ITT HARTFORD LIFE & ANNUITY INSURANCE CO SEPARATE ACCT VL II, 497, 1999-05-05

ITT HARTFORD LIFE & ANNUITY INSURANCE CO SEPARATE ACCT VL II
497, 1999-05-05

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STAG VARIABLE LIFE LAST SURVIVOR
SEPARATE ACCOUNT VL II
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 2999
HARTFORD, CONNECTICUT 06104-2999
[LOGO] Telephone: (800) 231-5453

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This Prospectus describes information you should know before you purchase the
Stag Variable Life Last Survivor variable life insurance policy. Please read it
carefully.

Stag Variable Life Last Survivor is a contract between you and Hartford Life and
Annuity Insurance Company. You agree to make sufficient premium payments to us,
and we agree to pay a death benefit to your beneficiary. The policy is a last
survivor flexible premium variable life insurance policy. It is:

X Last survivor, because we pay a death benefit after the death of the last
surviving insured.

X Flexible premium, because you may add payments to your policy after the first
payment.

X Variable, because the value of your life insurance policy will fluctuate with
the performance of the investment options you select and the Fixed Account.

The following Sub-Accounts are available under the policy:

<TABLE>
<CAPTION>
SUB-ACCOUNT PURCHASES SHARES OF:
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<S> <C> <C>
Hartford Advisers Fund Sub-Account -- Class IA of Hartford Advisers HLS Fund, Inc.
Hartford Bond Fund Sub-Account -- Class IA of Hartford Bond HLS Fund, Inc.
Hartford Capital Appreciation Fund -- Class IA of Hartford Capital Appreciation HLS Fund, Inc.
Sub-Account
Hartford Dividend and Growth Fund -- Class IA of Hartford Dividend and Growth HLS Fund, Inc.
Sub-Account
Hartford Growth and Income Fund Sub-Account -- Class IA of Hartford Growth and Income HLS Fund of
Hartford Series Fund, Inc.
Hartford Index Fund Sub-Account -- Class IA of Hartford Index HLS Fund, Inc.
Hartford International Advisers Fund -- Class IA of Hartford International Advisers HLS Fund, Inc.
Sub-Account
Hartford International Opportunities Fund -- Class IA of Hartford International Opportunities HLS Fund,
Sub-Account Inc.
Hartford MidCap Fund Sub-Account -- Class IA of Hartford MidCap HLS Fund, Inc.
Hartford Mortgage Securities Fund -- Class IA of Hartford Mortgage Securities HLS Fund, Inc.
Sub-Account
Hartford Money Market Fund Sub-Account -- Class IA of Hartford Money Market HLS Fund, Inc.
Hartford Small Company Fund Sub-Account -- Class IA of Hartford Small Company HLS Fund, Inc.
Hartford Stock Fund Sub-Account -- Class IA of Hartford Stock HLS Fund, Inc.
Putnam VT Asia Pacific Growth Fund -- Class IA of Putnam VT Asia Pacific Growth Fund of the
Sub-Account Putnam Variable Trust
Putnam VT Diversified Income Fund -- Class IA of Putnam VT Diversified Income Fund of Putnam
Sub-Account Variable Trust
Putnam VT Global Asset Allocation Fund -- Class IA of Putnam VT Global Asset Allocation Fund of
Sub-Account Putnam Variable Trust
Putnam VT Global Growth Fund Sub-Account -- Class IA of Putnam VT Global Growth Fund of Putnam
Variable Trust
Putnam VT Growth and Income Fund Sub-Account -- Class IA of Putnam VT Growth and Income Fund of Putnam
Variable Trust
Putnam VT Health Sciences Fund Sub-Account -- Class IA of Putnam VT Health Sciences Fund of Putnam
Variable Trust
Putnam VT High Yield Fund Sub-Account -- Class IA of Putnam VT High Yield Fund of Putnam Variable
Trust
Putnam VT Income Fund Sub-Account (formerly -- Class IA of Putnam VT Income Fund of Putnam Variable Trust
known as Putnam VT U.S. Government and
High Quality Bond Fund Sub-Account)
Putnam VT International Growth Fund -- Class IA of Putnam VT International Growth Fund of Putnam
Sub-Account Variable Trust
</TABLE>
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<TABLE>
<CAPTION>
SUB-ACCOUNT PURCHASES SHARES OF:
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Putnam VT International Growth and Income -- Class IA of Putnam VT International Growth and Income Fund
Fund Sub-Account of Putnam Variable Trust
<S> <C> <C>
Putnam VT International New Opportunities -- Class IA of Putnam VT International New Opportunities Fund
Fund Sub-Account of Putnam Variable Trust
Putnam VT Investors Fund Sub-Account -- Class IA of Putnam VT Investors Fund of Putnam Variable
Trust
Putnam VT Money Market Fund Sub-Account -- Class IA of Putnam VT Money Market Fund of Putnam Variable
Trust
Putnam VT New Opportunities Fund Sub-Account -- Class IA of Putnam VT New Opportunities Fund of Putnam
Variable Trust
Putnam VT New Value Fund Sub-Account -- Class IA of Putnam VT New Value Fund of Putnam Variable
Trust
Putnam VT OTC & Emerging Growth Fund -- Class IA of Putnam VT OTC & Emerging Growth Fund of Putnam
Sub-Account Variable Trust
Putnam VT The George Putnam Fund of Boston -- Class IA of Putnam VT The George Putnam Fund of Boston of
Sub-Account Putnam Variable Trust
Putnam VT Utilities Growth and Income Fund -- Class IA of Putnam VT Utilities Growth and Income Fund of
Sub-Account Putnam Variable Trust
Putnam VT Vista Fund Sub-Account -- Class IA of Putnam VT Vista Fund of Putnam Variable Trust
Putnam VT Voyager Fund Sub-Account -- Class IA of Putnam VT Voyager Fund of Putnam Variable
Trust
Fidelity VIP Equity-Income Portfolio -- Fidelity VIP Equity-Income Portfolio of Variable Insurance
Sub-Account Products Fund
Fidelity VIP Overseas Portfolio Sub-Account -- Fidelity VIP Overseas Portfolio of Variable Insurance
Products Fund
Fidelity VIP II Asset Manager Portfolio -- Fidelity VIP II Asset Manager Portfolio of Variable
Sub-Account Insurance Products Fund II
</TABLE>

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The policy may not be available for sale in all states.

This Prospectus can also be obtained from the Securities and Exchange
Commissions' website (HTTP://WWW.SEC.GOV).

This life insurance policy IS NOT:

- a bank deposit or obligation

- federally insured

- endorsed by any bank or governmental agency
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PROSPECTUS DATED: MAY 3, 1999
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF BENEFITS AND RISKS......................................... 4
FEE TABLES............................................................ 5
ABOUT US.............................................................. 7
Hartford Life and Annuity Insurance Company......................... 7
Separate Account VL II.............................................. 7
The Funds........................................................... 7
CHARGES AND DEDUCTIONS................................................ 10
YOUR POLICY........................................................... 13
PREMIUMS.............................................................. 15
DEATH BENEFITS AND POLICY VALUES...................................... 16
MAKING WITHDRAWALS FROM YOUR POLICY................................... 18
LOANS................................................................. 18
LAPSE AND REINSTATEMENT............................................... 19
TAXES................................................................. 20
LEGAL PROCEEDINGS..................................................... 23
OTHER MATTERS......................................................... 23
GLOSSARY OF SPECIAL TERMS............................................. 25
WHERE YOU CAN FIND MORE INFORMATION................................... 26
</TABLE>
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4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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SUMMARY OF BENEFITS
AND RISKS

BENEFITS OF YOUR POLICY

FLEXIBILITY -- The policy is designed to be flexible to meet your specific
life insurance needs. You have the flexibility to choose death benefit options,
investment options, and premiums you pay.

DEATH BENEFIT -- While the policy is inforce and when the last surviving
insured dies, we pay a death benefit to your beneficiary. You select one of
three death benefit options:

X LEVEL OPTION: The death benefit equals the current Face Amount.

X RETURN OF ACCOUNT VALUE OPTION: The death benefit is the current Face Amount
plus the Account Value of your policy;

X RETURN OF PREMIUM OPTION: The death benefit is the current Face Amount plus
the total of your premium payments.

The death benefit is reduced by any money you owe us, such as outstanding
loans, loan interest, or unpaid charges. You may change your death benefit
option under certain circumstances. You may increase or decrease the Face Amount
on your policy under certain circumstances.

INVESTMENT OPTIONS -- You may invest in up to 9 different investment choices
within your policy, from a choice of 36 investment options and a Fixed Account.
You may transfer money among your investment choices, subject to restrictions.

PREMIUM PAYMENTS -- You have the flexibility to choose how you pay premiums.
You choose a planned premium when you purchase the policy. You may change your
planned premium, or pay additional premium any time, subject to certain
limitations.

RIGHT TO EXAMINE YOUR POLICY -- You have a limited right to return the
policy for cancellation after purchase. See "Making Withdrawals From Your Policy
- -- Right to Examine a Policy."

RIGHT TO EXCHANGE YOUR POLICY -- During the first 24 months after your
policy is issued, you may exchange it, without submitting proof of insurability,
for a non-variable last survivor life insurance policy offered by us on the life
of the insureds.

SURRENDER -- You may surrender your policy at any time prior to the maturity
date for its Cash Surrender Value. You may make a partial surrender once per
month, subject to certain minimums. (See "Risks of Your Policy," below).

LOANS -- You may take a loan on the policy. The policy secures the loan.

SETTLEMENT OPTIONS -- You or your beneficiary may choose to receive the
proceeds of the policy over a period of time by using one of several settlement
options.

OPTIONAL COVERAGE -- You may add other coverages to your policy. See "Your
Policy -- Other Benefits."

WHAT DOES YOUR PREMIUM PAY FOR?

Your premium pays for three things. It pays for insurance coverage, it acts
as an investment in the Sub-Accounts, and it pays for sales loads and other
charges.

RISKS OF YOUR POLICY

INVESTMENT PERFORMANCE -- The value of your policy will fluctuate with the
performance of the investment options you choose. Your investment options may
decline in value, or they may not perform to your expectations. Your policy
values in the Sub-Accounts are not guaranteed.

UNSUITABLE FOR SHORT-TERM SAVINGS -- The policy is designed for long term
financial planning. You should not purchase the policy if you will need the
premium payment in a short time period.

RISK OF LAPSE -- Your policy could terminate if the value of the policy
becomes too low to support the policy's monthly charges. If this occurs, we will
notify you in writing. You will then have a 61-day grace period to pay
additional amounts to prevent the policy from terminating.

WITHDRAWAL LIMITATIONS -- You are limited to one partial surrender per
month. Withdrawals will reduce your policy's death benefit.

TRANSFER LIMITATIONS -- We reserve the right to limit the size of transfers
and remaining balances, and to limit the number and frequency of transfers among
your investment options and the Fixed Account.

LOANS -- Taking a loan from your policy may increase the risk that your
policy will lapse, will have a permanent effect on the policy's Account Value,
and will reduce the death proceeds.

ADVERSE TAX CONSEQUENCES -- You may be subject to income tax if you receive
any loans, withdrawals or other amounts from the policy, and you may be subject
to a 10% penalty tax. Under certain circumstances (usually if you prefund future
benefits in seven years or less), your policy may become a modified endowment
policy under federal tax law. If these circumstances were to occur, loans and
other pre-death distributions are includable in gross income on an income first
basis, and may be subject to a 10% penalty (unless you have attained age
59 1/2). You should consult with a tax adviser before taking steps that may
affect whether your policy becomes a modified endowment policy. See "Taxes."
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
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FEE TABLES

The following tables describe the MAXIMUM fees and expenses that you will
pay when buying, owning, and surrendering the policy. The first table describes
the maximum fees and expenses that you will pay at the time that you buy the
policy, surrender the policy, or transfer cash value between investment options.

TRANSACTION FEES

<TABLE>
<CAPTION>
POLICIES FROM WHICH
CHARGE WHEN CHARGE IS DEDUCTED AMOUNT DEDUCTED CHARGE IS DEDUCTED
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<S> <C> <C> <C>
Sales Charge When you pay premium. Premiums attributable to the Basic All
Face Amount up to the Target
Premium.
Policy
Year Percent
1 50%
2-5 15%
6-10 10%
11-20 2%
20+ 2%
Premiums attributable to the Basic
Face Amount in excess of the
Target Premium:
Policy
Year Percent
1 9%
2-10 4%
11-20 2%
20+ 2%
Premiums attributable to the
Supplemental Fact Amount:
Policy
Year Percent
1-10 4%
11-20 2%
20+ 2%
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Premium Tax Charge When you pay premium. A percent of premium which varies All
by your state and municipality of
residence. The range of premium
tax charge is generally between 0%
and 4%.
This rate will change if your
state or municipality changes its
premium tax charges. It may change
if you change your state or
municipality of residence.
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Federal Tax Charge When you pay premium. 1.25% of each premium payment. All
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Premium Processing When you pay premium. 1.25% of each premium payment. All
Charge
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Unscheduled Face Each month for five (5) years $0.05 per $1,000 of unscheduled Policies where the owner has made
Amount Increase Fee beginning on the effective date of face amount increase. an unscheduled increase.
any unscheduled increase in Face
Amount you request.
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Transfer Fees When you make a transfer after the $25 per transfer. Those policies with more than one
first transfer in any month. transfer per month.
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Withdrawal Charge When you take a withdrawal. $50 per withdrawal. Those policies where the owner has
made a withdrawal.
</TABLE>

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6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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The next table describes the MAXIMUM fees and expenses that you will pay
periodically during the time that you own the policy, not including Fund fees
and expenses.

CHARGES OTHER THAN FUND OPERATING EXPENSES

<TABLE>
<CAPTION>
POLICIES FROM WHICH
CHARGE WHEN CHARGE IS DEDUCTED AMOUNT DEDUCTED CHARGE IS DEDUCTED
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<S> <C> <C> <C>
Cost of Insurance Monthly. The charge is the maximum cost of All
Charges insurance rate times the net
amount at risk. Maximum cost of
insurance rates are
individualized, depending on the
insureds' issue ages, sexes,
insurance classes, substandard
ratings, and age of the policy.
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Mortality and Expense Monthly. Policy Years 1-10: All
Risk Charge 0.80% of the Sub-Account
accumulated value.
Policy Years 11+
0.80% of the first $100,000 of
accumulated Sub-Account value. For
the remaining Sub-Account value,
0.40% of Sub-Account value
attributable to the Basic Face
Amount, and 0.50% of Sub-Account
value attributable to the
Supplemental Face Amount.
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Administrative Charge Monthly. Years 1-5 All
$10 per month plus $0.03 per month
per $1,000 of Basic Face Amount at
the policy issue date, and $15 per
month plus $0.05 per month per
$1,000 of Supplemental Face Amount
at the policy issue date.
Years 6+:
$10
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Issue Charge Monthly. $20 per month for the first five All
policy years plus $0.05 per $1,000
of Face Amount at the date of
policy issue or unscheduled
Supplemental Face Amount increase
per month for the first five years
from the date of policy issue or
the date of increase.
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Special Class Charge Monthly. Individualized based on a special Only those Policies with benefits
insurance class rating. rated for a special class.
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Rider Charges Monthly. Individualized based on optional Only those policies with benefits
rider selected. provided by rider.
</TABLE>

The next table describes the Fund fees and expenses that you will pay
periodically during the time that you own the policy. The table shows the
minimum and maximum fees and expenses charged by any of the Funds. More detail
concerning each Fund's fees and expenses is contained in the prospectus for each
Fund.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
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ANNUAL FUND OPERATING EXPENSES

ABOUT US

HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY

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

HARTFORD'S RATINGS

<TABLE>
<CAPTION>
EFFECTIVE
DATE OF
RATING AGENCY RATING RATING BASIS OF RATING
- -------------------- ------------- ------ -----------------------
<S> <C> <C> <C>
A.M. Best and
Company, Inc........ 1/1/99 A+ Financial performance
Insurer financial
Standard & Poor's... 6/1/98 AA strength
Duff & Phelps....... 12/21/98 AA+ Claims paying ability
</TABLE>

SEPARATE ACCOUNT VL II

The Sub-Accounts are subdivisions of our separate account, called Separate
Account VL II. The Separate Account exists to keep your life insurance policy
assets separate from our company assets. As such, the investment performance of
the Separate Account is independent from the investment performance of
Hartford's other assets. Hartford's other assets are utilized to pay you
insurance obligations under the policy. Your assets in the Separate Account are
held exclusively for your benefit and may not be used for any other liability of
Hartford. Separate Account VL II was established on September 30, 1994 under the
laws of Connecticut.

THE FUNDS

The Sub-Accounts of the Separate Account purchase shares of mutual funds set
up exclusively for variable annuity and variable life insurance products. These
funds are not the same mutual funds that you buy through your stockbroker or
through a retail mutual fund, but they may have similar investment strategies
and the same portfolio managers as retail mutual funds. You choose the Sub-
Accounts that meet your investment style.

We do not guarantee the investment results of any of the underlying Funds.
Since each underlying Fund has different investment objectives, each is subject
to different risks. These risks and the Funds' expenses are described in the
prospectuses for the Funds, which are attached to this Prospectus, and the
Funds' Statements of Additional Information, which may be ordered from us. You
should read the following investment objectives and the prospectuses for each of
the Funds listed below for detailed information about each Fund before
investing. All Funds may not be available in all states.

You may also allocate some or all of your premium payments to the "Fixed
Account," which pays a declared interest rate. See "The Fixed Account."

HARTFORD ADVISERS HLS FUND -- Seeks maximum long-term total rate of return
by investing in common stocks and other equity securities, bonds and other debt
securities, and
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8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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money market instruments. Sub-advised by Wellington Management.

HARTFORD BOND HLS FUND -- Seeks maximum current income consistent with
preservation of capital by investing primarily in investment grade fixed-income
securities. Up to 20% of the total assets of this Fund may be invested in debt
securities rated in the highest category below investment grade ("Ba" by Moody's
Investor Services, Inc. or "BB" by Standard & Poor's) or, if unrated, are
determined to be of comparable quality by the Fund's investment adviser.
Securities rated below investment grade are commonly referred to as "high
yield-high risk securities" or "junk bonds." For more information concerning the
risks associated with investing in such securities, please refer to the section
in the accompanying prospectus for the Funds entitled "Hartford Bond HLS Fund,
Inc." Sub-advised by HIMCO.

HARTFORD CAPITAL APPRECIATION HLS FUND -- Seeks growth of capital by
investing in equity securities selected solely on the basis of potential for
capital appreciation. Sub-advised by Wellington Management.

HARTFORD DIVIDEND AND GROWTH HLS FUND -- Seeks a high level of current
income consistent with growth of capital by investing primarily in dividend
paying equity securities. Sub-advised by Wellington Management.

HARTFORD GROWTH AND INCOME HLS FUND -- Seeks growth of capital and current
income by investing primarily in equity securities with earnings growth
potential and steady or rising dividends. Sub-advised by Wellington Management.

HARTFORD INDEX HLS FUND -- Seeks to provide investment results which
approximate the price and yield performance of publicly-traded common stocks in
the aggregate, as represented by the Standard & Poor's 500 Composite Stock Price
Index.* Sub-advised by HIMCO.

HARTFORD INTERNATIONAL ADVISERS HLS FUND -- Seeks maximum long-term total
return by investing in a portfolio of equity, debt and money market securities.
Securities in which the Fund invests primarily will be denominated in non-U.S.
currencies and will be traded in non-U.S. markets. Sub-advised by Wellington
Management.

HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND -- Seeks growth of capital by
investing primarily in equity securities issued by non-U.S. companies.
Sub-advised by Wellington Management.

HARTFORD MIDCAP HLS FUND -- Seeks to achieve long-term capital growth
through capital appreciation by investing primarily in equity securities of
companies with market capitalizations within the range represented by the
Standard & Poor's MidCap 400 Index. Sub-advised by Wellington Management.

HARTFORD MONEY MARKET HLS FUND -- Seeks maximum current income consistent
with liquidity and preservation of capital. Sub-advised by HIMCO.

HARTFORD MORTGAGE SECURITIES HLS FUND -- Seeks maximum current income
consistent with safety of principal and maintenance of liquidity by investing
primarily in mortgage-related securities, including securities issued by the
Government National Mortgage Association. Sub-advised by HIMCO.

HARTFORD SMALL COMPANY HLS FUND -- Seeks growth of capital by investing
primarily in equity securities within a range represented by the Russell 2000
Index selected on the basis of potential for capital appreciation. Sub-advised
by Wellington Management.

HARTFORD STOCK HLS FUND -- Seeks long-term growth of capital by investing
primarily in equity securities. Sub-advised by Wellington Management.

PUTNAM VT ASIA PACIFIC GROWTH FUND -- Seeks capital appreciation by
investing primarily in securities of companies located in Asia and in the
Pacific Basin. The fund's investments will normally include common stocks,
preferred stocks, securities convertible into common stocks or preferred stocks,
and warrants to purchase common stocks or preferred stocks.

PUTNAM VT DIVERSIFIED INCOME FUND -- Seeks high current income consistent
with capital preservation by investing in the following three sectors of the
fixed income securities markets: a U.S. Government and Investment Grade Sector,
a High Yield Sector (which invests primarily in securities commonly known as
"junk bonds"), and an International Sector. See the special considerations for
investments in high yield securities described in the Fund prospectus.

PUTNAM VT THE GEORGE PUTNAM FUND OF BOSTON -- Seeks to provide a balanced
investment composed of a well-diversified portfolio of stocks and bonds which
will produce both capital growth and current income.

PUTNAM VT GLOBAL ASSET ALLOCATION FUND -- Seeks a high level of long-term
total return consistent with preservation of capital by investing in U.S.
equities, international equities, U.S. fixed income securities, and
international fixed income securities.

* "STANDARD & POOR'S-REGISTERED TRADEMARK-" "S&P-REGISTERED TRADEMARK-" "S&P
500-REGISTERED TRADEMARK-" "STANDARD & POOR'S 500," AND "500" ARE TRADEMARKS
OF THE MCGRAW-HILL COMPANIES, INC. AND HAVE BEEN LICENSED FOR USE BY HARTFORD
LIFE AND ANNUITY INSURANCE COMPANY. THE HARTFORD INDEX FUND, INC. ("INDEX
FUND") IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S AND
STANDARD & POOR'S MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF
INVESTING IN THE INDEX FUND.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
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PUTNAM VT GLOBAL GROWTH FUND -- Seeks capital appreciation through a
globally diversified portfolio of common stocks.

PUTNAM VT GROWTH AND INCOME FUND -- Seeks capital growth and current income
by investing primarily in common stocks that offer potential for capital growth,
current income, or both.

PUTNAM VT HEALTH SCIENCES FUND -- Seeks capital appreciation by investing
primarily in common stocks and other securities of companies in the health
sciences industries.

PUTNAM VT HIGH YIELD FUND -- Seeks high current income and, when consistent
with this objective, a secondary objective of capital growth, by investing
primarily in high-yielding, lower-rated fixed income securities, constituting a
portfolio which Putnam Management believes does not involve undue risk to income
or principal. See the special considerations for investments in high yield
securities described in the Fund prospectus.

PUTNAM VT INCOME FUND (FORMERLY KNOWN AS PUTNAM VT U.S. GOVERNMENT AND HIGH
QUALITY BOND FUND) -- Seeks high current income consistent with what Putnam
Management believes to be prudent risk. The Fund will normally invest mostly in
bonds and other debt securities, and, to a lesser degree, in preferred stocks.

PUTNAM VT INTERNATIONAL GROWTH FUND -- Seeks capital appreciation by
investing primarily in equity securities of companies located in a country other
than the United States.

PUTNAM VT INTERNATIONAL GROWTH AND INCOME FUND -- Seeks capital growth, and
a secondary objective of high current income by investing primarily in common
stocks that Putnam Management believes offer potential for capital growth and
may, when consistent with its investment objectives, invest in common stocks
that Putnam Management believes offer potential for current income. Under normal
market conditions, the fund expects to invest substantially all of its assets in
securities principally traded on markets outside the United States.

PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND -- Seeks long term capital
appreciation by investing in companies that have above-average growth prospects
due to the fundamental growth of their market sector. Under normal market
conditions, the fund expects to invest substantially all of its total assets,
other than cash or short-term investments held pending investment, in common
stocks, preferred stocks, convertible preferred stocks, convertible bonds and
other equity securities principally traded in securities markets outside the
United States.

PUTNAM VT INVESTORS FUND -- Seeks long-term growth of capital and any
increased income that results from this growth by investing primarily in common
stocks that Putnam Management believes afford the best opportunity for capital
growth over the long term.

PUTNAM VT MONEY MARKET FUND -- Seeks as high a rate of current income as
Putnam Management believes is consistent with preservation of capital and
maintenance of liquidity by investing in high-quality money market instruments.

PUTNAM VT NEW OPPORTUNITIES FUND -- Seeks long-term capital appreciation by
investing principally in common stocks of companies in sectors of the economy
which Putnam Management believes possess above-average long-term growth
potential.

PUTNAM VT NEW VALUE FUND -- Seeks long-term capital appreciation by
investing primarily in common stocks that Putnam Management believes are
undervalued at the time of purchase and have the potential for long-term capital
appreciation.

PUTNAM VT OTC & EMERGING GROWTH FUND -- Seeks capital appreciation by
investing primarily in common stocks that Putnam Management believes have
potential for capital appreciation significantly greater than that of market
averages.

PUTNAM VT UTILITIES GROWTH AND INCOME FUND -- Seeks capital growth and
current income by concentrating its investments in debt and equity securities
issued by companies in the public utilities industries.

PUTNAM VT VISTA FUND -- Seeks capital appreciation by investing in a
diversified portfolio of common stocks which Putnam Management believes have the
potential for above-average capital appreciation.

PUTNAM VT VOYAGER FUND -- Seeks capital appreciation by investing primarily
in common stocks of companies that Putnam Management believes have potential for
capital appreciation that is significantly greater than that of market averages.

FIDELITY VIP EQUITY-INCOME PORTFOLIO -- Seeks reasonable income by investing
primarily in income-producing equity securities. In choosing these securities,
the Portfolio Manager will also consider the potential for capital appreciation.
The Portfolio's goal is to achieve a yield which exceeds the composite yield on
the securities comprising the Standard & Poor's Index 500.

In addition, the Portfolio may invest in high yield, lower-rated securities
(commonly referred to as "junk bonds") which are subject to greater risk than
investments in higher-rated securities. For a further discussion of lower-rated
securities, see "Risks of Lower-Rated Debt Securities" in the Fidelity
prospectus for this Portfolio.
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10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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FIDELITY VIP OVERSEAS PORTFOLIO -- Seeks long-term growth of capital
primarily through investments in foreign securities and provides a means for
aggressive investors to diversify their own portfolios by participating in
companies and economies outside of the United States.

International funds have increased economic and political risks as they are
exposed to events and factors in the various world markets. These risks may be
greater for funds that invest in emerging markets.

FIDELITY VIP II ASSET MANAGER PORTFOLIO -- Seeks high total return with
reduced risk over the long-term by allocating its assets among stocks, bonds and
short-term money market instruments.

INVESTMENT ADVISERS -- HL Investment Advisors, LLC is investment adviser for
the Hartford Funds. Wellington Management Company, LLP ("Wellington Management")
is investment sub-adviser for Hartford Advisers HLS Fund, Inc., Hartford Capital
Appreciation HLS Fund, Inc., Hartford Dividend and Growth HLS Fund, Inc.,
Hartford Growth and Income HLS Fund, Hartford International Advisers HLS Fund,
Inc., Hartford International Opportunities HLS Fund, Inc., Hartford MidCap HLS
Fund, Inc., Hartford Small Company HLS Fund, Inc., and Hartford Stock HLS Fund,
Inc. The Hartford Investment Management Company, Inc. ("HIMCO") is investment
sub-adviser for Hartford Bond HLS Fund, Inc., Hartford Index HLS Fund, Inc.,
Hartford Mortgage Securities HLS Fund, Inc., and Hartford Money Market HLS Fund,
Inc. Each Hartford Fund, except for the Hartford Growth and Income HLS Fund, is
a separate Maryland corporation registered with the Securities and Exchange
Commission as an open-end management investment company. The Hartford Growth and
Income HLS Fund is a diversified series of Hartford Series Fund, Inc., a
Maryland corporation, also registered with the Securities and Exchange
Commission as an open-end management investment company. The shares of each Fund
have been divided into Class IA and Class IB. Only Class IA shares are available
in this policy.
Putnam Investment Management, Inc. ("Putnam Management") serves as the
investment manager for the Putnam Funds. Putnam Management is ultimately
controlled by Marsh & McLennan Companies, Inc., a publicly owned holding company
whose principal businesses are international insurance brokerage and employee
benefit consulting.

Fidelity Management & Research Company is investment adviser for the
Fidelity VIP Funds.

MIXED AND SHARED FUNDING -- Shares of the Funds may be sold to our other
separate accounts and our insurance company affiliates or other unaffiliated
insurance companies to serve as the 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 policy owners, and of owners of
other contracts whose contract values are allocated to one or more of these
other separate accounts investing in any one of the Funds. In the event of any
such material conflicts, we will consider what action may be appropriate,
including removing the Fund from the Separate Account or replacing the Fund with
another underlying fund. There are certain risks associated with mixed and
shared funding, as disclosed in the prospectuses for the Funds.

VOTING RIGHTS -- For Sub-Accounts in which you have invested, we will notify
you of shareholder's meetings of the Funds purchased by those Sub-Accounts. We
will send you proxy materials and instructions for you to vote the shares held
for your benefit by those Sub-Accounts. We will arrange for the handling and
tallying of proxies received from you or other policy owners. If you give no
instructions, we will vote those shares in the same proportion as shares for
which we received instructions.

THE FIXED ACCOUNT

You may allocate amounts to the Fixed Account. The Fixed Account is not a
part of the Separate Account, but is a part of our general assets. As such, the
Fixed Account (and this description of the Fixed Account) is not subject to the
same securities laws as the Separate Account.

The Fixed Account credits at least 4% per year. We are not obligated to, but
may, credit more than 4% per year. If we do, such rates are determined at our
sole discretion. You assume the risk that, at any time, the Fixed Account may
credit no more than 4%.

CHARGES AND DEDUCTIONS

DEDUCTIONS FROM PREMIUM

Before your premium is allocated to the Sub-Accounts and/or the Fixed
Account, we deduct a percentage from your premium for a sales load and a premium
tax charge. The amount allocated after the deductions is called your Net
Premium.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
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FRONT-END SALES LOAD -- We deduct a front-end sales load from each premium
you pay. The front-end sales load is based on:

1) the amount of premium paid in relation to the Target Premium;

2) the policy year in which the premium is paid; and

3) the amount of the premium Attributable to the Basic Face Amount and to the
Supplemental Face Amount.

Both current and maximum front-end sales loads for premiums Attributable to
the Basic Face Amount up to the Target Premium are:

- - 50% in the first policy year;

- - 15% in policy years 2 through 5;

- - 10% in policy years 6 through 10; and

- - 2% in policy years 11 through 20.

Thereafter, the current front-end sales load is 0%, with a maximum of 2%.

Both current and maximum front-end sales loads for premiums Attributable to
the Basic Face Amount in excess of the Target Premium are:

- - 9% in policy year 1;

- - 4% in policy years 2 through 10; and

- - 2% in policy years 11 through 20.

Thereafter, the current front-end sales load is 0%, with a maximum of 2%.

Both current and maximum front-end sales loads for all premiums Attributable
to the Supplemental Face Amount is:

- - 4% in policy years 1 through 10; and

- - 2% in policy years 11 through 20.

Thereafter, the current front-end sales load is 0%, with a maximum of 2%.

PREMIUM TAX CHARGE -- We deduct a premium tax charge from each premium you
pay. The premium tax charge covers taxes assessed against us by a state and/or
other governmental entity. The range of such charge generally is between 0% and
4%.

FEDERAL TAX CHARGE -- We deduct a 1.25% charge from each premium payment to
cover the estimated costs to us of the federal income tax treatment of the
Policies' deferred acquisition costs under Section 848 of the Code. We have
determined that this charge is reasonable in relation to our increased federal
income tax burden resulting from the receipt of premiums.

PREMIUM PROCESSING CHARGE -- We deduct a 1.25% charge from each premium
payment for premium collection costs and premium and policy processing costs.

DEDUCTIONS FROM ACCOUNT VALUE

MONTHLY DEDUCTION AMOUNTS -- Each month we will deduct an amount from your
Account Value to pay for the benefits provided by your policy. This amount is
called the Monthly Deduction Amount and equals the sum of:

- - the charge for the cost of insurance;

- - the mortality and expense risk charge;

- - the monthly administrative charge;

- - the issue charge;

- - charges for "special" insurance class rating, if any;

- - any charges for additional benefits provided by rider;

- - any Face Amount increase fee;

Each Monthly Deduction Amount will be deducted pro rata from the Fixed
Account and each of the Sub-Accounts. The Monthly Deduction Amount will vary
from month to month.

COST OF INSURANCE CHARGE -- The charge for the cost of insurance equals:

(i) the cost of insurance rate per $1,000, multiplied by

(ii) the amount at risk, divided by

(iii) $1,000.

On any Monthly Activity Date, the amount at risk equals the Death Benefit
less the Account Value on that date, prior to assessing the Monthly Deduction
Amount.

Cost of insurance rates will be determined on each policy anniversary based
on our future expectations of such factors as mortality, expenses, interest,
persistency and taxes. For standard risks, the cost of insurance rates will not
exceed those based on the 1980 Commissioners' Standard Ordinary Mortality Table
(ALB), Male or Female, Nonsmoker or Smoker Table, age last birthday (unisex
rates may be required in some states). A table of guaranteed cost of insurance
rates per $1,000 will be included in your policy, however, we reserve the right
to use rates less than those shown in the table. Substandard risks will be
charged higher cost of insurance rates that will not exceed rates based on a
multiple of 1980 Commissioners' Standard Ordinary Mortality Table (ALB), Male or
Female, Nonsmoker or Smoker Table, age last birthday (unisex rates may be
required in some states) plus any flat extra amount assessed. The multiple will
be based on the insured's substandard rating.
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12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Any changes in the cost of insurance rates will be made uniformly for all
insureds of the same issue ages, sexes, risk classes and whose coverage has been
in-force for the same length of time. No change in insurance class or cost will
occur on account of deterioration of the insureds' health.

Because your Account Value and death benefit may vary from month to month,
the cost of insurance may also vary on each Monthly Activity Date. The cost of
insurance depends on your policy's amount at risk. Items which may affect the
amount at risk include the amount and timing of premium payments, investment
performance, fees and charges assessed, rider charges, policy loans and changes
to the Face Amount.

On each Monthly Activity Date during the last 25 policy years before the
Maturity Date, we will apply a discount to the cost of insurance rate, provided
you qualify. The discount equals 10%, multiplied by the ratio of the Basic Face
Amount at the policy's issue date to the Face Amount at the policy's issue date,
as shown on the policy's specifications page. To qualify for the discount, the
policy must have been in force at least 15 policy years and the ratio of the
then-current Account Value to the then-current Death Benefit must equal at least
the qualifying ratio described below. The qualifying ratio is 0% with 25 policy
years remaining until the maturity date and increases by three percentage points
each policy year thereafter. For example, with ten policy years remaining until
the Maturity Date the qualifying ratio is 45%, and with one policy year
remaining the qualifying ratio is 72%. This discount may not be available in all
states.

MORTALITY AND EXPENSE RISK CHARGE -- We deduct a mortality and expense risk
charge each month from your Account Value. The current mortality and expense
risk charge for any Monthly Activity Date is equal to:

(i) the current mortality and expense risk rate; multiplied by

(ii) the portion of the Account Value allocated to the Sub-Accounts on the
Monthly Activity Date prior to assessing the Monthly Deduction Amount.

The current and maximum mortality and expense risk rate for the first ten
policy years is 0.80%. Thereafter, the current and maximum rate is 0.80% on the
first $100,000 of Account Value as determined just prior to Hartford assessing
the Monthly Deduction Amount. On the remaining Account Value, the current
mortality and expense risk rate is 0.25% and the maximum rate is 0.40% for
Account Value attributable to the Basic Face Amount and 0.50% for Account Value
attributable to the Supplemental Face Amount.
The mortality and expense risk charge compensates us for mortality and
expense risks assumed under the policies. The mortality risk assumed is that the
cost of insurance charges are insufficient to meet actual claims. The expense
risk assumed is that the expense incurred in issuing, distributing and
administering the policies exceed the administrative charges and sales loads
collected. Hartford may keep any difference between cost it incurs and the
charges it collects.

MONTHLY ADMINISTRATIVE CHARGE -- We deduct a monthly administrative charge
from your Account Value to compensate us for issue and administrative costs of
the policy. The current monthly administrative fee is the sum of $7.50 per
month, plus $0.01 per month per $1000 of Face Amount at the policy issue date,
paid in policy years 1 through 10. On a blended rate basis, the charge for all
policy years is guaranteed never to exceed the sum of $10.00 per month, plus
$0.03 per month per $1000 of Basic Face Amount at the policy issue date, and
$15.00 per month plus $0.05 per month per $1000 of Supplemental Face Amount at
the policy issue date. This maximum charge is a blended rate based on the ratio
of the initial Basic Face Amount and the initial Supplemental Face Amount to the
initial Face Amount. For example, if the initial Basic Face Amount was $200,000
and the initial Supplemental Face Amount was $50,000, then the ratio of initial
Basic Face Amount to initial Face Amount is .80 ($200,000 divided by $250,000)
and the ratio of initial Supplemental Face Amount to initial Face Amount is .20
($50,000 divided by $250,000). The blended maximum charge would be $11.00 per
month (.80, multiplied by $10.00, plus .20 multiplied by $15.00) and $.034 per
thousand of Face Amount (.80, multiplied by $.03, plus .20 multiplied by $.05).

ISSUE CHARGE -- In the first five policy years, we assess a monthly issue
charge to compensate us for the up-front costs to underwrite and issue a policy.
The issue charge is the sum of $20.00 per month for the first five policy years
plus $.05 per $1000 of Face Amount at the date the policy is issued.

FACE AMOUNT INCREASE FEE -- We deduct a dollar amount from your Account
Value for an unscheduled increase of the Face Amount on your policy. The fee is
$.05 per $1,000 of each increase per month for the first five policy years from
the date of each increase. This fee compensates us for underwriting and
processing costs for such increases.

RIDER CHARGE -- If your policy includes riders, a charge applicable to the
riders is made from the Account Value each month. The charge applicable to these
riders is to compensate Hartford for the anticipated cost of providing these
benefits and is specified on the applicable rider. For a description of the
riders available, see "Your Policy -- Supplemental Benefits."

CHARGES FOR THE FUNDS

The investment performance of each Fund reflects the management fee that the
Fund pays to its investment
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
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manager as well as other operating expenses that the Fund incurs. Investment
management fees are generally daily fees computed as a percentage of a Fund's
average daily net assets as an annual rate. Please read the prospectus for each
Fund for complete details.

YOUR POLICY

CONTRACT RIGHTS

POLICY OWNER, OR "YOU" -- As long as your policy is in force, you may
exercise all rights under the policy while either of the insureds is alive and
no beneficiary has been irrevocably named.

BENEFICIARY -- You name the beneficiary in your application for the policy.
You may change the beneficiary (unless irrevocably named) while either of the
insureds is alive by notifying us in writing. If no beneficiary is living when
the last surviving insured dies, the death benefit will be paid to you if
living; or, otherwise, to your estate.

ASSIGNMENT -- You may assign your policy. Until you notify us in writing, no
assignment will be effective against us. We are not responsible for the validity
of any assignment.

STATEMENTS -- We will send you a statement at least once each year, showing:

(a) the current Account Value, Cash Surrender Value and Face Amount;
(b) the premiums paid, monthly deduction amounts and any loans since your last
statement;

(d) any notifications required by the provisions of your policy; and

(e) any other information required by the Insurance Department of the state
where your policy was delivered.

CONTRACT LIMITATIONS

ALLOCATIONS TO SUB-ACCOUNTS AND THE FIXED ACCOUNT -- You may allocate
amounts to a maximum of nine (9) Sub-Accounts, or eight (8) Sub-Accounts and the
Fixed Account.

TRANSFERS OF ACCOUNT VALUE -- You may transfer amounts among the Fixed
Account and the Sub-Accounts subject to a charge described below. You may
request transfers in writing or by calling us at 1-800-231-5453. Transfers by
telephone may be made by your agent of record or by your attorney-in-fact
pursuant to a power of attorney. Telephone transfers may not be permitted in
some states. We will not be responsible for losses that result from acting upon
telephone requests reasonably believed to be genuine. We will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
The procedures we follow for transactions initiated by telephone include
requiring callers to provide certain identifying information. All transfer
instructions communicated to us by telephone are tape recorded.

You may make one transfer per calendar month free of charge, excluding any
transfers made pursuant to your enrollment in the Dollar Cost Averaging Program.
Each subsequent transfer in excess of one per calendar month will be subject to
a transfer charge of up to $25. We reserve the right to limit at a future date
the size of transfers and remaining balances and to limit the number and
frequency of transfers.

TRANSFERS FROM THE FIXED ACCOUNT -- Except for transfers made under the
Dollar Cost Averaging Program, any transfers from the Fixed Account must occur
during the 30-day period following each policy anniversary, and, if your
accumulated value in the Fixed Account exceeds $1,000, the amount transferred
from the Fixed Account in any policy year may not exceed 25% of the accumulated
value in the Fixed Account on the transfer date.

DEFERRAL OF PAYMENTS -- We may defer payment of any Cash Surrender Values,
withdrawals and loan amounts which are not from the Sub-Accounts for up to six
months from the date of the request. If we defer payment for more than 30 days,
we will pay you interest.

CHANGES TO CONTRACT OR SEPARATE ACCOUNT

MODIFICATION OF POLICY -- The only way the policy may be modified is by a
written agreement signed by our President, or one of our Vice Presidents,
Secretaries, or Assistant Secretaries.

SUBSTITUTION OF FUNDS -- We reserve the right to substitute the shares of
any other registered investment company for the shares of any Fund already
purchased or to be purchased in the future by the Separate Account provided that
the substitution has been approved by the Securities and Exchange Commission.

CHANGE IN OPERATION OF THE SEPARATE ACCOUNT -- The operation of the Separate
Account may be modified to the extent permitted by law, including deregistration
under the securities laws.

SEPARATE ACCOUNT TAXES -- Currently, no charge is made to the Separate
Account for federal, state and local taxes that may be allocable to the Separate
Account. A change in the applicable federal, state or local tax laws which
impose tax on Hartford and/or the Separate Account may result in a charge
against the policy in the future. Charges for other taxes, if any, allocable to
the Separate Account may also be made.
<PAGE>
14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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OTHER BENEFITS

DOLLAR COST AVERAGING PROGRAM -- You may elect to allocate your Net Premiums
among the Sub-Accounts and the Fixed Account pursuant to the Dollar Cost
Averaging (DCA) program. If you choose the DCA program, your Net Premiums will
be deposited into the Hartford Money Market Sub-Account or the Fixed Account.
Amounts will be transferred monthly to the other investment options in
accordance with your premium allocation instructions. The dollar amount will be
allocated to the investment options that you specify, in the proportions that
you specify. If, on any transfer date, your Account Value allocated to the
Dollar Cost Averaging program is less than the amount you have elected to
transfer, your DCA program will terminate.

You may cancel your DCA election by notice in writing or by calling us at
1-800-231-5453. We reserve the right to change or discontinue the DCA program.

The main objective of a DCA program is to minimize the impact of short-term
price fluctuations. The DCA program allows you to take advantage of market
fluctuations. Since the same dollar amount is transferred to your selected
investment options at set intervals, the DCA program allows you to purchase more
accumulation units when prices are low and fewer accumulation units when prices
are high. Therefore, a lower average cost per accumulation unit may be achieved
over the long term. However, it is important to understand that the DCA program
does not assure a profit or protect against loss in a declining market.

SETTLEMENT OPTIONS -- Proceeds under your policy may be paid in a lump sum
or may be applied to one of our four settlement options. The minimum amount that
may be placed under a settlement option is $5,000 (unless we consent to a lesser
amount), subject to our then-current rules. Once payments under the Second
Option, the Third Option or the Fourth Option begin, no surrender may be made
for a lump sum settlement in lieu of the life insurance payments. The following
payment options are available to you or your beneficiary. If a payment option is
not selected, proceeds will be paid in a lump sum. Your beneficiary may choose a
settlement.

FIRST OPTION -- Interest Income

Payments of interest at the rate we declare (but not less than 3 1/2% per
year) on the amount applied under this option.

SECOND OPTION -- Income of Fixed Amount

Equal payments of the amount chosen until the amount applied under this
option (with interest of not less than 3 1/2% per year) is exhausted. The final
payment will be for the balance remaining.

THIRD OPTION -- Payments for a Fixed Period

An amount payable monthly for the number of years selected, which may be
from one to 30 years.

FOURTH OPTION -- Life Income

Life Annuity -- An annuity payable monthly during the lifetime of the
annuitant and terminating with the last monthly payment due preceding the
death of the annuitant.

Life Annuity with 120 Monthly Payments Certain -- An annuity providing monthly
income to the annuitant for a fixed period of 120 months and for as long
thereafter as the annuitant shall live.

The policy provides for guaranteed dollar amounts of monthly payments for
each $1,000 applied under the four payment options. Under the Fourth Option, the
amount of each payment will depend upon the age of the Annuitant at the time the
first payment is due. If any periodic payment due any payee is less than $200,
we may make payments less often.

The table for the Fourth Option is based on the 1983a Individual Annuity
Mortality Table, set back one year and with a net investment rate of 3.5% per
annum. The tables for the First, Second and Third Options are based on a net
investment rate of 3.5% per annum. We may, however, from time to time, at our
discretion if mortality appears more favorable and interest rates justify, apply
other tables which will result in higher monthly payments for each $1,000
applied under one or more of the four payment options.

Other arrangements for income payments may be agreed upon.

SUPPLEMENTAL BENEFITS -- The following supplemental benefits are among the
options that may be included in a policy by rider, subject to the restrictions
and limitations set forth therein.

- - LAST SURVIVOR EXCHANGE OPTION RIDER. We will exchange your policy for two
individual policies on the life of each insured, subject to the conditions
stated in the rider.

- - ESTATE PROTECTION RIDER. We will pay a term insurance benefit upon receipt of
due proof of the last surviving insured's death while your policy and rider
are in force, subject to the conditions stated in the rider.

- - MATURITY DATE EXTENSION RIDER. We will extend the maturity date to the date of
the death of the second insured, regardless of the age of either insured,
subject to certain death benefit and premium restrictions.

- - YEARLY RENEWABLE TERM LIFE INSURANCE RIDER. While the rider is in force, we
will pay the term life insurance amount upon receipt of due proof of death of
the designated insured, subject to the conditions stated in the rider.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
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BENEFITS AT MATURITY -- If either insured is living on the "maturity date,"
we will pay the Cash Surrender Value to you upon surrender of the policy to us.
On the maturity date, your policy will terminate and Hartford will have no
further obligations under the policy.

CLASS OF PURCHASERS

REDUCED CHARGES FOR ELIGIBLE GROUPS -- Certain of the charges and deductions
described above may be reduced for policies issued in connection with a specific
plan, in accordance with our rules in effect as of the date the application for
a policy is approved. To qualify for such a reduction, a plan must satisfy
certain criteria, e.g., as to size of the plan, expected number of participants
and anticipated premium payment from the plan. Generally, the sales contacts and
effort, administrative costs and mortality cost per policy vary, based on such
factors as the size of the plan, the purposes for which policies are purchased
and certain characteristics of the plan's members. The amount of reduction and
the criteria for qualification will be reflected in the reduced sales effort and
administrative costs resulting from, and the different mortality experience
expected as a result of, sales to qualifying plans. We may modify, from time to
time on a uniform basis, both the amounts of reductions and the criteria for
qualification. Reductions in these charges will not be unfairly discriminatory
against any person, including the affected policy owners invested in Separate
Account VL II.

PREMIUMS

APPLICATION FOR A POLICY -- To purchase a policy you must submit an
application to us. Within limits, you may choose the initial Basic Face Amount
and the initial Supplemental Face Amount. The Basic Face Amount plus the
Supplemental Face Amount equals your initial Face Amount. Policies generally
will be issued only on the lives of insureds between the ages of 20 and 80 who
supply evidence of insurability satisfactory to us. Acceptance is subject to our
underwriting rules and we reserve the right to reject an application for any
reason. No change in the terms or conditions of a policy will be made without
your consent. The minimum initial premium is the amount required to keep the
policy in force for one month, but not less than $50.

Your policy will be effective on the policy date only after we receive all
outstanding delivery requirements and the initial premium payment. The policy
date is the date used to determine all future cyclical transactions on the
policy, such as Monthly Activity Date and policy years.

PREMIUM PAYMENT FLEXIBILITY -- You have considerable flexibility as to when
and in what amounts you pay premiums under your policy.

Prior to policy issue, you choose a planned premium, within a range
determined by us. We will send you premium notices for planned premiums. Such
notices may be sent on an annual, semi-annual or quarterly basis. You may also
have premiums automatically deducted monthly from your checking account. The
planned premiums and payment mode you select are shown on your policy's
specifications page. You may change the planned premiums, subject to our minimum
amount rules then in effect.

After the first premium has been paid, your subsequent premium payments are
flexible. The actual amount and frequency of payment will affect the Account
Value and could affect the amount and duration of insurance provided by the
policy. Your policy may lapse if the value of your policy becomes insufficient
to cover the Monthly Deduction Amounts. In such case you may be required to pay
additional premiums in order to prevent the policy from terminating. For details
see, "Lapse and Reinstatement."

You may pay additional premiums at any time prior to the scheduled maturity
date, subject to the following limitations:

- - The minimum premium that we will accept is $50 or the amount required to keep
the policy in force.

- - We reserve the right to refund any excess premiums that would cause the policy
to fail to meet the definition of life insurance under the Internal Revenue
Code.

- - We reserve the right to require evidence of insurability for any premium
payment that results in an increase in the death benefit greater than the
amount of the premium.

- - Any premium payment in excess of $1,000,000 is subject to our approval.

ALLOCATION OF PREMIUM PAYMENTS -- The initial Net Premium (and any
additional Net Premiums received by us before the end of the right to examine
period) will be allocated to the Hartford Money Market Sub-Account on the later
of the policy date or the date we receive your premium payment.

We will then allocate the Account Value in the Hartford Money Market
Sub-Account to the Fixed Account and the Sub-Accounts according to the premium
allocation specified in your policy application upon the expiration of the right
to examine policy period, or the date we receive the final requirement to put
the policy in force, whichever is later.

You may change your premium allocation upon request in writing. Subsequent
Net Premiums will be allocated to the Fixed Account and the Sub-Accounts
according to your most recent written instructions as long as the number of
investment choices does not exceed nine (9), and the percentage you allocate to
each Sub-Account and/or the Fixed Account is in whole percentages. If we receive
a
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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premium payment with a premium allocation instruction that does not comply with
the above rules, we will allocate the Net Premium pro rata based on the values
of your existing investment choices.

You will receive several different types of notifications as to what your
current premium allocation is. Each transaction confirmation received after we
receive a premium payment will show how a Net Premium has been allocated.
Additionally, each quarterly statement summarizes the current premium allocation
in effect for your policy.

ACCUMULATION UNITS -- Net Premiums allocated to the Sub-Accounts are used to
credit accumulation units to such Sub-Accounts.

The number of accumulation units in each Sub-Account to be credited to a
policy (including the initial allocation to the Hartford Money Market
Sub-Account) and the amount to be credited to the Fixed Account will be
determined, first, by multiplying the Net Premium by the appropriate allocation
percentage in order to determine the portion of Net Premiums or transferred
Account Value to be invested in the Fixed Account or the Sub-Account. Each
portion of the Net Premium or transferred Account Value to be invested in a
Sub-Account is then divided by the accumulation unit value in a particular
Sub-Account next computed following its receipt. The resulting figure is the
number of accumulation units to be credited to each Sub-Account.

ACCUMULATION UNIT VALUES -- The accumulation unit value for each Sub-Account
will vary to reflect the investment experience of the applicable Fund and will
be determined on each Valuation Day by multiplying the accumulation unit value
of the particular Sub-Account on the preceding Valuation Day by the net
investment factor for that Sub-Account for the Valuation Period then ended. The
net investment factor for each of the Sub-Accounts is equal to the net asset
value per share of the corresponding Fund at the end of the Valuation Period
(plus the per share amount of any dividend or capital gain distributions paid by
that Fund in the Valuation Period then ended) divided by the net asset value per
share of the corresponding Fund at the beginning of the Valuation Period.

All valuations in connection with a policy, e.g., with respect to
determining Account Value, in connection with policy loans, or in calculation of
death benefits, or with respect to determining the number of accumulation units
to be credited to a policy with each premium payment other than the initial
premium payment will be made on the date the request or payment is received by
us at the National Service Center, provided such date is a Valuation Day;
otherwise such determination will be made on the next succeeding date which is a
Valuation Day.

ACCOUNT VALUES -- Each policy will have an Account Value. There is no
minimum guaranteed Account Value.

The Account Value of a policy changes on a daily basis and will be computed
on each Valuation Day. The Account Value will vary to reflect the investment
experience of the Sub-Accounts, the interest credited to the Fixed Account and
the Loan Account, and the Monthly Deduction Amounts, Net Premiums paid, and any
withdrawals taken.

A policy's Account Value is related to the net asset value of the Funds
associated with the Sub-Accounts, if any, to which Net Premiums on the policy
have been allocated. The Account Value in the Sub-Accounts on any Valuation Day
is calculated by, first, multiplying the number of accumulation units in each
Sub-Account as of the Valuation Day by the then current value of the
accumulation units in that Sub-Account and then totaling the result for all of
the Sub-Accounts. A policy's Account Value equals the policy's value in all of
the Sub-Accounts, the Fixed Account, and the Loan Account. A policy's Cash Value
is equal to the Account Value less any applicable surrender charges. A policy's
Cash Surrender Value, which is the net amount available upon surrender of the
policy, is the Cash Value less any Indebtedness. See "Accumulation Unit Values,"
above.

We will pay death proceeds, Cash Surrender Values, partial withdrawals, and
loan amounts allocable to the Sub-Accounts within seven days after we receive
all the information needed to process the payment, unless the New York Stock
Exchange is closed for other than a regular holiday or weekend, trading is
restricted by the Commission or the Commission declares that an emergency
exists.

DEATH BENEFITS AND
POLICY VALUES

DEATH BENEFIT -- Your policy provides for the payment of the death proceeds
to the named beneficiary upon receipt of due proof of the death of the last
surviving insured. Your policy will be effective on the policy date only after
we receive all outstanding delivery requirements and the initial premium
payment. You must notify us in writing as soon as possible after the death of
either insured. The death proceeds payable to the beneficiary equal the death
benefit less any Indebtedness and less any due and unpaid Monthly Deduction
Amount occurring during a grace period. The death benefit depends on the death
benefit option you select, the minimum death benefit provision, and whether or
not the Death Benefit Guarantee is in effect.

DEATH BENEFIT OPTIONS -- There are three death benefit options: the Level
Death Benefit Option ("Option A"), the Return of Account Value Death Benefit
Option ("Option B") and the Return of Premium Death Benefit Option ("Option C").
Subject to the minimum death
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
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benefit described below, the death benefit under each option is as follows:

1. Under Option A, the current Face Amount.

2. Under Option B, the current Face Amount plus the Account Value on the date
we receive due proof of the last surviving insured's death.

3. Under Option C, the current Face Amount plus the sum of the premiums paid.

DEATH BENEFIT OPTION CHANGES -- You may change your death benefit option to
Option A or Option B without evidence of insurability. If you change to Option
A, the Face Amount will become that amount available as a death benefit
immediately prior to the option change. If you change to Option B, the Face
Amount will become that amount available as a death benefit immediately prior to
the option change, reduced by the then-current Account Value. Changing your
death benefit option does not result in any fees or charges against your policy.
However, you should consult a tax adviser regarding the possible adverse tax
consequences resulting from a change in your death benefit option.

Any unscheduled increase in the Face Amount will be deemed an increase in
the Supplemental Face Amount.

DEATH BENEFIT GUARANTEE -- The death benefit guarantee is a feature for all
policies at issue, unless the Supplemental Face Amount exceeds the Basic Face
Amount. If the premiums paid during policy year 1 are less than the Annual Death
Benefit Guarantee Premium, the death benefit guarantee will be removed from the
policy.

After policy year 1, the death benefit guarantee will be in effect as long
as the cumulative premiums paid into the policy, less any withdrawals, equal or
exceed the Cumulative Death Benefit Guarantee Premium. The death benefit
guarantee period will expire at the end of: (1) policy year 10 or (2) the life
expectancy of the last surviving insured (based on the 1980 Commissioners'
Standard Ordinary Mortality Smoker or Nonsmoker Table, age last birthday),
whichever period you chose.

If the death benefit guarantee is in effect, payment of the Basic Face
Amount upon the death of the last surviving insured will be guaranteed,
regardless of your policy's investment performance. The death benefit guarantee
is in effect if:

(a) the death benefit guarantee period has not expired;

(b) the Supplemental Face Amount has never exceeded, and is not scheduled to
exceed, the Basic Face Amount; and

(c) on each Monthly Activity Date, the cumulative premiums paid into your
policy, less withdrawals, equal or exceed the Cumulative Death Benefit
Guarantee Premium.

MINIMUM DEATH BENEFIT -- Your policy has a minimum death benefit. We will
automatically increase the death benefit so that it will never be less than the
Account Value multiplied by the minimum death benefit percentage for the then
current year. This percentage varies according to the policy year and each
insured's issue age, sex (where unisex rates are not used) and insurance class.

EXAMPLES OF MINIMUM DEATH BENEFIT:

<TABLE>
<CAPTION>
A B
---------- ----------
<S> <C> <C>
Face Amount............................ $ 100,000 $ 100,000
Account Value.......................... 46,500 34,000
Specified Percentage................... 250% 250%
Death Benefit Option................... Level Level
</TABLE>

In Example A, the death benefit equals $116,250, i.e., the greater of
$100,000 (the Face Amount) or $116,250 (the Account Value at the date of death
of $46,500, multiplied by the specified percentage of 250%). This amount, less
any outstanding Indebtedness, constitutes the death proceeds payable to the
beneficiary.

In Example B, the death benefit is $100,000, i.e., the greater of $100,000
(the Face Amount) or $85,000 (the Account Value of $34,000, multiplied by the
specified percentage of 250%).

SUPPLEMENTAL FACE AMOUNT -- If you selected Supplemental Face Amount
coverage on your policy application, the amount of such coverage is shown on
your policy's specifications page, subject to any scheduled changes you
instructed in your policy application and any unscheduled increases and/or
decreases in Face Amount, as described below. You may discontinue a scheduled
increase by request in writing. A decrease in Face Amount, other than as a
result of a partial withdrawal, will affect your scheduled increases in Face
Amount.

UNSCHEDULED INCREASES AND DECREASES IN FACE AMOUNT -- At any time after the
first policy year, you may request a change in the Face Amount by writing to us.

The minimum amount by which the Face Amount can be increased or decreased is
based on our rules then in effect.

Any unscheduled increase in the Face Amount will be deemed an increase in
the Supplemental Face Amount. All requests to increase the Face Amount must be
applied for on a new application and accompanied by your policy. All requests
will be subject to evidence of insurability satisfactory to us. Any increase
approved by us will be effective on the date shown on the new policy
specifications page, provided that the deduction for the cost of insurance for
the first month is made.
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18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Each unscheduled increase in Face Amount is subject to an increase fee of
$.05 per $1,000 of each increase per month for the first five policy years from
the date of each increase.

An unscheduled decrease in the Face Amount will be effective on the Monthly
Activity Date following the date we receive the request in writing. The
remaining Face Amount must not be less than that specified by our minimum rules
then in effect. Decreases will be applied first to the Supplemental Face Amount
and then to the Basic Face Amount.

We reserve the right to limit the number of increases and/or decreases made
under a policy to no more than one in any 12 month period.

CHARGES AND CONTRACT VALUES -- Your contract values decrease due to the
deduction of policy charges. Contract values may increase or decrease depending
on investment performance; investment expenses and fees reduce the investment
performance of the Sub-Accounts. Fluctuations in your account value may have an
effect on your death benefit. If your contract lapses, the contract terminates
and no death benefit will be paid.

MAKING WITHDRAWALS FROM
YOUR POLICY

SURRENDER -- Provided your policy has a Cash Surrender Value, you may
surrender your policy to us. We will pay you the Cash Surrender Value. Our
liability under the policy will cease as of the date of your request for
surrender, or the date you request to have your policy surrendered, if later.

AMOUNT PAYABLE ON SURRENDER OF THE POLICY -- You may elect to fully
surrender your policy as long as your policy is in effect. Upon surrender, you
will receive the Cash Surrender Value determined as of the later of (a) the date
on which we receive your request for surrender in writing (b) the date you
request. The policy will terminate on the later of (x) the date we receive your
request in writing or (y) the date you request the surrender to be effective.

PARTIAL WITHDRAWALS -- One partial withdrawal is allowed per month (between
any successive Monthly Activity Dates). The minimum partial withdrawal allowed
is $500. The maximum partial withdrawal is the Cash Surrender Value, less
$1,000. If the death benefit option then in effect is Option A or Option C, the
Face Amount is reduced by the amount of the partial withdrawal. The minimum Face
Amount required after a partial withdrawal is subject to our rules then in
effect. Unless specified otherwise, the partial withdrawal will be deducted pro
rata from the Fixed Account and the Sub-Accounts. Currently, we do not impose a
partial withdrawal charge. However, we reserve the right to impose in the future
a partial withdrawal charge of up to $50.

RIGHT TO EXAMINE A POLICY -- You have a limited right to return your policy
for cancellation. You may deliver or mail the policy to us or to the agent from
whom it was purchased any time during your free look period. Your free look
period ends the later of 10 days after you receive your policy, 10 days after we
deliver to you a Notice of Right to Withdraw, or 45 days after you sign the
application for your policy (or longer in some states). In such event, the
policy will be rescinded and we will pay an amount equal to the greater of the
premiums paid for the policy less any Indebtedness or the sum of: i) the Account
Value less any Indebtedness, on the date the returned policy is received by us
or the agent from whom it was purchased; and, ii) any deductions under the
policy or charges associated with the Separate Account. If your policy is
replacing another policy, your free look period and the amount paid to you upon
the return of your policy vary by state.

RIGHT TO EXCHANGE A POLICY -- During the first 24 months after its issuance,
you may exchange your policy for a non-variable life insurance policy on the
life of the insured offered by us or an affiliate. No evidence of insurability
will be required. The new policy will have an amount at risk which equals or is
less than the amount at risk in effect on the date of exchange. Premiums under
the new policy will be based on the same risk classifications as the policy for
which the new policy was exchanged. An exchange of a policy under such
circumstances should be a tax-free transaction under Section 1035 of the Code.

LOANS

AVAILABILITY OF LOANS -- At any time while the policy is in force, you may
borrow against the policy by assigning it as sole security to us. Any new loan
taken together with any existing Indebtedness may not exceed 90% of Account
Value on the date we grant a loan.

Unless you specify otherwise, all loan amounts will be transferred on a pro
rata basis from the Fixed Account and each of the Sub-Accounts to the Loan
Account.

If total Indebtedness equals or exceeds the Account Value on any Monthly
Activity Date, the policy will then go into default. See "Lapse and
Reinstatement."

PREFERRED INDEBTEDNESS -- If, at any time after the tenth (10th) policy
anniversary, your Account Value exceeds the total of all premiums paid since
issue, a portion of your Indebtedness may qualify as preferred. Preferred
Indebtedness is charged a lower interest rate than non-preferred Indebtedness,
if any. The maximum amount of preferred Indebtedness is the amount by which the
Account Value exceeds the total premiums paid and is determined on each Monthly
Activity Date.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
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LOAN REPAYMENTS -- You can repay all or any part of a loan at any time while
your policy is in force and either of the insureds' is alive. The amount of your
policy loan repayment will be deducted from the Loan Account. It will be
allocated among the Fixed Account and Sub-Accounts in the same percentage as
premiums are allocated.

EFFECT OF LOANS ON ACCOUNT VALUE -- A loan, whether or not repaid, will have
a permanent effect on your Account Value. This effect occurs because the
investment results of each Sub-Account will apply only to the amount remaining
in such Sub-Accounts. In addition, the rate of interest credited to the Fixed
Account will usually be different than the rate credited to the Loan Account.
The longer a loan is outstanding, the greater the effect on your Account Value
is likely to be. Such effect could be favorable or unfavorable. If the Fixed
Account and the Sub-Accounts earn more than the annual interest rate for funds
held in the Loan Account, your Account Value will not increase as rapidly as it
would have had no loan been made. If the Fixed Account and the Sub-Accounts earn
less than the Loan Account, then your Account Value will be greater than it
would have been had no loan been made. Additionally, if not repaid, the
aggregate amount of the outstanding Indebtedness will reduce the death proceeds
and the Cash Surrender Value otherwise payable.

CREDITED INTEREST -- Any amounts in the Loan Account will be credited with
interest at an annual rate of 2% (in most states) during the first ten policy
years. Thereafter, the rate will be 3% (in most states). For preferred loans,
the rate is 4% (in most states).

INTEREST CHARGED ON INDEBTEDNESS -- Interest will accrue daily on the
Indebtedness at the policy loan rate. Because the interest charged on
Indebtedness may exceed the rate credited to the Loan Account, the Indebtedness
may grow faster than the Loan Account. If this happens, any difference between
the value of the Loan Account and the Indebtedness will be transferred on each
Monthly Activity Date from the Fixed Account and Sub-Accounts to the Loan
Account on a pro rata basis. Policy loan rates are shown in the policy.

LAPSE AND REINSTATEMENT

A policy will be in default on any Monthly Activity Date on which its Cash
Surrender Value is not sufficient to cover the Monthly Deduction Amount. A
61-day period, called the "grace period," will begin from the date of default.
We will mail you and any assignee written notice of the amount of premium that
will be required to continue the defaulting policy in force at least 30 days
before the end of the grace period. The premiums required will be no greater
than the amount required to pay three Monthly Deduction Amounts as of the day
the grace period began. Unless the Death Benefit Guarantee is in effect, such
policy will terminate without value if the required premium is not paid by the
end of the grace period. If the Death Benefit Guarantee is in effect and
sufficient premium has not been paid by the end of the grace period, the death
benefit will be reduced to the Basic Face Amount and any riders will no longer
be in force. If the last surviving insured dies during the grace period, we will
pay the death proceeds.

DEATH BENEFIT GUARANTEE DEFAULT AND GRACE PERIOD -- If the cumulative
premiums, less withdrawals, are not sufficient to maintain the Death Benefit
Guarantee in effect, the lapse and grace period provisions for the Death Benefit
guarantee will apply as follows:

On every Monthly Activity Date during the Death Benefit Guarantee period, we
will compare the cumulative premiums received, less withdrawals, to the
Cumulative Death Benefit Guarantee Premium for the Death Benefit guarantee
period in effect.

If the cumulative premiums received, less withdrawals, are less than the
Cumulative Death Benefit Guarantee Premium, the Death Benefit Guarantee will be
deemed to be in default as of that Monthly Activity Date. A grace period of 61
days from the date of default will begin. We will mail to you and any assignee
written notice of the amount of premium required to continue the Death Benefit
Guarantee.

At the end of the grace period under a ten-year guarantee period, the Death
Benefit Guarantee will be removed from the policy if we have not received the
amount of the required premium. You will receive a written notification of the
change.

At the end of the grace period under the last survivor life expectancy
guarantee period, the Death Benefit Guarantee will be removed from your policy
if we have not received the amount of the required premium, subject to the
following exception: If your policy is in the first ten policy years and the
cumulative premiums received, less withdrawals, equal or exceed the Cumulative
Death Benefit Guarantee Premium for the ten-year period, we will change the
Death Benefit Guarantee period to ten years. In this case, we will send you
notification of:

(a) the ten-year period, measured from the policy date; and

(b) the Annual Death Benefit Guarantee Premium for that ten-year period.

REINSTATEMENT -- Unless the policy has been surrendered for its Cash
Surrender Value, the policy may be reinstated prior to the maturity date,
provided:

(a) the insureds alive at the end of the grace period are also alive on the date
of reinstatement;
<PAGE>
20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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(b) You make your request in writing within five years from the date the policy
lapsed;

(d) any policy Indebtedness is repaid or carried over to the reinstated policy;
and

(e) You pay sufficient premium to (1) cover all Monthly Deduction Amounts that
are due and unpaid during the Grace Period and (2) keep your policy in force
for three months after the date of reinstatement.
The Account Value on the reinstatement date will reflect:

(a) the Account Value at the time of termination; plus

(b) Net Premiums derived from premiums paid at the time of reinstatement.

Upon reinstatement, any Indebtedness at the time of termination must be
repaid or carried over to the reinstated policy.

TAXES

GENERAL

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

Our general discussion of the tax treatment of this policy 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 policy cannot be made in the prospectus. We also do not discuss
state, municipal or other tax laws that may apply to this policy. For detailed
information, you should consult with a qualified tax adviser familiar with your
situation.

TAXATION OF HARTFORD AND
THE SEPARATE ACCOUNT

The Separate Account is taxed as a part of Hartford which is taxed as a life
insurance company under Subchapter L of 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 the Code. Investment income
and realized capital gains on the assets of the Separate Account (the underlying
Funds) are reinvested and are taken into account in determining the value of the
Accumulation Units. (See "Accumulation Unit Values"). As a result, such
investment income and realized capital gains are automatically applied to
increase reserves under the policy.

Hartford does not expect to incur any federal income tax on the earnings or
realized capital gains attributable to the Separate Account. Based upon this
expectation, no charge is currently being made to the Separate Account for
federal income taxes. If Hartford incurs income taxes attributable to the
Separate Account or determines that such taxes will be incurred, it may assess a
charge for such taxes against the Separate Account.

INCOME TAXATION OF POLICY
BENEFITS -- GENERALLY

For federal income tax purposes, the Policies should be treated as life
insurance contracts under Section 7702 of the Code. The death benefit under a
life insurance contract is generally excluded from the gross income of the
Beneficiary. Also, a life insurance policy owner is generally not taxed on
increments in the contract value until the policy is partially or completely
surrendered. Section 7702 limits the amount of premiums that may be invested in
a policy that is treated as life insurance. Hartford intends to monitor premium
levels to assure compliance with the Section 702 requirements.

Although Hartford believes that the Last Survivor Policies are in compliance
with Section 7702 of the Code, the manner in which Section 7702 should be
applied to certain features of a joint survivorship life insurance contract is
not directly addressed by Section 7702. In the absence of final regulations or
other guidance issued under Section 7702, there is necessarily some uncertainty
whether a last survivor life insurance policy will meet the Section 7702
definition of a life insurance contract.

Hartford also believes that any loan received under a policy will be treated
as Indebtedness of the policy owner, and that no part of any loan under a policy
will constitute income to the policy owner. A surrender or assignment of the
policy may have tax consequences depending upon the circumstances. Policy owners
should consult a qualified tax adviser concerning the effect of such changes.

During the first fifteen policy years, an "income first" rule generally
applies to distributions of cash required to be made under Code Section 7702
because of a reduction in benefits under the policy.

The Last Survivor Exchange Option Rider permits, under limited
circumstances, a policy to be split into two individual policies on the life of
each of the Insureds. A policy split may have adverse tax consequences. It is
not clear whether a policy split will be treated as a nontaxable exchange or
transfer under the Code. Unless a policy split is so treated, among other
things, the split or transfer will result in the recognition of taxable income
on the gain in the policy. In addition, it is not clear whether, in all
circumstances, the individual policies that result from a policy split would be
treated as life insurance policies under
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
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Section 7702 of the Code or would be classified as modified endowment contracts.
The policy owner should consult a qualified tax adviser regarding the possible
adverse tax consequences of a policy split.

The Maturity Date Extension Rider allows a policy owner to extend the
Maturity Date to the date of the death of the last surviving insured. If the
Maturity Date of the policy is extended by rider, Hartford believes the policy
will continue to be treated as a life insurance contract for Federal income tax
purposes after the scheduled Maturity Date. However, due to the lack of specific
guidance on this issue, the result is not certain. If the policy is not treated
as a life insurance contract for federal income tax purposes after the scheduled
Maturity Date, among other things, the Death Proceeds may be taxable to the
recipient. The policy owner should consult a qualified tax adviser regarding the
possible adverse tax consequences resulting from an extension of the scheduled
Maturity Date.

DIVERSIFICATION REQUIREMENTS

The Code requires that investments supporting your policy be adequately
diversified. Code Section 817 provides that a variable life insurance contract
will not be treated as a life insurance 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 a life insurance contract, the
policy owner will be subject to income tax on annual increases in cash value.

The Treasury Department's diversification regulations require, among other
things, that:

- - no more than 55% of the value of the total assets of the segregated asset
account underlying a variable contract is represented by any one investment,

- - no more than 70% is represented by any two investments,

- - no more than 80% is represented by any three investments and

- - no more than 90% is represented by any four investments.

In determining whether the diversification standards are met, all securities
of the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In the
case of government securities, each government agency or instrumentality is
treated as a separate issuer.

A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the taxation of contract income on an ongoing basis. However, either the company
or the policy 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
policies subject to the diversification requirements in a manner that will
maintain adequate diversification.

OWNERSHIP OF THE ASSETS IN
THE SEPARATE ACCOUNT

In order for a variable life insurance 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 policy 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 policy owner, such as the
ability to select and control investments in a separate account, will cause the
policy 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 policy owner is considered the owner of the assets for
tax purposes. We reserve the right to modify the policy, as necessary, to
prevent you from being considered the owner of assets in the separate account.
<PAGE>
22 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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TAX DEFERRAL DURING ACCUMULATION PERIOD

Under existing provisions of the Code, except as described below, any
increase in an owner's contract value is generally not taxable to the owner
unless amounts are received (or are deemed to be received) under the policy
prior to the Insured's death. If there is a total withdrawal from the policy,
then the surrender value will be includible in the owner's income to the extent
that the amount received exceeds the "investment in the contract." (If there is
any debt at the time of a total withdrawal, then such debt will be treated as an
amount distributed to the owner.) The "investment in the contract" is the
aggregate amount of premium payments and other consideration paid for the
policy, less the aggregate amount received under the policy previously to the
extent such amounts received were excludable from gross income. Whether partial
withdrawals (or such other amounts deemed to be distributed) from the policy
constitute income to the owner depends, in part, upon whether the policy is
considered a modified endowment contract for federal income tax purposes.

MODIFIED ENDOWMENT CONTRACTS

Code Section 7702A applies an additional test, the "seven-pay" test, to life
insurance contracts. The seven-pay test provides that premiums cannot be paid at
a rate more rapidly than that allowed by the payment of seven annual premiums
using specified computational rules described in Section 7702A(c). A modified
endowment contract ("MEC") is a life insurance policy that either: (i) satisfies
the Section 7702 definition of life insurance, but fails the seven-pay test of
Section 7702A or (ii) is exchanged for a MEC. A policy fails the seven-pay test
if the accumulated amount paid into the policy at any time during the first
seven policy years exceeds the sum of the net level premiums that would have
been paid up to that point if the policy provided for paid-up future benefits
after the payment of seven level annual premiums. Computational rules for the
seven-pay test are described in Section 7702A(c).

If the policy satisfies the seven-pay test at issuance, distributions and
loans made thereafter will not be subject to the MEC rules, unless the policy is
changed materially. The seven-pay test will be applied anew at any time the
policy undergoes a material change, which includes an increase in the Face
Amount. In addition, if there is a reduction in benefits under the policy within
the first seven years, the seven-pay test is applied as if the policy had
initially been issued at the reduced benefit level. Any reduction in benefits
attributable to the nonpayment of premiums will not be taken into account for
purposes of the seven-pay test if the benefits are reinstated within 90 days
after the reduction.

A policy that is classified as a MEC is eligible for certain aspects of the
beneficial tax treatment accorded to life insurance. That is, the death benefit
is excluded from income and increments in value are not subject to current
taxation. However, if the contract is classified as a MEC, then withdrawals from
the contract will be considered first as withdrawals of income and then as a
recovery of premium payments. Thus, withdrawals will be includible in income to
the extent the contract value exceeds the investment in the contract. The amount
of any loan (including unpaid interest thereon) under the contract will be
treated as a withdrawal from the contract for tax purposes. In addition, if the
owner assigns or pledges any portion of the value of a contract (or agrees to
assign or pledge any portion), then such portion will be treated as a withdrawal
from the contract for tax purposes. Taxable withdrawals are subject to an
additional 10% tax, with certain exceptions. The owner's investment in the
contract is increased by the amount includible in income with respect to such
assignment, pledge, or loan, though it is not affected by any other aspect of
the assignment, pledge, or loan (including its release or repayment).

Generally, only distributions and loans made in the first year in which a
policy becomes a MEC, and in subsequent years, are taxable. However,
distributions and loans made in the two years prior to a policy's failing the
seven-pay test are deemed to be in anticipation of failure and are subject to
tax.

Before assigning, pledging, or requesting a loan under a policy that is a
MEC, an owner should consult a qualified tax adviser.

All MEC policies that are issued within any calendar year to the same policy
owner by one company or its affiliates are treated as one MEC policy for the
purpose of determining the taxable portion of any loan or distribution.

Hartford has instituted procedures to monitor whether a policy may become
classified as a MEC after issue.

ESTATE AND GENERATION SKIPPING TAXES

When the last surviving Insured dies, the Death Proceeds will generally be
includible in the policy owner's estate for purposes of federal estate tax if
the last surviving Insured owned the policy. If the policy owner was not the
last surviving Insured, the fair market value of the policy would be included in
the policy owner's estate upon the policy owner's death. The policy would not be
includible in the last surviving Insured's estate if he or she neither retained
incidents of ownership at death nor had given up ownership within three years
before death.

The federal estate tax is integrated with the federal gift tax under a
unified rate schedule and unified credit which shelters up to $650,000 (for
1999) from the estate and gift tax. The Taxpayer Relief Act of 1997 gradually
raises the credit over the next seven years to $1,000,000. In addition, an
unlimited marital deduction may be available for federal
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
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estate and gift tax purposes. The unlimited marital deduction permits the
deferral of taxes until the death of the surviving spouse.

If the policy owner (whether or not he or she is an Insured) transfers
ownership of the policy to someone two or more generations younger, the transfer
may be subject to the generation skipping transfer tax, the taxable amount being
the value of the policy. The generation-skipping transfer tax provisions
generally apply to transfers which would be subject to the gift and estate tax
rules. Individuals are generally allowed an aggregate generation skipping
transfer exemption of $1 million as adjusted for inflation. Because these rules
are complex, the policy owner should consult with a qualified tax adviser for
specific information if ownership is passing to younger generations.

LIFE INSURANCE PURCHASED FOR USE IN
SPLIT DOLLAR ARRANGEMENTS

On January 26, 1996, the IRS released a technical advice memorandum ("TAM")
on the taxability of life insurance policies used in certain split dollar
arrangements. A TAM, issued by the National Office of the IRS, provides advice
as to the internal revenue laws, regulations, and related statutes with respect
to a specific set of facts and a specific taxpayer. In the TAM, among other
things, the IRS concluded that an employee was subject to current taxation on
the excess of the cash surrender value of the policy over the premiums to be
returned to the employer. Purchasers of life insurance policies to be used in
split dollar arrangements are strongly advised to consult with a qualified tax
adviser to determine the tax treatment resulting from such an arrangement.

FEDERAL INCOME TAX WITHHOLDING

If any amounts are deemed to be current taxable income to the policy owner,
such amounts will be subject to federal income tax withholding and reporting,
pursuant to the Code.

NON-INDIVIDUAL OWNERSHIP OF POLICIES

In certain circumstances, the Code limits the application of specific tax
advantages to individual owners of life insurance contracts. Prospective policy
owners which are not individuals should consult a qualified tax adviser to
determine the potential impact on the purchaser.

OTHER

Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership, or receipt of policy proceeds depend on the
circumstances of each policy owner or beneficiary. A qualified tax adviser
should be consulted to determine the impact of these taxes.

LIFE INSURANCE PURCHASES BY NONRESIDENT
ALIENS AND FOREIGN CORPORATIONS

The discussion above provides general information regarding U.S. federal
income tax consequences to life insurance 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 taxable distributions from
life insurance policies at a 30% rate, unless a lower treaty rate applies. In
addition, purchasers may be subject to 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 a life insurance
policy purchase.

LEGAL PROCEEDINGS

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

OTHER MATTERS

YEAR 2000

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

The integrity and reliability of Hartford's IT systems, as well as the
reliability of its non-IT systems, are integral aspects of Hartford's business.
Hartford issues insurance policies, annuities, mutual funds and other financial
products to individual and business customers, nearly all of which contain date
sensitive data, such as policy expiration
<PAGE>
24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

dates, birth dates and premium payment dates. In addition, various IT systems
support communications and other systems that integrate Hartford's various
business segments and field offices. Hartford also has business relationships
with numerous third parties that affect virtually all aspects of Hartford's
business, including, without limitation, suppliers, computer hardware and
software vendors, insurance agents and brokers, securities broker-dealers and
other distributors of financial products, many of which provide date sensitive
data to Hartford, and whose operations are important to Hartford's business.

INTERNAL YEAR 2000 EFFORTS AND TIMETABLE -- Beginning in 1990, Hartford
began working on making its IT systems Year 2000 ready, either through
installing new programs or replacing systems. Since January 1998, Hartford's
Year 2000 efforts have focused on the remaining Year 2000 issues related to IT
and non-IT systems in all of Hartford's business segments. These Year 2000
efforts include the following five main initiatives: (1) identifying and
assessing Year 2000 issues; (2) taking actions to remediate IT and non-IT
systems so that they are Year 2000 ready; (3) testing IT and non-IT systems for
Year 2000 readiness; (4) deploying such remediated and tested systems back into
their respective production environments; and (5) conducting internal and
external integrated testing of such systems. As of December 31, 1998, Hartford
substantially completed initiatives (1) through (4) of its internal Year 2000
efforts. Hartford has begun initiative (5) and management currently anticipates
that such activity will continue into the fourth quarter of 1999.

THIRD PARTY YEAR 2000 EFFORTS AND TIMETABLE -- Hartford's Year 2000 efforts
include assessing the potential impact on Hartford of third parties' Year 2000
readiness. Hartford's third party Year 2000 efforts include the following three
main initiatives: (1) identifying third parties which have significant business
relationships with Hartford, including, without limitation, insurance agents,
brokers, third party administrators, banks and other distributors and servicers
of financial products, and inquiring of such third parties regarding their Year
2000 readiness; (2) evaluating such third parties' responses to Hartford's
inquiries; and (3) based on the evaluation of third party responses (or a third
party's failure to respond) and the significance of the business relationship,
conducting additional activities with respect to third parties as determined to
be necessary in each case. These activities may include conducting additional
inquiries, more in-depth evaluations of Year 2000 readiness and plans, and
integrated IT systems testing. Hartford has completed the first third party
initiative and, as of early 1999, had substantially completed evaluating third
party responses received. Hartford has begun conducting the additional
activities described in initiative (3) and management currently anticipates that
it will continue to do so through the end of 1999. However, notwithstanding
these third party Year 2000 efforts, Hartford does not have control over these
third parties and, as a result, Hartford cannot currently determine to what
extent future operating results may be adversely affected by the failure of
these third parties to adequately address their Year 2000 issues.

YEAR 2000 COSTS -- The costs of Hartford's Year 2000 program that were
incurred through the year ended December 31, 1997 were not material to
Hartford's financial condition or results of operations. The after-tax costs of
Hartford's Year 2000 efforts for the year ended December 31, 1998 were
approximately $3 million. Management currently estimates that after-tax costs
related to the Year 2000 program to be incurred in 1999 will be less than $10
million. These costs are being expensed as incurred.

RISKS AND CONTINGENCY PLANS -- If significant Year 2000 problems arise,
including problems arising with third parties, failures of IT and non-IT systems
could occur, which in turn could result in substantial interruptions in
Hartford's business. In addition, Hartford's investing activities are an
important aspect of its business and Hartford may be exposed to the risk that
issuers of investments held by it will be adversely impacted by Year 2000
issues. Given the uncertain nature of Year 2000 problems that may arise,
especially those related to the readiness of third parties discussed above,
management cannot determine at this time whether the consequences of Year 2000
related problems that could arise will have a material impact on Hartford's
financial condition or results of operations.

Hartford is in the process of developing certain contingency plans so that
if, despite its Year 2000 efforts, Year 2000 problems ultimately arise, the
impact of such problems may be avoided or minimized. These contingency plans are
being developed based on, among other things, known or reasonably anticipated
circumstances and potential vulnerabilities. The contingency planning also
includes assessing the dependency of Hartford's business on third parties and
their Year 2000 readiness. Hartford currently anticipates that internal and
external contingency plans will be substantially complete by the end of the
second quarter of 1999. However, in many contexts, Year 2000 issues are dynamic,
and ongoing assessments of business functions, vulnerabilities and risks must be
made. As such, new contingency plans may be needed in the future and/or existing
plans may need to be modified as circumstances warrant.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
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GLOSSARY OF SPECIAL TERMS

ACCOUNT VALUE: the total of all amounts in the Fixed Account, Loan Account and
Sub-Accounts.

ANNUAL DEATH BENEFIT GUARANTEE PREMIUM: An annual amount of premium shown in a
policy's specifications page required to keep the Death Benefit guarantee in
effect and used to calculate the Cumulative Death Benefit Guarantee Premium.

ATTRIBUTABLE: In calculating the front-end sales load, agent commissions and
mortality and expense risk charge, premiums (in the case of the front-end sales
load or commissions) and Account Value (in the case of the mortality and expense
risk charge) are Attributable to the Basic Face Amount and Supplemental Face
Amount in the same ratio that the initial Basic Face Amount and the initial
Supplemental Face Amount, respectively, bear to the initial Face Amount. For
example, if 60% of your initial Face Amount represents Basic Face Amount and 40%
represents Supplemental Face Amount, then 60% of each premium (in the case of
the sales load or commissions) or 60% of your Account Value (in the case of the
mortality and expense risk charge) is Attributable to Basic Face Amount and the
remaining 40% is Attributable to Supplemental Face Amount.

BASIC FACE AMOUNT: On the policy date, the Basic Face Amount equals the Basic
Face Amount shown on your policy's specifications page as of the date of issue.
Thereafter, the Basic Face Amount may change in accordance with the terms of the
policy.

CASH SURRENDER VALUE: the Account Value less all Indebtedness.

CUMULATIVE DEATH BENEFIT GUARANTEE PREMIUM: The sum of the number of completed
policy years plus the completed portion of the current policy year (expressed as
the number of completed months divided by 12), multiplied by the Annual Death
Benefit Guarantee Premium.

FACE AMOUNT: an amount we use to determine the Death Benefit. On the policy
date, the Face Amount equals the initial Face Amount shown in your policy.
Thereafter, it may change under the terms of the policy. On any day, the Face
Amount equals the Basic Face Amount plus the Supplemental Face Amount.

FIXED ACCOUNT: part of our general account to which all or a portion of the
Account Value may be allocated.

FUNDS: the registered open-end management companies in which assets of the
Separate Account may be invested.

INDEBTEDNESS: all loans taken on the policy, plus any interest due or accrued
minus any loan repayments.

LOAN ACCOUNT: an account established for any amounts transferred from the Fixed
Account and Sub-Accounts as a result of loans. The amounts in the Loan Account
are credited with interest and are not subject to the investment experience of
any Sub-Accounts.

MONTHLY ACTIVITY DATE: the policy date and the same date in each succeeding
month as the policy date. However, whenever the Monthly Activity Date falls on a
date other than a Valuation Day, the Monthly Activity Date will be deemed to be
the next Valuation Day.

NET PREMIUM: the amount of premium credited to Account Value. It is premium paid
minus the sales load and premium tax charge.

SEPARATE ACCOUNT: an account which has been established by us to separate the
assets funding the variable benefits for the class of contracts to which the
policy belongs from our other assets.

SUB-ACCOUNT: the subdivisions of the Separate Account.

SUPPLEMENTAL FACE AMOUNT: On the policy date, the Supplemental Face Amount is
shown on a policy's specifications page. Thereafter, the Supplemental Face
Amount may change according to the terms of the policy.

TARGET PREMIUM: The amount of level premium required to support a whole life
insurance policy with a net interest rate of 5%, assuming that the initial Face
Amount is entirely Basic Face Amount. The policy charges used in determining the
level premium amount are maximum guaranteed cost of insurance rates for standard
risks, actual premium tax rates, a 1.25% premium charge for processing, a 1.25%
premium charge for federal tax and other maximum policy deductions or charges,
exclusive of any additional rider charges.

VALUATION DAY: the date on which a Sub-Account is valued. This occurs every day
the New York Stock Exchange is open for trading.

WE, US, OUR: Hartford Life and Annuity Insurance Company, sometimes referred to
as "Hartford."

YOU, YOUR: the owner of the policy.
<PAGE>
26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

WHERE YOU CAN FIND MORE INFORMATION

You can call us at 1-800-231-5453 to ask us questions, or to get a Statement
of Additional Information, free of charge. The Statement of Additional
Information contains more information about this life insurance policy and, like
this prospectus, is filed with the Securities and Exchange Commission. You
should read the Statement of Additional Information because you are bound by the
terms contained in it.

We file other information with the Securities and Exchange Commission. You
may read and copy any document we file at the SEC's public reference room in
Washington, DC 20549-6009. Please call the SEC at 1-800-SEC-0330 for further
information. Our SEC filings are also available to the public at the SEC's web
site at http://www.sec.gov.
<PAGE>
PART B
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION
SEPARATE ACCOUNT VL II
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY

This Statement of Additional Information is not a prospectus. We will send
you a prospectus if you write us at P.O. Box 2999, Hartford, CT 06104-2999, or
if you call us at 1-800-231-5453.

DATE OF PROSPECTUS: MAY 3, 1999
DATE OF STATEMENT OF ADDITIONAL INFORMATION: MAY 3, 1999
<PAGE>
2 STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GENERAL INFORMATION AND HISTORY....................................... 3
SERVICES.............................................................. 6
EXPERTS............................................................... 6
DISTRIBUTION OF THE POLICIES.......................................... 6
ADDITIONAL INFORMATION ABOUT CHARGES.................................. 7
ILLUSTRATION OF BENEFITS.............................................. 9
FINANCIAL STATEMENTS.................................................. SA-1
</TABLE>

<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
- --------------------------------------------------------------------------------

GENERAL INFORMATION AND HISTORY

HARTFORD LIFE AND ANNUITY INSURANCE COMPANY ("HARTFORD")

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

Hartford Life and Annuity Insurance Company is controlled by Hartford Life
Insurance Company, which is controlled by Hartford Life & Accident Insurance
Company, which is controlled by Hartford Life Inc., which is controlled by
Hartford Accident & Indemnity Company, which is controlled by Hartford Fire
Insurance Company, which is controlled by Nutmeg Insurance Company, which is
controlled by The Hartford Financial Services Group, Inc. Each of these
companies is engaged in the business of insurance and financial services.

The following table shows a brief description of the business experience of
officers and directors of Hartford Life and Annuity Insurance Company:

Gregory A. Boyko Senior Vice President, Vice President & Controller (1995-1997), Hartford Life Insurance
Director, 1997* Company; Director (1997-Present); Senior Vice President
(1997-Present), Chief Financial Officer & Treasurer
(1997-1998); Vice President & Controller (1995-1997), Hartford
Life and Accident Insurance Company; Director (1997-Present);
Senior Vice President, Chief Financial Officer & Treasurer
(1997-Present); Vice President and Controller (1995-1997),
Hartford Life Insurance Company; Senior Vice President, Chief
Financial Officer & Treasurer (1997-Present), Hartford Life,
Inc.; Chief Financial Officer (1994-1995), IMG American Life;
Senior Vice President (1992-1994), Connecticut Mutual Life
Insurance Company.

Peter W. Cummins Senior Vice President, 1997 Vice President (1993-1997), Hartford; Senior Vice President,
(1997-Present); Vice President (1989-1997), Hartford Life and
Accident Insurance Company; Senior Vice President
(1997-Present); Vice President (1989-1997); Senior Vice
President (1997-Present); Vice President (1989-1997), Hartford
Life Insurance Company.

Timothy M. Fitch Vice President, 1995 Vice President (1995-Present); Actuary (1994-Present); Assistant
Actuary, 1997 Vice President (1992-1995), Hartford Life and Accident
Insurance Company; Vice President (1995-Present); Actuary
(1994-Present); Assistant Vice President (1992-1995), Hartford
Life Insurance Company.
</TABLE>
<PAGE>

4 STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
POSITION WITH HARTFORD; OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME YEAR OF ELECTION FOR PAST FIVE YEARS; OTHER DIRECTORSHIPS
- --------------------------- ------------------------------------- ----------------------------------------------------------------
<S> <C> <C>
Mary Jane B. Fortin Vice President & Chief Accounting Vice President & Chief Accounting Office (1998-Present),
Officer, 1998 Hartford Life Insurance Company; Vice President & Chief
Accounting Officer, (1998-Present), Royal Life Insurance
Company of America; Vice President & Chief Accounting Officer
(1998-Present) Alpine Life Insurance Company; Chief Accounting
Officer (1997-Present), Hartford Life, Inc.; Director, Finance
(1995-1997), Value Health, Inc.; Senior Manager (1993-1995),
Coopers and Lybrand; Audit Manager (1993-1996) Arthur Andersen
& Co.

David T. Foy Senior Vice President & Senior Vice President (1998-Present), Vice President (1998),
Treasurer, 1998 Assistant Vice President (1995-1998), Hartford; Senior Vice
President (1998-Present), Hartford Life and Accident Insurance
Company; Director, Strategic Planning Corporate Finance
(1995-1996), IA Product Development (1994-1995), Hartford;
Various Actuarial Roles (1989-1993) Milliman & Robertson

Lynda Godkin Senior Vice President, 1997 Assistant General Counsel and Secretary (1994-1995), Hartford;
General Counsel, 1996 Director (1997-Present); Senior Vice President (1997-Present);
Corporate Secretary, 1996 General Counsel (1996-Present); Corporate Secretary
Director, 1997* (1995-Present); Associate General Counsel (1995-1996);
Assistant General Counsel and Secretary (1994-1995); Counsel
(1990-1994), Hartford Life and Accident Insurance Company;
Senior Vice President (1997-Present); General Counsel
(1996-Present); Corporate Secretary (1995-Present); Director
(1997-Present); Associate General Counsel (1995-1996);
Assistant General Counsel and Secretary (1994-1995); Counsel
(1990-1994), Hartford Life Insurance Company; Vice President
and General Counsel (1997-Present), Hartford Life, Inc.

Lois W. Grady Senior Vice President, 1998 Vice President (1994-1998), Hartford; Senior Vice President
Vice President, 1994 (1998-Present); Vice President (1993-1997); Assistant Vice
President (1987-1993), Hartford Life and Accident Insurance
Company; Senior Vice President (1998-Present); Vice President
(1994-1997); Assistant Vice President (1987-1994), Hartford
Life Insurance Company.

Stephen T. Joyce Vice President, 1997 Assistant Vice President (1995-1997), Hartford; Assistant Vice
President (1994-1997), Hartford Life and Accident Insurance
Company; Vice President (1997-Present); Assistant Vice
President (1994-1997), Hartford Life Insurance Company.

Michael D. Keeler Vice President, 1998 Vice President (1998-Present); Hartford Life and Accident
Insurance Company; Vice President (1995-1997), Providian
Insurance; Supervisor/ Manager (1985-1995), U.S. West
Communications.
</TABLE>
<PAGE>

HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
- --------------------------------------------------------------------------------

Thomas M. Marra Executive Vice President, 1996 Senior Vice President (1993-1996); Director of Individual
Director, Individual Life and Annuities (1991-1993), Hartford; Director (1994-Present);
Annuity Division, 1993 Executive Vice President (1995-Present); Director, Individual
Director, 1994* Life and Annuity Division (1994-Present); Senior Vice
President (1994-1995); Vice President (1989-1994); Actuary
(1987-1997), Hartford Life and Accident Insurance Company;
Director (1994-Present); Executive Vice President
(1995-Present); Director, Individual Life and Annuity Division
(1994-Present); Senior Vice President (1994-1995); Vice
President (1989-1994); Actuary (1987-1995), Hartford Life
Insurance Company; Executive Vice President, Individual Life
and Annuities (1997-Present), Hartford Life, Inc.

Steven L. Matthieson Vice President, 1984 Director of New Business (1984-1997), Hartford.

Craig R. Raymond Senior Vice President, 1997 Vice President (1993-1997); Assistant Vice President
Chief Actuary, 1994 (1992-1993); Actuary (1989-1994), Hartford; Senior Vice
President (1997-Present); Chief Actuary (1995-Present); Vice
President (1993-1997); Actuary (1990-1995), Hartford Life and
Accident Insurance Company; Senior Vice President
(1997-Present); Chief Actuary (1994-Present); Vice President
(1993-1997); Assistant Vice President (1992-1993); Actuary
(1989-1994), Hartford Life Insurance Company; Vice President
and Chief Actuary (1997-Present), Hartford Life, Inc.

Lowndes A. Smith President, 1989 Chief Operating Officer (1989-1997), Hartford; Director
Chief Executive Officer, 1997 (1981-Present); President (1989-Present); Chief Executive
Director, 1985* Officer (1997-Present); Chief Operating Officer (1989-1997),
Hartford Life and Accident Insurance Company; Director
(1981-Present); President (1989-Present), Chief Executive
Officer (1997-Present); Chief Operating Officer (1989-1997),
Hartford Life Insurance Company; Chief Executive Officer and
President and Director (1997-Present), Hartford Life, Inc.

David M. Znamierowski Senior Vice President, 1997 Vice President (1997) Senior Vice President (1997) Director,
Director, 1998 Risk Management Strategy (1996) Director (1998), Hartford;
Director (1998-Present); Senior Vice President (1997-Present);
Hartford Life and Accident Insurance Company; Vice President,
Investment Strategy (1997-Present), Hartford Life, Inc.; Vice
President, Investment Strategy & Policy (1991-1996), Aetna
Life and Casualty.
</TABLE>

- ---------

* Denotes date of election to Board of Directors of Hartford.

** Affiliated Company of The Hartford Financial Services Group, Inc.

Unless otherwise indicated, the principal business address of each of the
above individuals is P.O. Box 2999, Hartford, CT 06104-2999.
<PAGE>
6 STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

SEPARATE ACCOUNT VL II was established as a separate account under
Connecticut law on September 30, 1994. The Separate Account is classified as a
unit investment trust registered with the Securities and Exchange Commission
under the Investment Company Act of 1940.

SERVICES

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.

EXPERTS

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.

ACTUARIAL EXPERT -- The hypothetical Policy illustrations included in this
Statement of Additional Information and the registration statement with respect
to the Separate Account have been approved by Kenneth A. McCullum, FSA, MAAA,
Assistant Vice President and Director, Individual Life Product Development, for
Hartford, and are included in reliance upon his opinion as to their
reasonableness.
DISTRIBUTION OF POLICIES

Hartford Equity Sales Company, Inc. ("HESCO") serves as principal
underwriter for the policies and will offer the policies on a continuous basis.
HESCO is controlled by Hartford and is located at the same address as Hartford.
HESCO is registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD").

The policies will be sold by salespersons who represent Hartford as
insurance agents and who are registered representatives of HESCO or certain
other registered broker-dealers who have entered into distribution agreements
with HESCO.

During the first Policy Year, the maximum sales commission payable to
Hartford agents, independent registered insurance brokers, and other registered
broker-dealers, is 45% of the premium paid up to a Target Premium, and 5% of any
excess. In Policy Years 2 through 10, such sales commission will not exceed 5.5%
of premiums paid. Thereafter, agent commissions will not exceed 2% of premiums
paid. Sales commissions may be less for premiums attributable to Supplemental
Face Amount. Additionally, expense allowances may be paid. A sales
representative may be required to return all or a portion of the commissions
paid if the Policy terminates prior to the Policy's second Policy Anniversary.

Broker-dealers or financial institutions are compensated according to a
schedule set forth by HESCO and any applicable rules or regulations for variable
insurance compensation. Compensation is generally based on premium payments.
This compensation is usually paid from the sales charges described in the
Prospectus.

In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HESCO, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or other financial institutions based
on total sales by the broker-dealer or financial institution of insurance
products. These payments, which may be different for broker-dealers or financial
institutions, will be made by HESCO, its affiliates or Hartford out of their
assets and will not affect the amounts paid by the policy owner to purchase,
hold or surrender variable insurance products.

The following table shows officers and directors of HESCO:

<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES
- ----------------------- ----------------------------------------
<S> <C>
Lowndes A. Smith President and Chief Executive Officer,
Director
Thomas M. Marra Executive Vice President, Director
Peter W. Cummins Senior Vice President
Lynda Godkin Senior Vice President, General Counsel
and Corporate Secretary
Donald E. Waggaman, Jr. Treasurer
George R. Jay Controller
</TABLE>

<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
- --------------------------------------------------------------------------------

ADDITIONAL INFORMATION ABOUT CHARGES

SALES LOAD -- The front-end sales load is a charge deducted from each
premium payment based on (1) the amount of premium paid in relation to the
Target Premium, (2) the Policy Year in which the premium is paid and (3) the
amount of the premium Attributable to the Basic Face Amount and to the
Supplemental Face Amount.

Both current and maximum front-end sales loads for premiums Attributable to
the Basic Face Amount up to the Target Premium is 50% in the first Policy Year,
15% in Policy Years 2 through 5, 10% in Policy Years 6 through 10, and 2% in
Policy Years 11 through 20. Thereafter, the current front-end sales load is 0%,
with a maximum of 2%.

Both current and maximum front-end sales loads for premiums Attributable to
the Basic Face Amount in excess of the Target Premium is 9% in Policy Year 1, 4%
in Policy Years 2 through 10 and 2% in Policy Years 11 through 20. Thereafter,
the current front-end sales load is 0%, with a maximum of 2%.

Both current and maximum front-end sales loads for all premiums Attributable
to the Supplemental Face Amount is 4% in Policy Years 1 through 10 and 2% in
Policy Years 11 through 20. Thereafter, the current front-end sales load is 0%,
with a maximum of 2%.

The front-end load under the policies may be used to cover expenses related
to the sale and distribution of the policies.

UNDERWRITING PROCEDURES -- To purchase a policy you must submit an
application to us. Within limits, you may choose the Scheduled Premiums and the
initial Face Amount and the Guarantee Period in the policy application. Policies
generally will be issued only on the lives of insureds the ages of 20 and 80 who
supply evidence of insurability satisfactory to us. (We may extend the age 80
limit to higher ages for the older Insured, in which case certain age and risk
classification restrictions on the younger Insured will apply). Acceptance is
subject to our underwriting rules and we reserve the right to reject an
application for any reason. No change in the terms or conditions of a policy
will be made without your consent.

The Cost of Insurance charge is to cover our anticipated mortality costs and
other expenses. For standard risks, the Cost of Insurance rates will not exceed
those based on the 1980 Commissioners' Standard Ordinary Mortality Smoker or
Nonsmoker Table, age last birthday. A table of guaranteed Cost of Insurance
rates per $1,000 will be included in each Policy; however, we reserve the right
to use rates less than those shown in the table. Substandard risks will be
charged a higher Cost of Insurance rate which will not exceed rates based on a
multiple of the 1980 Commissioners' Standard Ordinary Mortality Smoker or
Nonsmoker Table, age last birthday. The multiple will be based on the Insured's
risk class. We will determine the Cost of Insurance rate at the start of each
Policy Year. Any changes in the Cost of Insurance rate will be made uniformly
for all Insureds of the same issue age, sex and risk class and whose coverage
has been in force for the same length of time. No change in insurance class or
cost will occur on account of deterioration of the Insured's health.

Because the Account Value and the Death Benefit may vary from month to
month, the Cost of Insurance charge may also vary on each Monthly Activity Date.

INCREASES IN FACE AMOUNT -- At any time after the first Policy Year, You may
request In Writing a change in the Face Amount.

The minimum amount by which the Face Amount can be increased is based on Our
rules then in effect.

If You selected Supplemental Face Amount coverage on Your Policy
application, the amount of the coverage is shown on the Policy's specifications
page, subject to any scheduled changes You instructed in Your Policy application
and any unscheduled increases in Face Amount, as described below. You may
discontinue a scheduled increase by request In Writing.

Any unscheduled increase in Face Amount is subject to an increase fee of
$.05 per $1,000 of each increase per month for the first five Policy Years from
the date of each increase.
<PAGE>
8 STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

Any unscheduled increase in the Face Amount will be deemed an increase in
the Supplemental Face Amount. All requests to increase the Face Amount must be
applied for on a new application and accompanied by Your Policy. All requests
will be subject to evidence of insurability satisfactory to Us. Any increase
approved by Us will be effective on the date shown on the new Policy
specifications page, provided that the deduction for the Cost of Insurance for
the first month is made.

We reserve the right to limit the number of increases made under a Policy to
no more than one in any 12 month period.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
- --------------------------------------------------------------------------------

ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES
AND CASH SURRENDER VALUES

The following tables illustrate the way in which a Policy operates. They
show how the Death Benefit and Account Values could vary over an extended period
of time assuming hypothetical gross rates of return equal to constant after tax
annual rates of 0%, 6% and 12%. They assume the following: (a) a male,
preferred, age 55, and a female, preferred, age 50, with $1,000,000 of Basic
Face Amount and a premium of $15,500.00 paid in all years; (b) a male,
preferred, age 55, and a female, preferred, age 50, with $750,000 of Basic Face
Amount and $250,000 of Supplemental Face Amount and a premium of $7,500.00 paid
in all years; (c) a male, preferred, age 65, and a female, preferred, age 65,
with $1,000,000 of Basic Face Amount and a premium of $27,000.00 paid in all
years; and (d) a male, preferred, age 65, and a female, preferred, age 65 with
$750,000 of Basic Face Amount and $250,000 of Supplemental Face Amount and a
premium of $21,500.00 paid in all years.

The Death Benefit and Account Value for a Policy would be different from
those shown if the rates of return averaged 0%, 6% and 12% over a period of
years, but also fluctuated above or below those averages for individual Policy
Years. They would also differ if any Policy loan was made during the period of
time illustrated.

The tables reflect the deductions of current Policy charges and guaranteed
Policy charges for a single gross interest rate. The Death Benefits and Account
Values would change if current Cost of Insurance charges change.

The amounts shown for the Death Benefit and Account Values as of the end of
each Policy Year take into account an average daily charge equal to an annual
charge of 0.71% of the average daily net assets of the Funds for investment
advisory and administrative services fees. The gross annual investment return
rates of 0%, 6% and 12% on the Fund's assets are equal to net annual investment
return rates (net of the 0.71% average daily charge) of -.71%, 5.29% and 11.29%,
respectively.

In addition, the Death Benefit and Account Values as of the end of each
Policy Year take into account the front-end sales load, premium processing
charge, federal tax charge, premium tax charge (assumed to be 2.0% in the
illustrations), Cost of Insurance charge, monthly administrative fee, issue
charge, and mortality and expense risk charge.

The hypothetical returns shown in the illustrations are without any tax
charges that may be allocable to the Separate Account in the future. In order to
produce after-tax returns of 0%, 6%, and 12%, the Separate Account would have to
earn a sufficient amount in excess of 0%, 6%, 12%, respectively, to cover any
tax charges.

The "Premiums Accumulated at 5% Interest Per Year" column of each
illustration shows the amount which would accumulate if the initial premium was
invested to earn interest, after taxes, of 5% per year, compounded annually.

Hartford will furnish, upon request, a comparable illustration reflecting
the proposed Insured's age and risk classification, a Policy's proposed Face
Amount or initial premium requested, and reflecting guaranteed Cost of Insurance
rates. Hartford will also furnish an additional similar illustration reflecting
current Cost of Insurance rates which may be less than, but never greater than,
the guaranteed Cost of Insurance rates.
<PAGE>
10 STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 BASIC FACE AMOUNT
ISSUE AGE 55 MALE PREFERRED PLUS
ISSUE AGE 50 FEMALE PREFERRED PLUS
$15,500 PLANNED PREMIUM

ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.29% NET)

<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED ------------------------ ------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- --------------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1 16,275 6,682 1,000,000 6,397 1,000,000
2 33,364 19,964 1,000,000 19,364 1,000,000
3 51,307 34,522 1,000,000 33,574 1,000,000
4 70,147 50,469 1,000,000 49,137 1,000,000
5 89,930 67,925 1,000,000 66,168 1,000,000

6 110,701 88,765 1,000,000 86,539 1,000,000
7 132,511 111,570 1,000,000 108,824 1,000,000
8 155,412 136,518 1,000,000 133,198 1,000,000
9 179,457 163,805 1,000,000 159,849 1,000,000
10 204,705 193,640 1,000,000 188,979 1,000,000

11 231,215 230,322 1,000,000 222,660 1,000,000
12 259,051 271,006 1,000,000 259,637 1,000,000
13 288,279 316,129 1,000,000 300,235 1,000,000
14 318,968 366,172 1,000,000 344,816 1,000,000
15 351,191 421,681 1,000,000 393,801 1,000,000

16 385,026 483,256 1,000,000 447,685 1,000,000
17 420,552 551,544 1,041,087 507,060 1,000,000
18 457,855 627,230 1,146,223 572,543 1,046,286
19 497,022 711,097 1,259,083 644,149 1,140,543
20 538,148 804,031 1,380,523 722,178 1,239,979

25 724,270 1,439,432 2,149,200 1,224,161 1,827,783
30 1,014,302 2,479,650 3,310,871 1,954,419 2,609,573
</TABLE>

<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.

THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH VALUES WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>

THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- --------------------------------------------------------------------------------

FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 BASIC FACE AMOUNT
ISSUE AGE 55 MALE PREFERRED PLUS
ISSUE AGE 50 FEMALE PREFERRED PLUS
$15,500 PLANNED PREMIUM

ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.29% NET)

<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED ------------------------ ------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- --------------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1 16,275 6,294 1,000,000 6,018 1,000,000
2 33,364 18,453 1,000,000 17,887 1,000,000
3 51,307 31,050 1,000,000 30,182 1,000,000
4 70,147 44,085 1,000,000 42,901 1,000,000
5 89,930 57,551 1,000,000 56,038 1,000,000

6 110,701 73,113 1,000,000 71,254 1,000,000
7 132,511 89,162 1,000,000 86,942 1,000,000
8 155,412 105,688 1,000,000 103,090 1,000,000
9 179,457 122,678 1,000,000 119,683 1,000,000
10 204,705 140,107 1,000,000 136,695 1,000,000

11 231,215 161,647 1,000,000 155,612 1,000,000
12 259,051 184,225 1,000,000 175,022 1,000,000
13 288,279 207,886 1,000,000 194,876 1,000,000
14 318,968 232,668 1,000,000 215,109 1,000,000
15 351,191 258,623 1,000,000 235,647 1,000,000

16 385,026 285,793 1,000,000 256,408 1,000,000
17 420,552 314,194 1,000,000 277,305 1,000,000
18 457,855 343,898 1,000,000 298,247 1,000,000
19 497,022 374,988 1,000,000 319,132 1,000,000
20 538,148 407,548 1,000,000 339,845 1,000,000

25 724,270 593,590 1,000,000 434,554 1,000,000
30 1,014,302 825,121 1,101,716 488,575 1,000,000
</TABLE>

THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH VALUES WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>

THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
12 STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 BASIC FACE AMOUNT
ISSUE AGE 55 MALE PREFERRED PLUS
ISSUE AGE 50 FEMALE PREFERRED PLUS
$15,500 PLANNED PREMIUM

ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.71% NET)

<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED ------------------------ ------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- --------------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1 16,275 5,907 1,000,000 5,639 1,000,000
2 33,364 16,989 1,000,000 16,457 1,000,000
3 51,307 27,805 1,000,000 27,013 1,000,000
4 70,147 38,338 1,000,000 37,290 1,000,000
5 89,930 48,568 1,000,000 47,267 1,000,000

6 110,701 60,068 1,000,000 58,517 1,000,000
7 132,511 71,190 1,000,000 69,393 1,000,000
8 155,412 81,905 1,000,000 79,864 1,000,000
9 179,457 92,179 1,000,000 89,898 1,000,000
10 204,705 101,967 1,000,000 99,448 1,000,000

11 231,215 114,632 1,000,000 109,735 1,000,000
12 259,051 127,127 1,000,000 119,444 1,000,000
13 288,279 139,443 1,000,000 128,490 1,000,000
14 318,968 151,565 1,000,000 136,767 1,000,000
15 351,191 163,483 1,000,000 144,156 1,000,000

16 385,026 175,179 1,000,000 150,523 1,000,000
17 420,552 186,594 1,000,000 155,722 1,000,000
18 457,855 197,732 1,000,000 159,587 1,000,000
19 497,022 208,604 1,000,000 161,934 1,000,000
20 538,148 219,214 1,000,000 162,536 1,000,000

25 724,270 264,337 1,000,000 126,740 1,000,000
30 1,014,302 287,272 1,000,000 -- --
</TABLE>

THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH VALUES WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>

THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
- --------------------------------------------------------------------------------

FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$750,000 BASIC FACE AMOUNT
$250,000 SUPPLEMENTAL FACE AMOUNT
ISSUE AGE 55 MALE PREFERRED PLUS
ISSUE AGE 50 FEMALE PREFERRED PLUS
$7,500 PLANNED PREMIUM

ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.29% NET)

<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED ------------------------ ------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- --------------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1 7,875 3,594 1,000,000 3,229 1,000,000
2 16,144 9,648 1,000,000 8,881 1,000,000
3 24,826 16,225 1,000,000 15,014 1,000,000
4 33,942 23,355 1,000,000 21,653 1,000,000
5 43,514 31,067 1,000,000 28,822 1,000,000

6 53,565 40,589 1,000,000 37,745 1,000,000
7 64,118 50,876 1,000,000 47,368 1,000,000
8 75,199 61,971 1,000,000 57,729 1,000,000
9 86,834 73,915 1,000,000 68,860 1,000,000
10 99,051 86,745 1,000,000 80,789 1,000,000

11 111,878 103,314 1,000,000 94,076 1,000,000
12 125,347 121,643 1,000,000 108,269 1,000,000
13 139,490 141,928 1,000,000 123,413 1,000,000
14 154,339 164,369 1,000,000 139,504 1,000,000
15 169,931 189,197 1,000,000 156,533 1,000,000

16 186,303 216,655 1,000,000 174,480 1,000,000
17 203,493 246,982 1,000,000 193,325 1,000,000
18 221,543 280,506 1,000,000 213,042 1,000,000
19 240,495 317,601 1,000,000 233,602 1,000,000
20 260,394 358,683 1,000,000 254,963 1,000,000

25 350,453 638,756 1,000,000 370,350 1,000,000
30 490,791 1,101,638 1,470,927 486,164 1,000,000
</TABLE>

THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH VALUES WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>

THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
14 STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.29% NET)

<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED ------------------------ ------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- --------------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1 7,875 3,372 1,000,000 3,019 1,000,000
2 16,144 8,867 1,000,000 8,144 1,000,000
3 24,826 14,502 1,000,000 13,393 1,000,000
4 33,942 20,260 1,000,000 18,748 1,000,000
5 43,514 26,118 1,000,000 24,184 1,000,000

6 53,565 33,205 1,000,000 30,830 1,000,000
7 64,118 40,384 1,000,000 37,548 1,000,000
8 75,199 47,622 1,000,000 44,302 1,000,000
9 86,834 54,875 1,000,000 51,048 1,000,000
10 99,051 62,088 1,000,000 57,729 1,000,000

11 111,878 71,976 1,000,000 64,786 1,000,000
12 125,347 82,250 1,000,000 71,643 1,000,000
13 139,490 92,917 1,000,000 78,188 1,000,000
14 154,339 103,983 1,000,000 84,278 1,000,000
15 169,931 115,510 1,000,000 89,753 1,000,000

16 186,303 127,497 1,000,000 94,421 1,000,000
17 203,493 139,900 1,000,000 98,072 1,000,000
18 221,543 152,745 1,000,000 100,468 1,000,000
19 240,495 166,062 1,000,000 101,321 1,000,000
20 260,394 179,879 1,000,000 100,285 1,000,000

25 350,453 251,931 1,000,000 47,409 1,000,000
30 490,791 321,016 1,000,000 -- --
</TABLE>

THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH VALUES WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>

THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
- --------------------------------------------------------------------------------

ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.71% NET)

<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED ------------------------ ------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- --------------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1 7,875 3,152 1,000,000 2,809 1,000,000
2 16,144 8,114 1,000,000 7,434 1,000,000
3 24,826 12,900 1,000,000 11,888 1,000,000
4 33,942 17,490 1,000,000 16,150 1,000,000
5 43,514 21,859 1,000,000 20,196 1,000,000

6 53,565 27,090 1,000,000 25,109 1,000,000
7 64,118 32,025 1,000,000 29,729 1,000,000
8 75,199 36,627 1,000,000 34,020 1,000,000
9 86,834 40,856 1,000,000 37,941 1,000,000
10 99,051 44,658 1,000,000 41,439 1,000,000

11 111,878 50,697 1,000,000 44,933 1,000,000
12 125,347 56,589 1,000,000 47,856 1,000,000
13 139,490 62,327 1,000,000 50,107 1,000,000
14 154,339 67,892 1,000,000 51,562 1,000,000
15 169,931 73,274 1,000,000 52,081 1,000,000

16 186,303 78,449 1,000,000 51,501 1,000,000
17 203,493 83,351 1,000,000 49,645 1,000,000
18 221,543 87,983 1,000,000 46,309 1,000,000
19 240,495 92,352 1,000,000 41,262 1,000,000
20 260,394 96,462 1,000,000 34,225 1,000,000

25 350,453 107,383 1,000,000 -- --
30 490,791 88,682 1,000,000 -- --
</TABLE>

THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH VALUES WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>

THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
Hartford Life and Annuity Insurance Company SA-1
- --------------------------------------------------------------------------------

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Hartford Life and Annuity Insurance Company
Separate Account Variable Life Two and to the
Owners of Units of Interest therein:

We have audited the accompanying statements of assets and liabilities of
Hartford Life and Annuity Insurance Company Separate Account Variable Life Two
(Bond Fund, Stock Fund, Money Market Fund, Advisers Fund, Capital Appreciation
Fund, Mortgage Securities Fund, Index Fund, International Opportunities Fund,
Dividend and Growth Fund, Fidelity VIP Equity-Income Fund, Fidelity VIP Overseas
Fund, Fidelity VIP II Asset Manager Fund, Growth and Income Fund, International
Advisers Fund, Small Company Fund, and MidCap Fund) (collectively, the Account)
as of December 31, 1998, and the related statements of operations and the
statements of changes in net assets for the periods presented. These financial
statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Account as of December
31, 1998, and the results of their operations and the changes in their net
assets for the periods presented in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Hartford, Connecticut
February 16, 1999
<PAGE>
SA-2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

SEPARATE ACCOUNT VARIABLE LIFE TWO

STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998

<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- --------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 2,132,205
Cost $2,318,402
Market Value......... $ 2,304,199 --
Hartford Stock HLS
Fund, Inc. - Class IA
Shares 791,346
Cost $4,632,387
Market Value......... -- $ 5,192,546
Hartford Money Market
HLS Fund, Inc. - Class
IA
Shares 12,981,615
Cost $12,981,615
Market Value......... -- --
Hartford Advisers HLS
Fund, Inc. - Class IA
Shares 1,091,175
Cost $3,029,766
Market Value......... -- --
Hartford Capital
Appreciation HLS Fund,
Inc. - Class IA
Shares 729,577
Cost $3,165,354
Market Value......... -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 40,097
Cost $44,447
Market Value......... -- --
Hartford Index HLS
Fund, Inc. - Class IA
Shares 2,920,622
Cost $8,806,337
Market Value......... -- --
Hartford International
Opportunities HLS
Fund, Inc. - Class IA
Shares 1,085,187
Cost $1,406,135
Market Value......... -- --
Due from Hartford Life
and Annuity Insurance
Company................. 37 26,077
Receivable from fund
shares sold............. -- --
-------------- --------------
Total Assets............. 2,304,236 5,218,623
-------------- --------------
LIABILITIES:
Due to Hartford Life and
Annuity Insurance
Company................. -- --
Payable for fund shares
purchased............... 44 26,052
-------------- --------------
Total Liabilities........ 44 26,052
-------------- --------------
Net Assets (variable life
contract liabilities)... $ 2,304,192 $ 5,192,571
-------------- --------------
-------------- --------------
Units Owned by
Participants............ 1,551,309 1,654,836
Unit Values.............. $ 1.485321 $ 3.137815
</TABLE>

<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- -------------- --------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 2,132,205
Cost $2,318,402
Market Value......... -- -- -- -- -- --
Hartford Stock HLS
Fund, Inc. - Class IA
Shares 791,346
Cost $4,632,387
Market Value......... -- -- -- -- -- --
Hartford Money Market
HLS Fund, Inc. - Class
IA
Shares 12,981,615
Cost $12,981,615
Market Value......... $ 12,981,615 -- -- -- -- --
Hartford Advisers HLS
Fund, Inc. - Class IA
Shares 1,091,175
Cost $3,029,766
Market Value......... -- $ 3,257,433 -- -- -- --
Hartford Capital
Appreciation HLS Fund,
Inc. - Class IA
Shares 729,577
Cost $3,165,354
Market Value......... -- -- $ 3,472,117 -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 40,097
Cost $44,447
Market Value......... -- -- -- $ 43,487 -- --
Hartford Index HLS
Fund, Inc. - Class IA
Shares 2,920,622
Cost $8,806,337
Market Value......... -- -- -- -- $ 10,427,941 --
Hartford International
Opportunities HLS
Fund, Inc. - Class IA
Shares 1,085,187
Cost $1,406,135
Market Value......... -- -- -- -- -- $1,470,274
Due from Hartford Life
and Annuity Insurance
Company................. 118,848 20 17,159 -- 14,175 12,605
Receivable from fund
shares sold............. -- -- -- -- -- --
--------------- -------------- --------------- -------------- -------------- ----------------
Total Assets............. 13,100,463 3,257,453 3,489,276 43,487 10,442,116 1,482,879
--------------- -------------- --------------- -------------- -------------- ----------------
LIABILITIES:
Due to Hartford Life and
Annuity Insurance
Company................. -- -- -- -- -- --
Payable for fund shares
purchased............... 118,713 45 17,190 -- 14,242 12,641
--------------- -------------- --------------- -------------- -------------- ----------------
Total Liabilities........ 118,713 45 17,190 -- 14,242 12,641
--------------- -------------- --------------- -------------- -------------- ----------------
Net Assets (variable life
contract liabilities)... $ 12,981,750 $ 3,257,408 $ 3,472,086 $ 43,487 $ 10,427,874 $1,470,238
--------------- -------------- --------------- -------------- -------------- ----------------
--------------- -------------- --------------- -------------- -------------- ----------------
Units Owned by
Participants............ 9,956,078 1,342,105 1,407,660 30,198 3,505,476 865,269
Unit Values.............. $ 1.303902 $ 2.427089 $ 2.466566 $ 1.440067 $ 2.974738 $ 1.699168
</TABLE>
<PAGE>
SA-4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

SEPARATE ACCOUNT VARIABLE LIFE TWO

STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998

<TABLE>
<CAPTION>
DIVIDEND FIDELITY VIP
AND GROWTH EQUITY-INCOME
FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 1,055,565
Cost $2,159,136
Market Value....... $ 2,280,532 --
Fidelity VIP
Equity-Income
Portfolio
Shares 53,993
Cost $1,298,173
Market Value....... -- $1,372,514
Fidelity VIP Overseas
Portfolio
Shares 47,654
Cost $911,449
Market Value....... -- --
Fidelity VIP II Asset
Manager Portfolio
Shares 21,404
Cost $371,018
Market Value....... -- --
Hartford Growth and
Income HLS Fund -
Class IA
Shares 36,103
Cost $38,125
Market Value....... -- --
Hartford
International
Advisers HLS Fund,
Inc. - Class IA
Shares 69,593
Cost $75,997
Market Value....... -- --
Hartford Small
Company HLS Fund,
Inc. - Class IA
Shares 64,192
Cost $72,344
Market Value....... -- --
Hartford MidCap HLS
Fund, Inc. - Class
IA
Shares 61,941
Cost $80,971
Market Value....... -- --
Due from Hartford Life
and Annuity Insurance
Company............... 12,768 --
Receivable from fund
shares sold........... -- --
-------------- ----------------
Total Assets........... 2,293,300 1,372,514
-------------- ----------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... -- 18
Payable for fund shares
purchased............. 12,795 --
-------------- ----------------
Total Liabilities...... 12,795 18
-------------- ----------------
Net Assets (variable
life contract
liabilities).......... $ 2,280,505 $1,372,496
-------------- ----------------
-------------- ----------------
Units Owned by
Participants.......... 980,098 700,553
Unit Values............ $ 2.326815 $ 1.959216
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-5
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP II INTERNATIONAL
OVERSEAS ASSET MANAGER GROWTH AND INCOME ADVISERS SMALL COMPANY
PORTFOLIO PORTFOLIO FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ---------------- -------------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 1,055,565
Cost $2,159,136
Market Value....... -- -- -- -- --
Fidelity VIP
Equity-Income
Portfolio
Shares 53,993
Cost $1,298,173
Market Value....... -- -- -- -- --
Fidelity VIP Overseas
Portfolio
Shares 47,654
Cost $911,449
Market Value....... $ 955,461 -- -- -- --
Fidelity VIP II Asset
Manager Portfolio
Shares 21,404
Cost $371,018
Market Value....... -- $ 388,704 -- -- --
Hartford Growth and
Income HLS Fund -
Class IA
Shares 36,103
Cost $38,125
Market Value....... -- -- $ 42,817 -- --
Hartford
International
Advisers HLS Fund,
Inc. - Class IA
Shares 69,593
Cost $75,997
Market Value....... -- -- -- $ 80,358 --
Hartford Small
Company HLS Fund,
Inc. - Class IA
Shares 64,192
Cost $72,344
Market Value....... -- -- -- -- $ 84,806
Hartford MidCap HLS
Fund, Inc. - Class
IA
Shares 61,941
Cost $80,971
Market Value....... -- -- -- -- --
Due from Hartford Life
and Annuity Insurance
Company............... 2,473 2 6,368 -- 1
Receivable from fund
shares sold........... -- -- -- -- --
-------------- ---------------- ---------- ---------------- ----------------
Total Assets........... 957,934 388,706 49,185 80,358 84,807
-------------- ---------------- ---------- ---------------- ----------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... -- -- -- -- --
Payable for fund shares
purchased............. 2,474 -- 6,367 -- --
-------------- ---------------- ---------- ---------------- ----------------
Total Liabilities...... 2,474 -- 6,367 -- --
-------------- ---------------- ---------- ---------------- ----------------
Net Assets (variable
life contract
liabilities).......... $ 955,460 $ 388,706 $ 42,818 $ 80,358 $ 84,807
-------------- ---------------- ---------- ---------------- ----------------
-------------- ---------------- ---------- ---------------- ----------------
Units Owned by
Participants.......... 624,827 221,943 37,201 79,762 78,789
Unit Values............ $ 1.529160 $1.751379 $1.150984 $1.007480 $1.076363

MIDCAP
FUND
SUB-ACCOUNT
--------------
<S> <C>
ASSETS:
Investments:
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 1,055,565
Cost $2,159,136
Market Value....... --
Fidelity VIP
Equity-Income
Portfolio
Shares 53,993
Cost $1,298,173
Market Value....... --
Fidelity VIP Overseas
Portfolio
Shares 47,654
Cost $911,449
Market Value....... --
Fidelity VIP II Asset
Manager Portfolio
Shares 21,404
Cost $371,018
Market Value....... --
Hartford Growth and
Income HLS Fund -
Class IA
Shares 36,103
Cost $38,125
Market Value....... --
Hartford
International
Advisers HLS Fund,
Inc. - Class IA
Shares 69,593
Cost $75,997
Market Value....... --
Hartford Small
Company HLS Fund,
Inc. - Class IA
Shares 64,192
Cost $72,344
Market Value....... --
Hartford MidCap HLS
Fund, Inc. - Class
IA
Shares 61,941
Cost $80,971
Market Value....... $ 89,149
Due from Hartford Life
and Annuity Insurance
Company............... --
Receivable from fund
shares sold........... --
--------------
Total Assets........... 89,149
--------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... --
Payable for fund shares
purchased............. --
--------------
Total Liabilities...... --
--------------
Net Assets (variable
life contract
liabilities).......... $ 89,149
--------------
--------------
Units Owned by
Participants.......... 80,771
Unit Values............ $ 1.103726
</TABLE>
<PAGE>
SA-6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

SEPARATE ACCOUNT VARIABLE LIFE TWO

STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
CAPITAL MORTGAGE
BOND STOCK MONEY MARKET ADVISERS APPRECIATION SECURITIES
FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $106,052 $ 38,074 $178,529 $ 63,199 $ 17,887 $2,575
-------------- -------------- --------------- -------------- --------------- ------
CAPITAL GAINS INCOME..... -- 18,418 -- 11,531 30,576 --
-------------- -------------- --------------- -------------- --------------- ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 746 (2,645) -- 1,768 (3,241) (114)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (16,930) 557,352 -- 224,740 308,545 147
-------------- -------------- --------------- -------------- --------------- ------
Net gain (loss) on
investments......... (16,184) 554,707 -- 226,508 305,304 33
-------------- -------------- --------------- -------------- --------------- ------
Net increase
(decrease) in net
assets resulting
from operations..... $ 89,868 $611,199 $178,529 $301,238 $353,767 $2,608
-------------- -------------- --------------- -------------- --------------- ------
-------------- -------------- --------------- -------------- --------------- ------

INDEX
FUND
SUB-ACCOUNT
--------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $ 79,420
--------------
CAPITAL GAINS INCOME..... 12,992
--------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 14,698
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 1,617,496
--------------
Net gain (loss) on
investments......... 1,632,194
--------------
Net increase
(decrease) in net
assets resulting
from operations..... $1,724,606
--------------
--------------
</TABLE>

*From inception, August 3, 1998, to December 31, 1998

The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-7
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL DIVIDEND FIDELITY VIP FIDELITY VIP FIDELITY VIP II
OPPORTUNITIES AND GROWTH EQUITY-INCOME OVERSEAS ASSET MANAGER
FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 18,410 $ 33,160 $ 1,864 $ 540 $ 5,839
-------- -------------- ------- ------- -------
CAPITAL GAINS INCOME..... 17,744 8,141 6,635 1,592 17,517
-------- -------------- ------- ------- -------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 77 63 (1,856) 89 (16)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 73,152 117,405 70,207 44,647 15,814
-------- -------------- ------- ------- -------
Net gain (loss) on
investments......... 73,229 117,468 68,351 44,736 15,798
-------- -------------- ------- ------- -------
Net increase
(decrease) in net
assets resulting
from operations..... $109,383 $158,769 $76,850 $46,868 $39,154
-------- -------------- ------- ------- -------
-------- -------------- ------- ------- -------

<CAPTION>
GROWTH SMALL
AND INCOME INTERNATIONAL COMPANY MIDCAP
FUND ADVISERS FUND FUND FUND
SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
--------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 138 -- -- --
------ ------ ------- ------
CAPITAL GAINS INCOME..... -- -- -- --
------ ------ ------- ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 21 308 (148) 19
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 4,692 4,361 12,462 8,178
------ ------ ------- ------
Net gain (loss) on
investments......... 4,713 4,669 12,314 8,197
------ ------ ------- ------
Net increase
(decrease) in net
assets resulting
from operations..... $4,851 $4,669 $12,314 $8,197
------ ------ ------- ------
------ ------ ------- ------
</TABLE>

*From inception, August 3, 1998, to December 31, 1998
<PAGE>
SA-8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

SEPARATE ACCOUNT VARIABLE LIFE TWO

STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment
income................ $ 106,052 $ 38,074
Capital gains income... -- 18,418
Net realized gain
(loss) on security
transactions.......... 746 (2,645)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (16,930) 557,352
-------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 89,868 611,199
-------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 219,212 486,207
Net transfers.......... 1,873,633 4,031,316
Surrenders for benefit
payments and fees..... (22,489) (93,425)
Net loan activity...... (63,707) (57)
Cost of insurance...... (39,274) (74,817)
-------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,967,375 4,349,224
-------------- --------------
Net increase (decrease)
in net assets......... 2,057,243 4,960,423
NET ASSETS:
Beginning of period.... $ 246,949 $ 232,148
-------------- --------------
End of period.......... $ 2,304,192 $ 5,192,571
-------------- --------------
-------------- --------------
</TABLE>

STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment
income................ $ 10,020 $ 1,517
Capital gains income... -- 113
Net realized gain
(loss) on security
transactions.......... 281 287
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 3,212 2,743
-------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 13,513 4,660
-------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 16,326 9,295
Net transfers.......... 161,664 224,575
Surrenders for benefit
payments and fees..... (4,558) (6,421)
Cost of insurance...... (4,584) (1,028)
-------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 168,848 226,421
-------------- --------------
Net increase (decrease)
in net assets......... 182,361 231,081
NET ASSETS:
Beginning of period.... $ 64,588 $ 1,067
-------------- --------------
End of period.......... $ 246,949 $ 232,148
-------------- --------------
-------------- --------------
</TABLE>

<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- -------------- --------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 178,529 $ 63,199 $ 17,887 $ 2,575 $ 79,420 $ 18,410
Capital gains income... -- 11,531 30,576 -- 12,992 17,744
Net realized gain
(loss) on security
transactions.......... -- 1,768 (3,241) (114) 14,698 77
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 224,740 308,545 147 1,617,496 73,152
--------------- -------------- --------------- -------------- -------------- ----------------
Net increase (decrease)
in net assets
resulting from
operations............ 178,529 301,238 353,767 2,608 1,724,606 109,383
--------------- -------------- --------------- -------------- -------------- ----------------
UNIT TRANSACTIONS:
Purchases.............. 44,552,053 332,157 483,397 7,687 443,474 286,640
Net transfers.......... (32,394,672) 2,418,661 2,506,371 (37,994) 8,055,206 1,011,184
Surrenders for benefit
payments and fees..... (423,409) (40,763) (79,406) (1,565) (110,057) (27,008)
Net loan activity...... (6,910) (23,103) -- -- -- (17,916)
Cost of insurance...... (362,173) (28,973) (51,821) (4,367) (60,585) (39,292)
--------------- -------------- --------------- -------------- -------------- ----------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 11,364,889 2,657,979 2,858,541 (36,239) 8,328,038 1,213,608
--------------- -------------- --------------- -------------- -------------- ----------------
Net increase (decrease)
in net assets......... 11,543,418 2,959,217 3,212,308 (33,631) 10,052,644 1,322,991
NET ASSETS:
Beginning of period.... $ 1,438,332 $ 298,191 $ 259,778 $ 77,118 $ 375,230 $ 147,247
--------------- -------------- --------------- -------------- -------------- ----------------
End of period.......... $ 12,981,750 $ 3,257,408 $ 3,472,086 $ 43,487 $ 10,427,874 $1,470,238
--------------- -------------- --------------- -------------- -------------- ----------------
--------------- -------------- --------------- -------------- -------------- ----------------
</TABLE>

<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- -------------- --------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 22,397 $ 4,523 $ 817 $ 2,894 $ 3,998 $ 1,213
Capital gains income... -- 1,075 385 -- 574 2,408
Net realized gain
(loss) on security
transactions.......... -- (3) 2,118 25 911 1,535
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 3,056 (1,824) (1,118) 4,041 (9,304)
--------------- -------------- --------------- -------------- -------------- ----------------
Net increase (decrease)
in net assets
resulting from
operations............ 22,397 8,651 1,496 1,801 9,524 (4,148)
--------------- -------------- --------------- -------------- -------------- ----------------
UNIT TRANSACTIONS:
Purchases.............. 4,374,149 16,165 16,079 1,604 28,684 16,294
Net transfers.......... (2,888,312) 256,828 253,669 76,343 352,567 125,494
Surrenders for benefit
payments and fees..... (61,718) (2,671) (7,630) (883) (9,226) (6,183)
Cost of insurance...... (55,698) (811) (4,880) (2,772) (7,390) (4,631)
--------------- -------------- --------------- -------------- -------------- ----------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,368,421 269,511 257,238 74,292 364,635 130,974
--------------- -------------- --------------- -------------- -------------- ----------------
Net increase (decrease)
in net assets......... 1,390,818 278,162 258,734 76,093 374,159 126,826
NET ASSETS:
Beginning of period.... $ 47,514 $ 20,029 $ 1,044 $ 1,025 $ 1,071 $ 20,421
--------------- -------------- --------------- -------------- -------------- ----------------
End of period.......... $ 1,438,332 $ 298,191 $ 259,778 $ 77,118 $ 375,230 $ 147,247
--------------- -------------- --------------- -------------- -------------- ----------------
--------------- -------------- --------------- -------------- -------------- ----------------
</TABLE>
<PAGE>
SA-10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

SEPARATE ACCOUNT VARIABLE LIFE TWO

STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
DIVIDEND FIDELITY VIP
AND GROWTH EQUITY-INCOME
FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment
income................ $ 33,160 $ 1,864
Capital gains income... 8,141 6,635
Net realized gain
(loss) on security
transactions.......... 63 (1,856)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 117,405 70,207
-------------- ----------------
Net increase (decrease)
in net assets
resulting from
operations............ 158,769 76,850
-------------- ----------------
UNIT TRANSACTIONS:
Purchases.............. 250,584 213,483
Net transfers.......... 1,838,934 1,066,683
Surrenders for benefit
payments and fees..... (49,049) (28,144)
Net loan activity...... -- --
Cost of insurance...... (41,259) (15,372)
-------------- ----------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,999,210 1,236,650
-------------- ----------------
Net increase (decrease)
in net assets......... 2,157,979 1,313,500
NET ASSETS:
Beginning of period.... $ 122,526 $ 58,996
-------------- ----------------
End of period.......... $ 2,280,505 $1,372,496
-------------- ----------------
-------------- ----------------
</TABLE>

* From inception, August 3, 1998, to December 31, 1998

STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
DIVIDEND FIDELITY VIP
AND GROWTH EQUITY-INCOME
FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income....... $ 1,121 $ 18
Capital gains income........ 30 91
Net realized gain (loss) on
security transactions...... 12 782
Net unrealized appreciation
(depreciation) of
investments during the
period..................... 3,930 4,077
-------------- ----------------
Net increase (decrease) in
net assets resulting from
operations................. 5,093 4,968
-------------- ----------------
UNIT TRANSACTIONS:
Purchases................... 11,377 2,252
Net transfers............... 109,235 54,175
Surrenders for benefit
payments and fees.......... (2,933) (2,747)
Cost of insurance........... (1,314) (708)
-------------- ----------------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 116,365 52,972
-------------- ----------------
Net increase (decrease) in
net assets................. 121,458 57,940
NET ASSETS:
Beginning of period......... $ 1,068 $ 1,056
-------------- ----------------
End of period............... $ 122,526 $ 58,996
-------------- ----------------
-------------- ----------------
</TABLE>

<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP II GROWTH INTERNATIONAL SMALL
OVERSEAS ASSET MANAGER AND INCOME ADVISERS COMPANY MIDCAP
PORTFOLIO PORTFOLIO FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
-------------- ---------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 540 $ 5,839 $ 138 $-- $-- $--
Capital gains income... 1,592 17,517 -- -- -- --
Net realized gain
(loss) on security
transactions.......... 89 (16) 21 308 (148) 19
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 44,647 15,814 4,692 4,361 12,462 8,178
-------------- -------- ------- ------- ------- -------
Net increase (decrease)
in net assets
resulting from
operations............ 46,868 39,154 4,851 4,669 12,314 8,197
-------------- -------- ------- ------- ------- -------
UNIT TRANSACTIONS:
Purchases.............. 152,670 54,314 1,000 1,000 10,618 1,000
Net transfers.......... 770,437 134,602 37,221 75,134 62,509 80,559
Surrenders for benefit
payments and fees..... (16,660) (10,808) (181) (356) (439) (361)
Net loan activity...... -- -- -- -- -- --
Cost of insurance...... (19,327) (5,833) (73) (89) (195) (246)
-------------- -------- ------- ------- ------- -------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 887,120 172,275 37,967 75,689 72,493 80,952
-------------- -------- ------- ------- ------- -------
Net increase (decrease)
in net assets......... 933,988 211,429 42,818 80,358 84,807 89,149
NET ASSETS:
Beginning of period.... $ 21,472 $177,277 -- -- -- --
-------------- -------- ------- ------- ------- -------
End of period.......... $955,460 $388,706 $42,818 $80,358 $84,807 $89,149
-------------- -------- ------- ------- ------- -------
-------------- -------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP II
OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income....... $ 38 $ 37
Capital gains income........ 150 92
Net realized gain (loss) on
security transactions...... (6) --
Net unrealized appreciation
(depreciation) of
investments during the
period..................... (679) 1,822
-------------- --------
Net increase (decrease) in
net assets resulting from
operations................. (497) 1,951
-------------- --------
UNIT TRANSACTIONS:
Purchases................... 1,594 10,283
Net transfers............... 22,728 165,107
Surrenders for benefit
payments and fees.......... (1,120) (735)
Cost of insurance........... (2,277) (379)
-------------- --------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 20,925 174,276
-------------- --------
Net increase (decrease) in
net assets................. 20,428 176,227
NET ASSETS:
Beginning of period......... $ 1,044 $ 1,050
-------------- --------
End of period............... $ 21,472 $177,277
-------------- --------
-------------- --------

<CAPTION>
<S> <C>
OPERATIONS:
Net investment income.......
Capital gains income........
Net realized gain (loss) on
security transactions......
Net unrealized appreciation
(depreciation) of
investments during the
period.....................
Net increase (decrease) in
net assets resulting from
operations.................
UNIT TRANSACTIONS:
Purchases...................
Net transfers...............
Surrenders for benefit
payments and fees..........
Cost of insurance...........
Net increase (decrease) in
net assets resulting from
unit transactions..........
Net increase (decrease) in
net assets.................
NET ASSETS:
Beginning of period.........
End of period...............
</TABLE>
<PAGE>
SA-12 Hartford Life and Annuity Insurance Company
- --------------------------------------------------------------------------------

SEPARATE ACCOUNT VARIABLE LIFE TWO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998

1. ORGANIZATION:

Separate Account Variable Life Two (the Account) is a separate investment
account within Hartford Life and Annuity Insurance Company (the Company) and is
registered with the Securities and Exchange Commission (SEC) as a unit
investment trust under the Investment Company Act of 1940, as amended. Both the
Company and the Account are subject to supervision and regulation by the
Department of Insurance of the State of Connecticut and the SEC. The Account
invests deposits by variable life contractholders of the Company in various
mutual funds (the Funds) as directed by the contractholders.

2. SIGNIFICANT ACCOUNTING POLICIES:

The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:

a) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments sold is
determined on the basis of identified cost. Dividend and capital gains income is
accrued as of the ex-dividend date. Capital gains income represents those
dividends from the Funds which are characterized as capital gains under tax
regulations.

b) SECURITY VALUATION -- The investments in shares of the Funds are valued
at the closing net asset value per share as determined by the appropriate Fund
as of December 31, 1998.

c) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no federal
income taxes are payable with respect to the operations of the Account.

d) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.

3. ADMINISTRATION OF THE ACCOUNT AND
RELATED CHARGES:

a) DEDUCTIONS AND CHARGES FROM THE ACCOUNT VALUE -- On the policy date and
on each subsequent monthly activity date, the Company will deduct from the
Account an amount to cover mortality and expense risk charges, cost of
insurance, administrative charges and any other benefits provided by the rider.
These charges, which may vary from month to month in accordance with the terms
of the contracts, are deducted through termination of units of interest from
applicable contract owners' accounts.
<PAGE>
SA-1 Hartford Life and Annuity Insurance Company
- --------------------------------------------------------------------------------

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Hartford Life and Annuity Insurance Company Putnam Capital Manager Trust
Separate Account Variable Life Two and to the Owners of Units of Interest
therein:

We have audited the accompanying statements of assets and liabilities of
Hartford Life and Annuity Insurance Company Putnam Capital Manager Trust
Separate Account Variable Life Two (Asia Pacific Growth, Diversified Income, The
George Putnam Fund of Boston, Global Asset Allocation, Global Growth, Growth and
Income, Health Sciences, High Yield, International Growth, International Growth
and Income, International New Opportunities, Investors, Money Market, New
Opportunities, New Value, OTC & Emerging Growth, U.S. Government and High
Quality Bond, Utilities Growth and Income, Vista, and Voyager), (collectively,
the Account) as of December 31, 1998, and the related statements of operations
and the statements of changes in net assets for the periods presented. These
financial statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1998, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

Hartford, Connecticut
February 15, 1999
<PAGE>
SA-2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE TWO

STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1998

<TABLE>
<CAPTION>
ASIA THE GEORGE
PACIFIC DIVERSIFIED PUTNAM FUND
GROWTH INCOME OF BOSTON
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments:
Putnam VT Asia Pacific
Growth Fund
Shares 1,029
Cost $ 8,238
Market Value......... $8,569 $ -- $--
Putnam VT Diversified
Income Fund
Shares 21,396
Cost $ 230,976
Market Value......... -- 224,439 --
Putnam VT The George
Putnam Fund of Boston
Shares 9,650
Cost $ 97,179
Market Value......... -- -- 99,197
Putnam VT Global Asset
Allocation Fund
Shares 17,534
Cost $ 315,568
Market Value......... -- -- --
Putnam VT Global Growth
Fund
Shares 95,116
Cost $1,708,011
Market Value......... -- -- --
Putnam VT Growth and
Income Fund
Shares 97,389
Cost $2,636,312
Market Value......... -- -- --
Putnam VT Health
Sciences Fund
Shares 4,102
Cost $ 39,919
Market Value......... -- -- --
Putnam VT High Yield
Fund
Shares 64,253
Cost $ 803,539
Market Value......... -- -- --
Putnam VT International
Growth Fund
Shares 1,526
Cost $ 18,730
Market Value......... -- -- --
Putnam VT International
Growth and Income Fund
Shares 1,786
Cost $ 21,063
Market Value......... -- -- --
Due from Hartford Life
Insurance Company..... -- 0 --
Receivable from fund
shares sold........... -- -- --
----------- ----------- -----------
Total Assets........... 8,569 224,439 99,197
----------- ----------- -----------
LIABILITIES
Due to Hartford Life
Insurance Company..... -- -- --
Payable for fund shares
purchased............. -- -- --
----------- ----------- -----------
Total Liabilities...... -- -- --
----------- ----------- -----------
Net Assets (variable
life contract
liabilities).......... $8,569 $224,439 $99,197
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-3
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL
ASSET GLOBAL
ALLOCATION GROWTH
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
ASSETS
Investments:
Putnam VT Asia Pacific
Growth Fund
Shares 1,029
Cost $ 8,238
Market Value......... $ -- $ --
Putnam VT Diversified
Income Fund
Shares 21,396
Cost $ 230,976
Market Value......... -- --
Putnam VT The George
Putnam Fund of Boston
Shares 9,650
Cost $ 97,179
Market Value......... -- --
Putnam VT Global Asset
Allocation Fund
Shares 17,534
Cost $ 315,568
Market Value......... 332,260 --
Putnam VT Global Growth
Fund
Shares 95,116
Cost $1,708,011
Market Value......... -- 1,928,949
Putnam VT Growth and
Income Fund
Shares 97,389
Cost $2,636,312
Market Value......... -- --
Putnam VT Health
Sciences Fund
Shares 4,102
Cost $ 39,919
Market Value......... -- --
Putnam VT High Yield
Fund
Shares 64,253
Cost $ 803,539
Market Value......... -- --
Putnam VT International
Growth Fund
Shares 1,526
Cost $ 18,730
Market Value......... -- --
Putnam VT International
Growth and Income Fund
Shares 1,786
Cost $ 21,063
Market Value......... -- --
Due from Hartford Life
Insurance Company..... 13 4,736
Receivable from fund
shares sold........... -- --
----------- -----------
Total Assets........... 332,273 1,933,685
----------- -----------
LIABILITIES
Due to Hartford Life
Insurance Company..... -- --
Payable for fund shares
purchased............. -- 4,853
----------- -----------
Total Liabilities...... -- 4,853
----------- -----------
Net Assets (variable
life contract
liabilities).......... $332,273 $1,928,832
----------- -----------
----------- -----------

<CAPTION>
INTERNATIONAL
GROWTH HEALTH INTERNATIONAL GROWTH AND
AND INCOME SCIENCES HIGH YIELD GROWTH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments:
Putnam VT Asia Pacific
Growth Fund
Shares 1,029
Cost $ 8,238
Market Value......... $ -- $-- $ -- $-- $--
Putnam VT Diversified
Income Fund
Shares 21,396
Cost $ 230,976
Market Value......... -- -- -- -- --
Putnam VT The George
Putnam Fund of Boston
Shares 9,650
Cost $ 97,179
Market Value......... -- -- -- -- --
Putnam VT Global Asset
Allocation Fund
Shares 17,534
Cost $ 315,568
Market Value......... -- -- -- -- --
Putnam VT Global Growth
Fund
Shares 95,116
Cost $1,708,011
Market Value......... -- -- -- -- --
Putnam VT Growth and
Income Fund
Shares 97,389
Cost $2,636,312
Market Value......... 2,801,893 -- -- -- --
Putnam VT Health
Sciences Fund
Shares 4,102
Cost $ 39,919
Market Value......... -- 44,876 -- -- --
Putnam VT High Yield
Fund
Shares 64,253
Cost $ 803,539
Market Value......... -- -- 751,761 -- --
Putnam VT International
Growth Fund
Shares 1,526
Cost $ 18,730
Market Value......... -- -- -- 20,639 --
Putnam VT International
Growth and Income Fund
Shares 1,786
Cost $ 21,063
Market Value......... -- -- -- -- 21,859
Due from Hartford Life
Insurance Company..... 2,545 -- 4 -- --
Receivable from fund
shares sold........... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total Assets........... 2,804,438 44,876 751,765 20,639 21,859
----------- ----------- ----------- ----------- -----------
LIABILITIES
Due to Hartford Life
Insurance Company..... -- -- -- 1 --
Payable for fund shares
purchased............. 2,584 -- -- -- --
----------- ----------- ----------- ----------- -----------
Total Liabilities...... 2,584 -- -- 1 --
----------- ----------- ----------- ----------- -----------
Net Assets (variable
life contract
liabilities).......... $2,801,854 $44,876 $751,765 $20,638 $21,859
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>

<PAGE>
SA-4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE TWO

STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
DECEMBER 31, 1998

<TABLE>
<CAPTION>
INTERNATIONAL
NEW MONEY
OPPORTUNITIES INVESTORS MARKET
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments:
Putnam VT International
New Opportunities Fund
Shares 319
Cost $ 3,423
Market Value......... $3,662 $-- $ --
Putnam VT Investors
Fund
Shares 8,158
Cost $ 85,802
Market Value......... -- 95,043 --
Putnam VT Money Market
Fund
Shares 141,680
Cost $ 141,680
Market Value......... -- -- 141,680
Putnam VT New
Opportunities Fund
Shares 46,981
Cost $1,029,532
Market Value......... -- -- --
Putnam VT New Value
Fund
Shares 793
Cost $ 8,608
Market Value......... -- -- --
Putnam VT OTC &
Emerging Growth Fund
Shares 2,721
Cost $ 19,976
Market Value......... -- -- --
Putnam VT U.S.
Government and High
Quality Bond Fund
Shares 59,215
Cost $ 797,359
Market Value......... -- -- --
Putnam VT Utilities
Growth & Income Fund
Shares 24,324
Cost $ 407,151
Market Value......... -- -- --
Putnam VT Vista Fund
Shares 506
Cost $ 6,431
Market Value......... -- -- --
Putnam VT Voyager Fund
Shares 59,192
Cost $2,354,731
Market Value......... -- -- --
Due from Hartford Life
Insurance Company..... -- 9 --
Receivable from fund
shares sold........... -- -- 1
------ ----------- -----------
Total Assets........... 3,662 95,052 141,681
------ ----------- -----------
LIABILITIES
Due to Hartford Life
Insurance Company..... -- -- 1
------ ----------- -----------
Payable for fund shares
purchased............. -- -- --
------ ----------- -----------
Total Liabilities...... -- -- 1
------ ----------- -----------
Net Assets (variable
life contract
liabilities).......... $3,662 $95,052 $141,680
------ ----------- -----------
------ ----------- -----------
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-5
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW NEW
OPPORTUNITIES VALUE
SUB-ACCOUNT SUB-ACCOUNT
------------- -----------
<S> <C> <C>
ASSETS
Investments:
Putnam VT International
New Opportunities Fund
Shares 319
Cost $ 3,423
Market Value......... $ -- $--
Putnam VT Investors
Fund
Shares 8,158
Cost $ 85,802
Market Value......... -- --
Putnam VT Money Market
Fund
Shares 141,680
Cost $ 141,680
Market Value......... -- --
Putnam VT New
Opportunities Fund
Shares 46,981
Cost $1,029,532
Market Value......... 1,224,320 --
Putnam VT New Value
Fund
Shares 793
Cost $ 8,608
Market Value......... -- 9,542
Putnam VT OTC &
Emerging Growth Fund
Shares 2,721
Cost $ 19,976
Market Value......... -- --
Putnam VT U.S.
Government and High
Quality Bond Fund
Shares 59,215
Cost $ 797,359
Market Value......... -- --
Putnam VT Utilities
Growth & Income Fund
Shares 24,324
Cost $ 407,151
Market Value......... -- --
Putnam VT Vista Fund
Shares 506
Cost $ 6,431
Market Value......... -- --
Putnam VT Voyager Fund
Shares 59,192
Cost $2,354,731
Market Value......... -- --
Due from Hartford Life
Insurance Company..... 12,557 --
Receivable from fund
shares sold........... -- --
------------- -----------
Total Assets........... 1,236,877 9,542
------------- -----------
LIABILITIES
Due to Hartford Life
Insurance Company..... -- --
------------- -----------
Payable for fund shares
purchased.............. 12,606 --
------------- -----------
Total Liabilities...... 12,606 --
------------- -----------
Net Assets (variable
life contract
liabilities).......... $1,224,271 $9,542
------------- -----------
------------- -----------

<CAPTION>
OTC & U.S. GOVERNMENT UTILITIES
EMERGING AND HIGH GROWTH
GROWTH QUALITY BOND AND INCOME VISTA VOYAGER
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments:
Putnam VT International
New Opportunities Fund
Shares 319
Cost $ 3,423
Market Value......... $-- $-- $ -- $-- $ --
Putnam VT Investors
Fund
Shares 8,158
Cost $ 85,802
Market Value......... -- -- -- -- --
Putnam VT Money Market
Fund
Shares 141,680
Cost $ 141,680
Market Value......... -- -- -- -- --
Putnam VT New
Opportunities Fund
Shares 46,981
Cost $1,029,532
Market Value......... -- -- -- -- --
Putnam VT New Value
Fund
Shares 793
Cost $ 8,608
Market Value......... -- -- -- -- --
Putnam VT OTC &
Emerging Growth Fund
Shares 2,721
Cost $ 19,976
Market Value......... 27,453 -- -- -- --
Putnam VT U.S.
Government and High
Quality Bond Fund
Shares 59,215
Cost $ 797,359
Market Value......... -- 813,020 -- -- --
Putnam VT Utilities
Growth & Income Fund
Shares 24,324
Cost $ 407,151
Market Value......... -- -- 442,450 -- --
Putnam VT Vista Fund
Shares 506
Cost $ 6,431
Market Value......... -- -- -- 7,451 --
Putnam VT Voyager Fund
Shares 59,192
Cost $2,354,731
Market Value......... -- -- -- -- 2,713,936
Due from Hartford Life
Insurance Company..... -- -- 2 -- 19,965
Receivable from fund
shares sold........... -- -- -- -- --
----------- --------------- ----------- ----------- -----------
Total Assets........... 27,453 813,020 442,452 7,451 2,733,901
----------- --------------- ----------- ----------- -----------
LIABILITIES
Due to Hartford Life
Insurance Company..... -- 1 -- -- --
----------- --------------- ----------- ----------- -----------
Payable for fund shares
purchased.............. -- -- -- -- 19,835
----------- --------------- ----------- ----------- -----------
Total Liabilities...... -- 1 -- -- 19,835
----------- --------------- ----------- ----------- -----------
Net Assets (variable
life contract
liabilities).......... $27,453 $813,019 $442,452 $7,451 $2,714,066
----------- --------------- ----------- ----------- -----------
----------- --------------- ----------- ----------- -----------
</TABLE>

<PAGE>
SA-6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE TWO

STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998

<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
-------- ---------- -----------
Variable life contracts:
<S> <C> <C> <C>
Asia Pacific Growth Fund.................. 801 $10.693257 $ 8,569
Diversified Income Fund................... 17,566 12.777025 224,439
George Putnam Fund of Boston.............. 9,356 10.602638 99,197
Global Asset Allocation Fund.............. 15,981 20.792218 332,273
Global Growth Fund........................ 81,814 23.575913 1,928,832
Growth and Income Fund.................... 109,800 25.517876 2,801,854
Health Sciences Fund...................... 3,991 11.242853 44,876
High Yield Fund........................... 48,264 15.576256 751,765
International Growth Fund................. 2,109 9.785387 20,638
International Growth and Income Fund...... 2,238 9.768076 21,859
International New Opportunities Fund...... 375 9.753782 3,662
Investors Fund............................ 8,498 11.185169 95,052
Money Market Fund......................... 109,370 1.295432 141,680
New Opportunities Fund.................... 53,832 22.742256 1,224,271
New Value Fund............................ 899 10.611164 9,542
OTC & Emerging Growth Fund................ 2,548 10.773294 27,453
U.S. Government and High Quality Bond
Fund..................................... 55,286 14.705728 813,019
Utilities Growth and Income Fund.......... 20,450 21.636249 442,452
Vista Fund................................ 702 10.612377 7,451
Voyager Fund.............................. 94,119 28.836430 2,714,066
-----------
Grand Total............................... $11,712,950
-----------
-----------
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>
This page intentionally left blank.
<PAGE>
SA-8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE TWO

STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
ASIA THE GEORGE
PACIFIC DIVERSIFIED PUTNAM FUND
GROWTH INCOME OF BOSTON
SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT*
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. -$- $ 3,629 $ 778
----- ----------- -----------
CAPITAL GAINS INCOME..... -- 1,541 --
----- ----------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 1 21 2
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 331 (6,773) 2,018
----- ----------- -----------
Net gain (loss) on
investments......... 332 (6,752) 2,020
----- ----------- -----------
Net increase
(decrease) in net
assets resulting
from operations..... $332 $(1,582) $2,798
----- ----------- -----------
----- ----------- -----------
</TABLE>

* From inception, August 3, 1998, to December 31, 1998.

The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-9
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL
ASSET GLOBAL
ALLOCATION GROWTH
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 2,857 $ 10,284
----------- -----------
CAPITAL GAINS INCOME..... 12,271 51,418
----------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 16 2,284
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 15,297 222,508
----------- -----------
Net gain (loss) on
investments......... 15,313 224,792
----------- -----------
Net increase
(decrease) in net
assets resulting
from operations..... $30,441 $286,494
----------- -----------
----------- -----------

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

PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE TWO

STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
INTERNATIONAL
NEW MONEY
OPPORTUNITIES INVESTORS MARKET
SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT
------------ ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. -$- $ 112 $1,123
----- ------ -----------
CAPITAL GAINS INCOME -- -- --
----- ------ -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 5 14 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 239 9,241 --
----- ------ -----------
Net gain (loss) on
investments......... 244 9,255 --
----- ------ -----------
Net increase
(decrease) in net
assets resulting
from operations..... $244 $9,367 $1,123
----- ------ -----------
----- ------ -----------
</TABLE>

* From inception, August 3, 1998, to December 31, 1998.

The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-11
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW NEW
OPPORTUNITIES VALUE
SUB-ACCOUNT SUB-ACCOUNT*
------------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $-- $ 98
------------- ------
CAPITAL GAINS INCOME 4,296 19
------------- ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (21,117) 15
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 190,762 934
------------- ------
Net gain (loss) on
investments......... 169,645 949
------------- ------
Net increase
(decrease) in net
assets resulting
from operations..... $173,941 $1,066
------------- ------
------------- ------

PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE TWO
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
THE GEORGE
ASIA PACIFIC DIVERSIFIED PUTNAM FUND
GROWTH INCOME OF BOSTON
SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT*
------------ ----------- ------------
<S> <C> <C> <C>
OPERATIONS:
Net investment
income................ $-- $ 3,629 $ 778
Capital gains income... -- 1,541 --
Net realized gain
(loss) on security
transactions.......... 1 21 2
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 331 (6,773) 2,018
------ ----------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 332 (1,582) 2,798
------ ----------- ------------
UNIT TRANSACTIONS:
Purchases.............. 1,000 18,359 1,018
Net transfers.......... 7,366 130,020 95,712
Surrenders............. (106) (3,807) 42
Cost of insurance...... (23) (3,546) (373)
------ ----------- ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 8,237 141,026 96,399
------ ----------- ------------
Total increase
(decrease) in net
assets................ 8,569 139,444 99,197
NET ASSETS:
Beginning of period.... -- 84,995 --
------ ----------- ------------
End of period.......... $8,569 $224,439 $99,197
------ ----------- ------------
------ ----------- ------------
</TABLE>

* From inception, August 3, 1998, to December 31, 1998.

The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-13
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL
ASSET GLOBAL
ALLOCATION GROWTH SUB-
SUB-ACCOUNT ACCOUNT
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment
income................ $ 2,857 $ 10,284
Capital gains income... 12,271 51,418
Net realized gain
(loss) on security
transactions.......... 16 2,284
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 15,297 222,508
----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 30,441 286,494
----------- -----------
UNIT TRANSACTIONS:
Purchases.............. 15,068 322,831
Net transfers.......... 264,595 1,095,109
Surrenders............. (10,473) (47,555)
Cost of insurance...... (6,166) (30,391)
----------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 263,024 1,339,994
----------- -----------
Total increase
(decrease) in net
assets................ 293,465 1,626,488
NET ASSETS:
Beginning of period.... 38,808 302,344
----------- -----------
End of period.......... $332,273 $ 1,928,832
----------- -----------
----------- -----------

<CAPTION>
INTERNATIONAL
GROWTH HEALTH INTERNATIONAL GROWTH AND
AND INCOME SCIENCES HIGH YIELD GROWTH INCOME
SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT*
----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 6,912 $ 38 $ 10,447 $ 66 $ 206
Capital gains income... 45,119 -- 1,639 -- 496
Net realized gain
(loss) on security
transactions.......... (64) (1) 5,348 11 8
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 157,616 4,957 (52,560) 1,909 796
----------- ------------ ----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 209,583 4,994 (35,126) 1,986 1,506
----------- ------------ ----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases.............. 341,341 1,000 295,001 1,018 5,809
Net transfers.......... 2,215,815 39,704 484,563 18,763 14,788
Surrenders............. (85,000) (308) (33,428) (618) (143)
Cost of insurance...... (35,272) (514) (6,247) (511) (101)
----------- ------------ ----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 2,436,884 39,882 739,889 18,652 20,353
----------- ------------ ----------- ----------- -----------
Total increase
(decrease) in net
assets................ 2,646,467 44,876 704,763 20,638 21,859
NET ASSETS:
Beginning of period.... 155,387 -- 47,002 -- --
----------- ------------ ----------- ----------- -----------
End of period.......... $ 2,801,854 $44,876 $751,765 $20,638 $21,859
----------- ------------ ----------- ----------- -----------
----------- ------------ ----------- ----------- -----------
</TABLE>

<PAGE>
SA-14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE TWO
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
INTERNATIONAL
NEW MONEY
OPPORTUNITIES INVESTORS MARKET
SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT
------------ ------------ -----------
<S> <C> <C> <C>
OPERATIONS:
Net investment
income................ $-- $ 112 $ 1,123
Capital gains income... -- -- --
Net realized gain
(loss) on security
transactions.......... 5 14 --
------ ------------ -----------
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 239 9,241 --
------ ------------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ 244 9,367 1,123
UNIT TRANSACTIONS:
Purchases.............. 1,000 7,115 49,306
Net transfers.......... 2,548 79,363 88,070
Surrenders............. (104) (437) (3,369)
Cost of insurance...... (26) (356) (1,780)
------ ------------ -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 3,418 85,685 132,227
------ ------------ -----------
Total increase
(decrease) in net
assets................ 3,662 95,052 133,350
NET ASSETS:
Beginning of period.... -- -- 8,330
------ ------------ -----------
End of period.......... $3,662 $95,052 $141,680
------ ------------ -----------
------ ------------ -----------
</TABLE>

* From inception, August 3, 1998, to December 31, 1998.

The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-15
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW NEW
OPPORTUNITIES VALUE
SUB-ACCOUNT SUB-ACCOUNT*
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment
income................ $ -- $ 98
Capital gains income... 4,296 19
Net realized gain
(loss) on security
transactions.......... (21,117) 15
------------- ------
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 190,762 934
------------- ------
Net increase (decrease)
in net assets
resulting from
operations............ 173,941 1,066
UNIT TRANSACTIONS:
Purchases.............. 258,118 1,525
Net transfers.......... 690,830 7,543
Surrenders............. (36,267) (191)
Cost of insurance...... (34,620) (401)
------------- ------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 878,061 8,476
------------- ------
Total increase
(decrease) in net
assets................ 1,052,002 9,542
NET ASSETS:
Beginning of period.... 172,269 --
------------- ------
End of period.......... $1,224,271 $9,542
------------- ------
------------- ------

<CAPTION>
OTC & U.S. GOVERNMENT UTILITIES
EMERGING AND HIGH GROWTH
GROWTH QUALITY BOND AND INCOME VISTA VOYAGER
SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB- ACCOUNT
------------ --------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 10 $ 10,911 $ 1,849 $ -- $ 896
Capital gains income... -- 284 3,187 -- 21,866
Net realized gain
(loss) on security
transactions.......... 21 (1,150) 58 11 (5,975)
------------ --------------- ----------- ------ -----------
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 7,477 12,055 31,421 1,020 350,909
------------ --------------- ----------- ------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ 7,508 22,100 36,515 1,031 367,696
UNIT TRANSACTIONS:
Purchases.............. 3,676 11,794 12,990 1,000 364,335
Net transfers.......... 17,238 574,461 379,093 5,651 1,952,698
Surrenders............. (314) (10,223) (5,423) (223) (51,533)
Cost of insurance...... (655) (8,204) (6,554) (8) (28,004)
------------ --------------- ----------- ------ -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 19,945 567,828 380,106 6,420 2,237,496
------------ --------------- ----------- ------ -----------
Total increase
(decrease) in net
assets................ 27,453 589,928 416,621 7,451 2,605,192
NET ASSETS:
Beginning of period.... -- 223,091 25,831 -- 108,874
------------ --------------- ----------- ------ -----------
End of period.......... $27,453 $813,019 $442,452 $ 7,451 $ 2,714,066
------------ --------------- ----------- ------ -----------
------------ --------------- ----------- ------ -----------
</TABLE>
<PAGE>
SA-16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------

PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE TWO

STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
GLOBAL
DIVERSIFIED ASSET GLOBAL
INCOME ALLOCATION GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- -----------
<S> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 57 $ 88 $ 420
Capital gains income... 9 150 452
Net realized gain
(loss) on security
transactions.......... 3 109 1,118
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 207 1,348 (1,615)
----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 276 1,695 375
----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases.............. 4,114 3,230 13,967
Net transfers.......... 80,535 35,538 302,978
Surrenders............. (505) (1,812) (10,646)
Cost of insurance...... (455) (890) (5,376)
----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions 83,689 36,066 300,923
----------- ----------- -----------
Total increase
(decrease) in net
assets................ 83,965 37,761 301,298
NET ASSETS:
Beginning of period.... 1,030 1,047 1,046
----------- ----------- -----------
End of period.......... $84,995 $38,808 $302,344
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-17
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH
AND INCOME HIGH YIELD
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment
income................ $ 622 $ 154
Capital gains income... 1,514 18
Net realized gain
(loss) on security
transactions.......... 314 5
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 7,951 757
----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 10,401 934
----------- -----------
UNIT TRANSACTIONS:
Purchases.............. 7,475 1,594
Net transfers.......... 119,617 44,780
Surrenders............. (6,077) (1,070)
Cost of insurance...... (2,516) (261)
----------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions 118,499 45,043
----------- -----------
Total increase
(decrease) in net
assets................ 128,900 45,977
NET ASSETS:
Beginning of period.... 26,487 1,025
----------- -----------
End of period.......... $155,387 $47,002
----------- -----------
----------- -----------

<CAPTION>
U.S. GOVERNMENT UTILITIES
MONEY NEW AND HIGH GROWTH
MARKET OPPORTUNITIES QUALITY BOND AND INCOME VOYAGER
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 424 $-- $ 756 $ 40 $ 16
Capital gains income... -- -- -- 54 355
Net realized gain
(loss) on security
transactions.......... -- (1,905) 387 25 3,074
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 4,088 3,578 3,805 8,319
----------- ------------- --------------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 424 2,183 4,721 3,924 11,764
----------- ------------- --------------- ----------- -----------
UNIT TRANSACTIONS:
Purchases.............. -- 13,204 10,535 1,604 10,861
Net transfers.......... 10,765 164,787 214,693 20,012 92,223
Surrenders............. (2,441) (4,674) (4,108) (711) (4,146)
Cost of insurance...... (1,430) (4,168) (3,779) (71) (2,805)
----------- ------------- --------------- ----------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions 6,894 169,149 217,341 20,834 96,133
----------- ------------- --------------- ----------- -----------
Total increase
(decrease) in net
assets................ 7,318 171,332 222,062 24,758 107,897
NET ASSETS:
Beginning of period.... 1,012 937 1,029 1,073 977
----------- ------------- --------------- ----------- -----------
End of period.......... $8,330 $172,269 $223,091 $25,831 $108,874
----------- ------------- --------------- ----------- -----------
----------- ------------- --------------- ----------- -----------
</TABLE>
<PAGE>
SA-18 Hartford Life and Annuity Insurance Company
- --------------------------------------------------------------------------------

PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE TWO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998

1. ORGANIZATION:

Separate Account Variable Life Two (the Account) is a separate investment
account within Hartford Life and Annuity Insurance Company (the Company) and is
registered with the Securities and Exchange Commission (SEC) as a unit
investment trust under the Investment Company Act of 1940, as amended. Both the
Company and the Account are subject to supervision and regulation by the
Department of Insurance of the State of Connecticut and the SEC. The Account
invests deposits by variable life contractholders of the Company in the various
mutual funds (the Funds) as directed by the contractholders.

2. SIGNIFICANT ACCOUNTING POLICIES:

The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:

a) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments sold is
determined on the basis of identified cost. Dividend and capital gains income is
accrued as of the ex-dividend date. Capital gains income represents dividends
from the Funds which are characterized as capital gains under tax regulations.

b) SECURITY VALUATION -- The investments in shares of the Funds are valued
at the closing net asset value per share as determined by the appropriate Fund
as of December 31, 1998.

3. ADMINISTRATION OF THE ACCOUNT AND
RELATED CHARGES:

a) COST OF INSURANCE -- In accordance with terms of the contracts, the
Company makes deductions for costs of insurance to cover the Company's
anticipated mortality costs. Because a policy's account value and death benefit
may vary from month to month, the cost of insurance charges may also vary.

b) MORTALITY AND EXPENSE RISK CHARGE -- The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and, with
respect to the Account, receives a maximum annual fee of 1.40% of the Account's
average daily net assets. These expenses are reflected in surrenders on the
accompanying statements of changes in net assets.

c) ADMINISTRATIVE AND ISSUE CHARGES -- The Company assesses a monthly
administrative charge to compensate the Company for administrative costs in
connection with the policies. This charge covers the average expected cost for
these expenses at a maximum of $12 per month. Additionally, the Company assesses
a monthly charge in the first policy year for up-front costs of underwriting and
issuing a policy at a monthly maximum amount of $62.50. These expenses are
reflected in surrenders on the accompanying statements of changes in net assets.

d) DEDUCTION OF ANNUAL MAINTENANCE FEE -- Annual maintenance fees are
deducted through termination of units of interest from applicable contract
owners' accounts, in accordance with the terms of the contracts. These expenses
are reflected in surrenders on the accompanying statements of changes in net
assets.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-1
- --------------------------------------------------------------------------------

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

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

The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 1 of notes to statutory financial
statements. When statutory financial statements are presented for purposes other
than for filing with a regulatory agency, generally accepted auditing standards
require that an auditors' report on them state whether they are presented in
conformity with generally accepted accounting principles. The accounting
practices used by the Company vary from generally accepted accounting principles
as explained and quantified in Note 1.

In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the statutory financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of the Company as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998.

However, in our opinion, the statutory financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998 in
conformity with statutory accounting practices as described in Note 1.

ARTHUR ANDERSEN LLP

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

BALANCE SHEETS
(STATUTORY BASIS)
($000)

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

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

STATEMENTS OF OPERATIONS
(STATUTORY BASIS)
($000)

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

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

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

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

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

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

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

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

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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

ORGANIZATION

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

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

BASIS OF PRESENTATION

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

INVESTMENTS

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

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

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

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

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

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

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

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

OTHER LIABILITIES

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

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

(A) COMPONENTS OF NET INVESTMENT INCOME

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

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

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

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

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

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

(E) OFF-BALANCE SHEET INVESTMENTS

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

(F) CONCENTRATION OF CREDIT RISK

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3. AGGREGATE RESERVES FOR FUTURE BENEFITS

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

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

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

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

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

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

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

4. RELATED PARTY TRANSACTIONS:

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

5. FEDERAL INCOME TAXES:

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

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

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

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

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

6.CAPITAL AND SURPLUS AND SHAREHOLDER DIVIDEND RESTRICTIONS:

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

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

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

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

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

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

8. SEPARATE ACCOUNTS:

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

9. COMMITMENTS AND CONTINGENCIES:

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

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

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