----------------------------------------------------------------------------------------------------------------
Emerging Markets Debt 6/16/97 18.59% N/A N/A -10.31%
- -----------------------------------------------------------------------------------------------------------------
Emerging Markets Equity 10/1/96 83.97% N/A N/A 4.80%
- -----------------------------------------------------------------------------------------------------------------
Fixed Income 1/2/97 -11.99% N/A N/A -0.71%
- -----------------------------------------------------------------------------------------------------------------
Active International
Allocation 9/20/99 N/A N/A N/A 8.18%
- -----------------------------------------------------------------------------------------------------------------
Strategic Stock 11/3/97 -10.85% N/A N/A 0.64%
- -----------------------------------------------------------------------------------------------------------------
Enterprise 6/13/94 15.10% 24.50% N/A 20.75%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
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 for
one year, five years, and ten years or other periods. Non-standardized total
return is measured in the same manner as the standardized total return
described above, except that the contingent deferred sales charge and the
Annual Maintenance Fee are not deducted and the time periods used to
calculate return are based on the inception date of the underlying Funds.
Therefore, non-standardized total return for a Sub-Account is higher than
standardized total return for a Sub-Account.
The following are the non-standardized annualized total return quotations for
the Sub-Accounts.
<PAGE>
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
SUB-ACCOUNT INCEPTION 1 YEAR 5 YEAR 10 YEAR INCEPTION OF
DATE FUND
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market 11/8/94 3.32% 3.80% N/A 3.80%
- -----------------------------------------------------------------------------------------------------------------
North American Government
Securities 11/8/94 1.96% 3.40% N/A 3.39%
- -----------------------------------------------------------------------------------------------------------------
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%
- -----------------------------------------------------------------------------------------------------------------
Mid-Cap 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 11/8/94 80.99% 7.55% N/A 7.40%
- -----------------------------------------------------------------------------------------------------------------
High Yield 1/2/97 5.62% N/A N/A 6.92%
- -----------------------------------------------------------------------------------------------------------------
Mid-Cap 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% N/A
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
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.
<PAGE>
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. The total return and yield may also be used to
compare the performance of the Sub-Accounts against certain widely
acknowledged outside standards or indices for stock and bond market
performance. Index performance is not representative of the performance of
the Sub-Account to which it is compared and is not adjusted for commissions
and other costs. Portfolio holdings of the Sub-Account will differ from
those of the index to which it is compared. Performance comparison indices
include the following:
The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics, is
a commonly used measure of the rate of inflation. The index shows the
average change in the cost of selected consumer goods and services and does
not represent a return on an investment vehicle.
The Dow Jones Industrial Average is an unmanaged list of 30 common stocks
frequently used as a general measure of stock market performance. Its
performance figures reflect changes of market prices and reinvestment of all
distributions.
Lehman Brothers Corporate Bond Index is an unmanaged list of publicly issued,
fixed-rate, non-convertible investment-grade domestic corporate debt
securities frequently used as a general measure of the performance of
fixed-income securities. The average quality of bonds included in the index
may be higher than the average quality of those bonds in which a Fund
customarily invests. The index does not include bonds in certain of the
lower rating classifications in which a Fund may invest. The performance
figures of the index reflect changes in market prices and reinvestment of all
interest payments.
The Lehman Brothers Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury;
all publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
The Lehman Brothers Government/Corporate Bond Index (the "SL Government/
Corporate Index") is a measure of the market value of approximately 5,300
bonds with a face value currently in excess of $1.3 trillion. To be included
in the SL Government/Corporate Index, an issue must have amounts outstanding
in excess of $1 million, have at least one year to maturity and be rated
"Baa" or higher ("investment grade") by a nationally recognized rating
agency. The index does not include bonds in certain of the lower-rating
classifications in which a Fund may invest. Its performance figures reflect
changes in market prices and reinvestment of all interest payments.
<PAGE>
Morgan Stanley Capital International World Index is an unmanaged list of
approximately 1,450 equity securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand and the Far East, with
all values expressed in U.S. dollars. Performance figures reflect changes in
market prices and reinvestment of distributions net of withholding taxes.
The securities in the index change over time to maintain representativeness.
The NASDAQ-OTC Industrial Average (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate
market value of approximately 3,500 stocks relative to the base measure of
100.00 on February 5, 1971. The NASDAQ Index is composed entirely of common
stocks of companies traded over-the-counter and often through the National
Association of Securities Dealers Automated Quotations ("NASDAQ") system.
Only those over-the-counter stocks having only one market maker or traded on
exchanges are excluded. Its performance figures reflect changes of market
prices but do not reflect reinvestment of cash dividends.
Salomon Brothers Long-Term High-Grade Corporate Bond Index is an unmanaged
list of publicly traded corporate bonds having a rating of at least AA by
Standard & Poor's or Aa by Moody's and is frequently used as general measure
of the performance of fixed-income securities. The average quality of bonds
included in the index may be higher than the average quality of those bonds
in which a Fund may customarily invest. The index does not include bonds in
certain of the lower rating classifications in which a Fund may invest.
Performance figures for the index reflect changes of market prices and
reinvestment of all distributions.
The Salomon Brothers 7-10 Year Government Bond Index is an unmanaged list of
U.S. Government and government agency securities with maturities of 7 to 10
years. Performance figures for the index reflect changes of market prices
and reinvestment of all interest payments.
The Standard & Poor's Composite Index of 500 stocks (the "S&P 500") is a
market value-weighted and unmanaged index showing changes in the aggregate
market value of 500 stocks relative to the base period 1941-43. The S&P 500
is composed almost entirely of common stocks of companies listed on the New
York Stock Exchange, although the common stocks of a few companies listed on
the American Stock Exchange or traded over-the-counter are included. The 500
companies represented include 400 industrial, 60 transportation and 40
financial services concerns. The S&P 500 represents about 80% of the market
value of all issues traded on the New York Stock Exchange. Its performance
figures reflect changes of market prices and reinvestment of all regular cash
dividends.
The Standard & Poor's 40 Utilities Index is unmanaged list of 40 utility
stocks. The Index assumes reinvestment of all distributions and reflects
changes in market prices but does not take into account brokerage commissions
or other fees.
<PAGE>
PART C
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements included in Part A and Part B to be filed
by amendment.
(b) (1) Resolution of the Board of Directors of Hartford Life and
Annuity Insurance Company ("Hartford") authorizing 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.(1)
(5) Form of Application.(1)
(6) (a) Certificate of Incorporation of Hartford.(3)
(6) (b) Bylaws of Hartford.(2)
(7) Not applicable.
(8) Participation Agreement.(1)
(9) Opinion and Consent of Lynda Godkin, Senior Vice President,
General Counsel and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public
Accountants to be filed by amendment.
(11) No financial statements are omitted.
(12) Not applicable.
(13) Not applicable
(14) Not applicable
(15) Power of Attorney.(4)
(16) Organizational Chart.(4)
- ------------------
(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 May 1, 1996.
(3) Incorporated by reference to Post-Effective Amendment No. 5, to
the Registration Statement File No. 33-80732, dated April 13, 1998.
(4) Incorporated by reference to Post-Effective Amendment No. 9 to
the Registration Statement, File No. 33-80732, dated April 13,
2000.
<PAGE>
Item 25. Directors and Officers of the Depositor
<TABLE>
- -------------------------- ----------------------------------------------------------------------
NAME POSITION WITH HARTFORD
<S> <C>
- -------------------------- ----------------------------------------------------------------------
David A. Carlson Vice President
- -------------------------- ----------------------------------------------------------------------
Peter W. Cummins Senior Vice President
- -------------------------- ----------------------------------------------------------------------
Bruce W. Ferris Vice President
- -------------------------- ----------------------------------------------------------------------
Timothy M. Fitch Vice President & Actuary
- -------------------------- ----------------------------------------------------------------------
Mary Jane B. Fortin Vice President & Chief Accounting Officer
- -------------------------- ----------------------------------------------------------------------
David T. Foy Senior Vice President, Chief Financial Officer and 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 and Chief Investment Officer, Director*
- -------------------------- ----------------------------------------------------------------------
</TABLE>
Unless otherwise indicated, the principal business address of each of the above
individuals is P.O. Box 2999, Hartford, Connecticut 06104-2999.
*Denotes date of election to Board of Directors.
<PAGE>
Item 26. Persons Controlled By or Under Common Control with
the Depositor or Registrant
Filed herewith as Exhibit 16.
Item 27. Number of Contract Owners
As of February 28, 2000, there were 32,590 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
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
<PAGE>
(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 of the
above individuals is P. O. Box 2999, Hartford, Connecticut 06104-2999.
Item 30. Location of Accounts and Records
All the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and
rules thereunder are maintained by Hartford at 200 Hopmeadow
Street, Simsbury, Connecticut 06089.
Item 31. Management Services
All management contracts are discussed in Part A and Part B of
this Registration Statement.
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective
amendment to this Registration Statement as frequently as is
necessary to ensure that the audited financial statements in the
Registration Statement are never more than 16 months old so long
as payments under the variable annuity contracts may be accepted.
(b) The Registrant hereby undertakes to include either (1) as part of
any application to purchase a Contract offered by the Prospectus,
a space that an applicant can check to request a Statement of
Additional Information, or (2) a post card or similar written
communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional
Information.
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to be
made available under this Form promptly upon written or oral
request.
(d) Hartford hereby represents that the aggregate fees and charges
under the Contracts 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 Council of Life
Insurance, Ref. No. IP-6-88, November 28, 1988. The Registrant has
complied with conditions one through four of the no-action letter.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has duly caused this Registration Statement to be signed
on its behalf, in the Town of Simsbury, and State of Connecticut on this 17th
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, as amended, this
Registration Statement has been signed below by the following persons and in
the capacity and on the date 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, Director* *By: /s/ Marianne O'Doherty
Lowndes A. Smith, Chief Executive Officer, ----------------------
Director* Marianne O'Doherty
David M. Znamierowski, Senior Vice President Attorney-in-Fact
And Chief Investment Officer, Director*
Date: April 17, 2000
<PAGE>
EXHIBIT INDEX
(9) Opinion and Consent of Lynda Godkin, Senior Vice President, General
Counsel and Corporate Secretary.
<PAGE>
April 17, 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
INITIAL FILING
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 connection with the
registration of an indefinite amount of securities in the form of variable
annuity 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 validly 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.
<PAGE>
Board of Directors
Hartford Life and Annuity Insurance Company
April 17, 2000
Page 2
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,
/s/ Lynda Godkin
Lynda Godkin
