<PAGE>
As filed with the Securities and Exchange Commission on December 4, 2000.
File No. 333-67373
811-07273
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 4 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON
FORM N-8B-2
A. Exact name of trust: Separate Account VL II
B. Name of depositor: Hartford Life and Annuity Insurance Company
C. Complete address of depositor's principal executive offices:
P.O. Box 2999
Hartford, CT 06104-2999
D. Name and complete address of agent for service:
Marianne O'Doherty
Hartford Life and Annuity Insurance Company
P.O. Box 2999
Hartford, CT 06104-2999
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ on January 2, 2001 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on _______, 2000 pursuant to paragraph (a)(1) of Rule 485
___ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
E. Title and amount of securities being registered: Pursuant to Rule
24f-2 under the Investment Company Act of 1940, the Registrant has
registered an indefinite amount of securities.
F. Proposed maximum aggregate offering price to the public of the
securities being registered: Not yet determined.
G. Amount of filing fee: Not applicable.
H. Approximate date of proposed public offering: As soon as practicable
after the effective date of this registration statement.
The purpose of this Post-Effective Amendment No. 4 to the registration
statement on Form S-6 (File No. 333-67373) is to (I) supplement the prospectus
for Stag Variable Life Last Survivor II variable life insurance policy to
include additional sub-accounts and (II) to add to the registration statement a
prospectus which describes Hartford Select Leaders Last Survivor -- Variable
Universal Life Insurance policy. A Supplement dated January 2, 2001 to the
prospectus for Stag Variable Life Last Survivor II is included in this
Post-Effective Amendment No. 4. The prospectus for Stag Variable Life Last
Survivor II is incorporated by reference in this Post-Effective Amendment No. 4
by reference to Post-Effective Amendment No. 2 to the registration statement,
as filed on April 12, 2000 and declared effective on May 1, 2000.
<PAGE>
RECONCILIATION AND TIE BETWEEN
FORM N-8B-2 AND PROSPECTUS
<TABLE>
<CAPTION>
ITEM NO. OF FORM N-8B-2 CAPTION IN PROSPECTUS
----------------------- --------------------
<S> <C>
1. Cover Page
2. Cover Page
3. Not Applicable
4. Statement of Additional Information - Distribution of the Policies
5. About Us - Separate Account VL II
6. About Us - Separate Account VL II
7. Not required by Form S-6
8. Not required by Form S-6
9. Legal Proceedings
10. About Us - Separate Account VL II; The Funds
11. About Us - Separate Account VL II; The Funds
12. About Us - The Funds
13. Fee Table; Charges and Deductions
14. Premiums
15. Premiums
16. Premiums
17. Making Withdrawals From Your Policy
18. About Us - The Funds; Charges and Deductions
19. Your Policy - Contract Rights
20. Not Applicable
21. Loans
22. Not Applicable
23. Not Applicable
24. Not Applicable
25. About Us - Hartford Life and Annuity Insurance Company
26. Not Applicable
27. About Us - Hartford Life and Annuity Insurance Company
28. Statement of Additional Information - General Information and History
29. About Us - Hartford Life and Annuity Insurance Company
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. OF FORM N-8B-2 CAPTION IN PROSPECTUS
----------------------- --------------------
<S> <C>
35. Statement of Additional Information -
Distribution of the Policies
36. Not required by Form S-6
37. Not Applicable
38. Statement of Additional Information -
Distribution of the Policies
39. Statement of Additional Information -
Distribution of the Policies
40. Not Applicable
41. Statement of Additional Information -
Distribution of the Policies
42. Not Applicable
43. Not Applicable
44. Premiums
45. Not Applicable
46. Premiums; Making Withdrawals From Your Policy
47. About Us - The Funds
48. Cover Page; About Us - Hartford Life and Annuity
49. Not Applicable
50. About Us - Separate Account VL II
51. Not Applicable
52. About Us - The Funds
53. Taxes
54. Not Applicable
55. Not Applicable
56. Not Required by Form S-6
57. Not Required by Form S-6
58. Not Required by Form S-6
59. Not Required by Form S-6
</TABLE>
<PAGE>
<TABLE>
<S> <C>
STAG VARIABLE LIFE LAST SURVIVOR II
SEPARATE ACCOUNT VL II
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SUPPLEMENT DATED JANUARY 2, 2001 TO PROSPECTUS
DATED MAY 1, 2000 [LOGO]
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Effective January 15, 2001 the following changes apply:
The following Sub-Accounts are added in alphabetical order to the cover page of
the prospectus:
- AMERICAN FUNDS GLOBAL GROWTH FUND SUB-ACCOUNT Class 2 of the Global Growth
Fund of American Funds Insurance Series
- AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION FUND SUB-ACCOUNT Class 2 of the
Global Small Capitalization Fund of American Funds Insurance Series
- AMERICAN FUNDS GROWTH FUND SUB-ACCOUNT Class 2 of the Growth Fund of American
Funds Insurance Series
- AMERICAN FUNDS GROWTH-INCOME FUND SUB-ACCOUNT Class 2 of the Growth-Income
Fund of American Funds Insurance Series
- HARTFORD GLOBAL LEADERS SUB-ACCOUNT Class IA of Hartford Global Leaders HLS
Fund of Hartford Series Fund, Inc.
- HARTFORD GLOBAL TECHNOLOGY SUB-ACCOUNT Class IA of Hartford Global Technology
HLS Fund of Hartford Series Fund, Inc.
Under the section entitled "Summary of Benefits and Risks", the paragraph
entitled "Investment Choices" is deleted and replaced with the following:
INVESTMENT CHOICES -- You may invest in up to 9 different investment choices
within your policy, from a choice of 42 investment options and a Fixed Account.
You may transfer money among your investment choices, subject to restrictions.
The table of Annual Fund Operating Expenses is deleted and replaced with the
following:
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
EXPENSES
MANAGEMENT FEES 12B-1 FEES OTHER EXPENSES (INCLUDING ANY
(INCLUDING ANY (INCLUDING ANY (INCLUDING ANY WAIVERS AND/OR ANY
WAIVERS) WAIVERS) REIMBURSEMENTS) REIMBURSEMENTS)
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
American Funds Global Growth Fund 0.68% 0.25% 0.03% 0.96%
---------------------------------------------------------------------------------------------------------------------------
American Funds Global Small Capitalization Fund 0.79% 0.25% 0.03% 1.07%
---------------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund 0.38% 0.25% 0.01% 0.64%
---------------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income Fund 0.34% 0.25% 0.01% 0.60%
---------------------------------------------------------------------------------------------------------------------------
Hartford Advisers HLS Fund 0.63% N/A 0.02% 0.65%
---------------------------------------------------------------------------------------------------------------------------
Hartford Bond HLS Fund 0.49% N/A 0.03% 0.52%
---------------------------------------------------------------------------------------------------------------------------
Hartford Capital Appreciation HLS Fund 0.64% N/A 0.02% 0.66%
---------------------------------------------------------------------------------------------------------------------------
Hartford Dividend and Growth HLS Fund 0.65% N/A 0.03% 0.68%
---------------------------------------------------------------------------------------------------------------------------
Hartford Global Leaders HLS Fund 0.74% N/A 0.12% 0.86%
---------------------------------------------------------------------------------------------------------------------------
Hartford Global Technology HLS Fund (1) 0.85% N/A 0.25% 1.10%
---------------------------------------------------------------------------------------------------------------------------
Hartford Growth and Income HLS Fund 0.78% N/A 0.04% 0.82%
---------------------------------------------------------------------------------------------------------------------------
Hartford Index HLS Fund 0.40% N/A 0.03% 0.43%
---------------------------------------------------------------------------------------------------------------------------
Hartford International Advisers HLS Fund 0.76% N/A 0.09% 0.85%
---------------------------------------------------------------------------------------------------------------------------
Hartford International Opportunities HLS Fund 0.69% N/A 0.09% 0.78%
---------------------------------------------------------------------------------------------------------------------------
Hartford MidCap HLS Fund 0.76% N/A 0.03% 0.79%
---------------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS Fund 0.45% N/A 0.02% 0.47%
---------------------------------------------------------------------------------------------------------------------------
Hartford Mortgage Securities HLS Fund 0.45% N/A 0.03% 0.48%
---------------------------------------------------------------------------------------------------------------------------
Hartford Small Company HLS Fund 0.75% N/A 0.03% 0.78%
---------------------------------------------------------------------------------------------------------------------------
Hartford Stock HLS Fund 0.46% N/A 0.02% 0.48%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
<TABLE>
---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL FUND
OPERATING
EXPENSES
MANAGEMENT FEES 12B-1 FEES OTHER EXPENSES (INCLUDING ANY
(INCLUDING ANY (INCLUDING ANY (INCLUDING ANY WAIVERS AND/OR ANY
WAIVERS) WAIVERS) REIMBURSEMENTS) REIMBURSEMENTS)
<S> <C> <C> <C> <C>
Putnam VT Asia Pacific Growth Fund 0.80% N/A 0.33% 1.13%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT Diversified Income Fund 0.68% N/A 0.10% 0.78%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT Global Asset Allocation Fund 0.65% N/A 0.12% 0.77%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT Global Growth Fund 0.61% N/A 0.12% 0.73%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT Growth and Income Fund 0.46% N/A 0.04% 0.50%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT Health Sciences Fund 0.70% N/A 0.13% 0.83%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT High Yield Fund 0.65% N/A 0.07% 0.72%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT Income Fund 0.60% N/A 0.07% 0.67%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth Fund 0.80% N/A 0.22% 1.02%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth and Income Fund 0.80% N/A 0.18% 0.98%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT International New Opportunities Fund 1.08% N/A 0.33% 1.41%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT Investors Fund 0.63% N/A 0.08% 0.71%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT Money Market Fund 0.41% N/A 0.08% 0.49%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT New Opportunities Fund 0.54% N/A 0.05% 0.59%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT New Value Fund 0.70% N/A 0.10% 0.80%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT OTC & Emerging Growth Fund (2) 0.53% N/A 0.37% 0.90%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT The George Putnam Fund of Boston 0.65% N/A 0.18% 0.83%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income Fund 0.65% N/A 0.06% 0.71%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund 0.65% N/A 0.10% 0.75%
---------------------------------------------------------------------------------------------------------------------------
Putnam VT Voyager Fund 0.53% N/A 0.04% 0.57%
---------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio (3) 0.53% N/A 0.09% 0.62%
---------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity- Income Portfolio (3) 0.48% N/A 0.08% 0.56%
---------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio (3) 0.73% N/A 0.14% 0.87%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Hartford Global Technology HLS Fund is a new fund. Total Fund Operating
Expenses are based on annualized estimates of such expenses to be incurred
during the current fiscal year.
(2) Total Annual Fund Operating Expenses for Putnam VT OTC & Emerging Growth
Fund reflect voluntary reductions and reimbursements through at least
December 31, 2000. Absent voluntary reductions and reimbursements, Total
Annual Fund Operating Expenses would have been as follows:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES EXPENSES EXPENSES
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
Putnam VT OTC & Emerging Growth Fund 0.70% 0.37% 1.07%
---------------------------------------------------------------------------------------------------------
</TABLE>
(3) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds
of FMR on behalf of certain funds' custodian, credits realized as a result
of uninvested cash balances were used to reduce a portion of each applicable
fund's expenses. These reductions will continue through at least
December 31, 2000 pursuant to an agreement between the adviser and the
funds. Without these reductions, Total Fund Operating Expenses would have
been:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES EXPENSES EXPENSES
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 0.53% 0.10% 0.63%
---------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 0.48% 0.09% 0.57%
---------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0.73% 0.18% 0.91%
---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNIUTY INSURANCE COMPANY 3
--------------------------------------------------------------------------------
The following is added in the section entitled "About Us" immediately following
the Hartford Ratings table:
These ratings apply to Hartford's ability to meet its obligations under the
Contract. The ratings do not apply to the Separate Account or the underlying
Funds.
Under the section entitled "The Funds", the following language is added in
alphabetical order:
AMERICAN FUNDS GLOBAL GROWTH FUND -- Seeks long-term growth of capital by
investing primarily in common stocks of issuers domiciled around the world.
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION FUND -- Seeks long-term growth of
capital by investing primarily in equity securities of smaller companies located
around the world that typically have market capitalization of $50 million to
$1.5 billion.
AMERICAN FUNDS GROWTH FUND -- Seeks long-term growth of capital by investing
primarily in common stocks which demonstrate the potential for appreciation.
AMERICAN FUNDS GROWTH-INCOME FUND -- Seeks growth of capital and income by
investing primarily in common stocks or other securities which demonstrate the
potential for appreciation and/or dividends.
HARTFORD GLOBAL LEADERS HLS FUND -- Seeks growth of capital by investing
primarily in equity securities issued through high-quality growth companies
worldwide that, in the opinion of Wellington Management, are leaders within
their respective industries as indicated by established market presence and
strong competitive position on a global, regional or country basis. Sub-advised
by Wellington Management.
HARTFORD GLOBAL TECHNOLOGY HLS FUND -- Seeks long-term capital appreciation by
investing in equity securities of technology companies worldwide. Sub-advised by
Wellington Management.
The following text is added under the section entitled "The Funds":
The Funds may not be available in all states.
Under the section entitled "The Funds", under the sub-section entitled
"Investment Advisers," the following paragraph is inserted as the first
paragraph of the section:
American Funds Global Growth Fund, American Funds Global Small Capitalization
Fund, American Funds Growth Fund and American Funds Growth-Income Fund are all
part of American Funds Insurance Series. American Funds Insurance Series is a
fully managed, diversified, open-end investment company organized as a
Massachusetts business trust in 1983. American Funds Insurance Series offers two
classes of fund shares: Class 1 shares and Class 2 shares. This policy invests
only in Class 2 shares of American Funds Insurance Series. The investment
adviser for each of the funds of American Funds Insurance Series is Capital
Research and Management Company located at 333 South Hope Street, Los Angeles,
California 90071. Capital Research and Management Company is a wholly owned
subsidiary of The Capital Growth Companies, Inc.
Under the section entitled "Investment Advisers", the second paragraph is
deleted and replaced with the following:
Each Hartford HLS Fund, except for Hartford Global Leaders HLS Fund, Hartford
Global Technology HLS Fund and 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. Hartford Global Leaders HLS Fund and
Hartford Growth and Income HLS Fund are 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. Hartford
Global Technology HLS Fund is a non-diversified series of Hartford Series Fund,
Inc. The shares of each Fund have been divided into Class IA and Class IB. Only
Class IA shares are available in this policy.
The fourth paragraph under the sub-section entitled "Illustration of Death
Benefits, Account Values and Cash Surrender Values" in the section entitled
"Statement of Additional Information" is deleted and replaced with the
following:
The amounts shown for the Death Benefit, Account Value and Cash Surrender Value
as of the end of each Policy Year take into account an average daily charge
equal to an annual charge of 0.75% of the average daily net assets of the Funds
for investment advisory and administrative service 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 0.75% average daily charge) of
-0.75%, 5.25% and 11.25%, respectively.
The six "Illustration of Death Benefits, Account Values and Cash Surrender
Values" tables in the section entitled "Statement of Additional Information" are
replaced with the attached six tables.
The attached Financial Statements are added to the section entitled "Statement
of Additional Information."
THIS SUPPLEMENT SHOULD BE RETAINED WITH THE PROSPECTUS FOR FUTURE REFERENCE.
HV-2856
333-67373
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$1,000,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$20,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.25% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -----------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------
1 21,000 16,603 2,481 1,000,000 16,161 2,039 1,000,000
2 43,050 34,922 20,800 1,000,000 33,882 19,760 1,000,000
3 66,203 55,141 41,019 1,000,000 53,306 39,183 1,000,000
4 90,513 77,453 65,348 1,000,000 74,583 62,478 1,000,000
5 116,038 102,067 91,979 1,000,000 97,882 87,795 1,000,000
6 142,840 129,481 121,411 1,000,000 123,636 115,566 1,000,000
7 170,982 159,717 153,665 1,000,000 151,808 145,756 1,000,000
8 200,531 193,063 189,028 1,000,000 182,601 178,567 1,000,000
9 231,558 229,833 227,816 1,000,000 216,236 214,219 1,000,000
10 264,136 270,373 270,373 1,000,000 252,957 252,957 1,000,000
11 298,343 319,878 319,878 1,000,000 297,277 297,277 1,000,000
12 334,260 374,648 374,648 1,000,000 345,830 345,830 1,000,000
13 371,973 435,247 435,247 1,000,000 399,082 399,082 1,000,000
14 411,571 502,294 502,294 1,000,000 457,577 457,577 1,000,000
15 453,150 576,488 576,488 1,000,000 521,944 521,944 1,000,000
16 496,807 658,603 658,603 1,000,000 592,922 592,922 1,000,000
17 542,648 749,505 749,505 1,000,000 671,396 671,396 1,000,000
18 590,780 850,168 850,168 1,000,000 758,463 758,463 1,000,000
19 641,319 961,680 961,680 1,048,231 855,526 855,526 1,000,000
20 694,385 1,085,209 1,085,209 1,161,173 964,341 964,341 1,031,845
25 1,002,269 1,937,437 1,937,437 2,034,309 1,704,730 1,704,730 1,789,966
30 1,395,216 3,362,700 3,362,700 3,530,835 2,888,630 2,888,630 3,033,061
----------------------------------------------------------------------------------------------------------------
</TABLE>
*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.
These values reflect Current Front-End Sales Loads of 4% and Guaranteed
Front-End Sales Loads of 6% in all years. The surrender charge effective in any
year can be determined by subtracting the cash surrender value from the account
value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
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 5
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$1,000,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$20,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.25% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -----------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------
1 21,000 15,606 1,484 1,000,000 15,188 1,066 1,000,000
2 43,050 31,896 17,774 1,000,000 30,934 16,812 1,000,000
3 66,203 48,904 34,782 1,000,000 47,242 33,120 1,000,000
4 90,513 66,657 54,552 1,000,000 64,110 52,006 1,000,000
5 116,038 85,180 75,093 1,000,000 81,537 71,450 1,000,000
6 142,840 104,757 96,687 1,000,000 99,758 91,688 1,000,000
7 170,982 125,174 119,121 1,000,000 118,517 112,465 1,000,000
8 200,531 146,457 142,422 1,000,000 137,779 133,745 1,000,000
9 231,558 168,634 166,617 1,000,000 157,497 155,480 1,000,000
10 264,136 191,731 191,731 1,000,000 177,612 177,612 1,000,000
11 298,343 220,244 220,244 1,000,000 202,039 202,039 1,000,000
12 334,260 250,064 250,064 1,000,000 226,974 226,974 1,000,000
13 371,973 281,248 281,248 1,000,000 252,377 252,377 1,000,000
14 411,571 313,845 313,845 1,000,000 278,204 278,204 1,000,000
15 453,150 347,919 347,919 1,000,000 304,387 304,387 1,000,000
16 496,807 383,528 383,528 1,000,000 330,829 330,829 1,000,000
17 542,648 420,730 420,730 1,000,000 357,393 357,393 1,000,000
18 590,780 459,590 459,590 1,000,000 383,897 383,897 1,000,000
19 641,319 500,175 500,175 1,000,000 410,139 410,139 1,000,000
20 694,385 542,556 542,556 1,000,000 435,920 435,920 1,000,000
25 1,002,269 784,543 784,543 1,000,000 552,646 552,646 1,000,000
30 1,395,216 1,090,266 1,090,266 1,144,780 629,497 629,497 1,000,000
----------------------------------------------------------------------------------------------------------------
</TABLE>
*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.
These values reflect Current Front-End Sales Loads of 4% and Guaranteed
Front-End Sales Loads of 6% in all years. The surrender charge effective in any
year can be determined by subtracting the cash surrender value from the account
value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
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>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$1,000,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$20,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.75% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -----------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------
1 21,000 14,612 490 1,000,000 14,218 96 1,000,000
2 43,050 28,993 14,870 1,000,000 28,106 13,984 1,000,000
3 66,203 43,151 29,029 1,000,000 41,650 27,528 1,000,000
4 90,513 57,083 44,978 1,000,000 54,828 42,723 1,000,000
5 116,038 70,786 60,698 1,000,000 67,616 57,529 1,000,000
6 142,840 84,503 76,433 1,000,000 80,221 72,151 1,000,000
7 170,982 97,980 91,927 1,000,000 92,359 86,307 1,000,000
8 200,531 111,210 107,175 1,000,000 103,971 99,936 1,000,000
9 231,558 124,184 122,167 1,000,000 114,985 112,968 1,000,000
10 264,136 136,889 136,889 1,000,000 125,317 125,317 1,000,000
11 298,343 153,509 153,509 1,000,000 138,645 138,645 1,000,000
12 334,260 169,878 169,878 1,000,000 151,090 151,090 1,000,000
13 371,973 185,989 185,989 1,000,000 162,561 162,561 1,000,000
14 411,571 201,826 201,826 1,000,000 172,956 172,956 1,000,000
15 453,150 217,383 217,383 1,000,000 182,133 182,133 1,000,000
16 496,807 232,643 232,643 1,000,000 189,902 189,902 1,000,000
17 542,648 247,581 247,581 1,000,000 196,003 196,003 1,000,000
18 590,780 262,174 262,174 1,000,000 200,092 200,092 1,000,000
19 641,319 276,386 276,386 1,000,000 201,751 201,751 1,000,000
20 694,385 290,176 290,176 1,000,000 200,517 200,517 1,000,000
25 1,002,269 350,329 350,329 1,000,000 130,517 130,517 1,000,000
30 1,395,216 378,686 378,686 1,000,000 0 0 0
----------------------------------------------------------------------------------------------------------------
</TABLE>
*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.
These values reflect Current Front-End Sales Loads of 4% and Guaranteed
Front-End Sales Loads of 6% in all years. The surrender charge effective in any
year can be determined by subtracting the cash surrender value from the account
value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
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 7
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$500,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$10,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.25% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -----------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------
1 10,500 8,059 570 1,000,000 7,838 350 1,000,000
2 21,525 16,943 9,454 1,000,000 16,366 8,877 1,000,000
3 33,101 26,743 19,255 1,000,000 25,632 18,144 1,000,000
4 45,256 37,548 31,129 1,000,000 35,683 29,265 1,000,000
5 58,019 49,454 44,106 1,000,000 46,569 41,221 1,000,000
6 71,420 62,834 58,555 1,000,000 58,589 54,310 1,000,000
7 85,491 77,568 74,359 1,000,000 71,555 68,346 1,000,000
8 100,266 93,787 91,648 1,000,000 85,497 83,357 1,000,000
9 115,779 111,634 110,564 1,000,000 100,433 99,363 1,000,000
10 132,068 131,260 131,260 1,000,000 116,374 116,374 1,000,000
11 149,171 155,421 155,421 1,000,000 135,454 135,454 1,000,000
12 167,130 182,119 182,119 1,000,000 155,826 155,826 1,000,000
13 185,986 211,620 211,620 1,000,000 177,543 177,543 1,000,000
14 205,786 244,207 244,207 1,000,000 200,663 200,663 1,000,000
15 226,575 280,204 280,204 1,000,000 225,228 225,228 1,000,000
16 248,404 319,964 319,964 1,000,000 251,250 251,250 1,000,000
17 271,324 363,876 363,876 1,000,000 278,711 278,711 1,000,000
18 295,390 412,374 412,374 1,000,000 307,549 307,549 1,000,000
19 320,660 465,942 465,942 1,000,000 337,693 337,693 1,000,000
20 347,193 525,122 525,122 1,000,000 369,097 369,097 1,000,000
25 501,135 930,138 930,138 1,000,000 548,797 548,797 1,000,000
30 697,608 1,608,057 1,608,057 1,688,459 809,857 809,857 1,000,000
----------------------------------------------------------------------------------------------------------------
</TABLE>
*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.
These values reflect Current Front-End Sales Loads of 4% and Guaranteed
Front-End Sales Loads of 6% in all years. The surrender charge effective in any
year can be determined by subtracting the cash surrender value from the account
value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
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>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$500,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$10,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.25% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -----------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------
1 10,500 7,568 79 1,000,000 7,359 0 1,000,000
2 21,525 15,459 7,971 1,000,000 14,923 7,435 1,000,000
3 33,101 23,694 16,205 1,000,000 22,678 15,190 1,000,000
4 45,256 32,280 25,861 1,000,000 30,604 24,185 1,000,000
5 58,019 41,225 35,876 1,000,000 38,675 33,326 1,000,000
6 71,420 50,794 46,515 1,000,000 47,100 42,821 1,000,000
7 85,491 60,752 57,543 1,000,000 55,596 52,387 1,000,000
8 100,266 71,103 68,964 1,000,000 64,094 61,954 1,000,000
9 115,779 81,853 80,783 1,000,000 72,503 71,433 1,000,000
10 132,068 92,998 92,998 1,000,000 80,716 80,716 1,000,000
11 149,171 106,953 106,953 1,000,000 90,614 90,614 1,000,000
12 167,130 121,516 121,516 1,000,000 100,182 100,182 1,000,000
13 185,986 136,708 136,708 1,000,000 109,285 109,285 1,000,000
14 205,786 152,537 152,537 1,000,000 117,773 117,773 1,000,000
15 226,575 169,021 169,021 1,000,000 125,439 125,439 1,000,000
16 248,404 186,171 186,171 1,000,000 132,014 132,014 1,000,000
17 271,324 203,986 203,986 1,000,000 137,134 137,134 1,000,000
18 295,390 222,470 222,470 1,000,000 140,319 140,319 1,000,000
19 320,660 241,615 241,615 1,000,000 140,981 140,981 1,000,000
20 347,193 261,404 261,404 1,000,000 138,439 138,439 1,000,000
25 501,135 368,534 368,534 1,000,000 45,342 45,342 1,000,000
30 697,608 477,340 477,340 1,000,000 0 0 0
----------------------------------------------------------------------------------------------------------------
</TABLE>
*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.
These values reflect Current Front-End Sales Loads of 4% and Guaranteed
Front-End Sales Loads of 6% in all years. The surrender charge effective in any
year can be determined by subtracting the cash surrender value from the account
value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
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 9
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$500,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$10,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.75% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -----------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------
1 10,500 7,078 0 1,000,000 6,881 0 1,000,000
2 21,525 14,036 6,548 1,000,000 13,540 6,051 1,000,000
3 33,101 20,882 13,394 1,000,000 19,957 12,469 1,000,000
4 45,256 27,610 21,192 1,000,000 26,107 19,688 1,000,000
5 58,019 34,215 28,866 1,000,000 31,961 26,612 1,000,000
6 71,420 40,937 36,658 1,000,000 37,718 33,439 1,000,000
7 85,491 47,521 44,312 1,000,000 43,088 39,879 1,000,000
8 100,266 53,957 51,817 1,000,000 48,001 45,861 1,000,000
9 115,779 60,231 59,162 1,000,000 52,373 51,303 1,000,000
10 132,068 66,328 66,328 1,000,000 56,103 56,103 1,000,000
11 149,171 74,504 74,504 1,000,000 60,981 60,981 1,000,000
12 167,130 82,526 82,526 1,000,000 64,982 64,982 1,000,000
13 185,986 90,385 90,385 1,000,000 67,987 67,987 1,000,000
14 205,786 98,061 98,061 1,000,000 69,859 69,859 1,000,000
15 226,575 105,541 105,541 1,000,000 70,414 70,414 1,000,000
16 248,404 112,803 112,803 1,000,000 69,402 69,402 1,000,000
17 271,324 119,813 119,813 1,000,000 66,489 66,489 1,000,000
18 295,390 126,537 126,537 1,000,000 61,226 61,226 1,000,000
19 320,660 132,928 132,928 1,000,000 53,069 53,069 1,000,000
20 347,193 138,925 138,925 1,000,000 41,396 41,396 1,000,000
25 501,135 159,509 159,509 1,000,000 0 0 0
30 697,608 141,324 141,324 1,000,000 0 0 0
----------------------------------------------------------------------------------------------------------------
</TABLE>
*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.
These values reflect Current Front-End Sales Loads of 4% and Guaranteed
Front-End Sales Loads of 6% in all years. The surrender charge effective in any
year can be determined by subtracting the cash surrender value from the account
value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
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>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Financial Statements
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INDEX FOR HARTFORD AND FIDELITY
SUB-ACCOUNTS
Statements of Assets and
Liabilities For the Period Ended
September 30, 2000
(unaudited)..................... SA-2
Statements of Operations For the
Period Ended September 30, 2000
(unaudited)..................... SA-4
Statements of Changes in Net
Assets For the Period Ended
September 30, 2000
(unaudited)..................... SA-6
INDEX FOR PUTNAM SUB-ACCOUNTS
Statements of Assets and
Liabilities For the Period Ended
September 30, 2000
(unaudited)..................... SA-8
Statements of Operations For the
Period Ended September 30, 2000
(unaudited)..................... SA-12
Statements of Changes in Net
Assets For the Period Ended
September 30, 2000
(unaudited)..................... SA-15
</TABLE>
SA-1
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Assets and Liabilities (unaudited)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 Bond Stock Money Advisers Capital Mortgage Index
Fund Fund Market Fund Appreciation Securities Fund
Sub-Account Sub-Account Fund Sub-Account Fund Fund Sub-Account
Sub-Account Sub-Account Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
-------------------------------------------------------------------------------------------------------------------------
HARTFORD BOND HLS FUND, INC. --
CLASS IA
Shares 7,514,382
Cost $7,915,494
........................................................................................................................
Market Value $7,990,373 $ -- $ -- $ -- $ -- $ -- $ --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD STOCK HLS
FUND, INC. -- CLASS IA
Shares 5,294,047
Cost $34,679,305
........................................................................................................................
Market Value -- 32,906,774 -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS
FUND, INC. -- CLASS IA
Shares 31,594,607
Cost $31,594,607
........................................................................................................................
Market Value -- -- 31,594,607 -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD ADVISERS HLS
FUND, INC. -- CLASS IA
Shares 7,949,249
Cost $22,674,211
........................................................................................................................
Market Value -- -- -- 21,567,481 -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION HLS
FUND, INC. -- CLASS IA
Shares 3,745,296
Cost $21,015,095
........................................................................................................................
Market Value -- -- -- -- 23,650,071 -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD MORTGAGE SECURITIES HLS
FUND, INC. -- CLASS IA
Shares 1,003,299
Cost $1,081,666
........................................................................................................................
Market Value -- -- -- -- -- 1,101,616 --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INDEX HLS
FUND, INC. -- CLASS IA
Shares 9,625,511
Cost $35,192,153
........................................................................................................................
Market Value -- -- -- -- -- -- 39,243,361
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
OPPORTUNITIES HLS FUND, INC. --
CLASS IA
Shares 3,894,076
Cost $5,970,516
........................................................................................................................
Market Value -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life & Annuity
Insurance Company 20,520 76,469 206,964 76,630 222,713 3,040 630,903
........................................................................................................................
Receivable from fund shares sold -- -- -- -- -- -- --
........................................................................................................................
Total Assets 8,010,893 32,983,243 31,801,571 21,644,111 23,872,784 1,104,656 39,874,264
........................................................................................................................
LIABILITIES:
Due to Hartford Life & Annuity
Insurance Company -- -- -- -- -- -- --
........................................................................................................................
Payable for fund shares purchased 20,553 76,402 203,021 76,596 222,869 3,043 631,594
........................................................................................................................
TOTAL LIABILITIES 20,553 76,402 203,021 76,596 222,869 3043 631,594
-------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $7,990,340 $32,906,841 $31,598,550 $21,567,515 $23,649,915 $1,101,613 $39,242,670
-------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 5,107,956 8,994,897 22,110,371 8,000,325 5,821,905 708,325 11,141,646
........................................................................................................................
Unit Values $ 1.564293 $ 3.658390 $ 1.429128 $ 2.695830 $ 4.062230 $ 1.555236 $ 3.522161
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
September 30, 2000 International
Opportunities
Fund
Sub-Account
-----------------------------------------------------------
ASSETS
Investments:
----------------------------------------------------------------------
HARTFORD BOND HLS FUND, INC. --
CLASS IA
Shares 7,514,382
Cost $7,915,494
................................
Market Value $ --
---------------------------------------------------------------------------------
HARTFORD STOCK HLS
FUND, INC. -- CLASS IA
Shares 5,294,047
Cost $34,679,305
................................
Market Value --
--------------------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS
FUND, INC. -- CLASS IA
Shares 31,594,607
Cost $31,594,607
................................
Market Value --
-------------------------------------------------------------------------------------------------------
HARTFORD ADVISERS HLS
FUND, INC. -- CLASS IA
Shares 7,949,249
Cost $22,674,211
................................
Market Value --
------------------------------------------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION HLS
FUND, INC. -- CLASS IA
Shares 3,745,296
Cost $21,015,095
................................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD MORTGAGE SECURITIES HLS
FUND, INC. -- CLASS IA
Shares 1,003,299
Cost $1,081,666
................................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INDEX HLS
FUND, INC. -- CLASS IA
Shares 9,625,511
Cost $35,192,153
................................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
OPPORTUNITIES HLS FUND, INC. --
CLASS IA
Shares 3,894,076
Cost $5,970,516
................................
Market Value 5,674,413
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life & Annuity
Insurance Company 724,351
................................
Receivable from fund shares sold --
................................
Total Assets 6,398,764
................................
LIABILITIES:
Due to Hartford Life & Annuity
Insurance Company --
................................
Payable for fund shares purchased 724,458
................................
TOTAL LIABILITIES 724,458
-------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $5,674,306
-------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 2,717,349
................................
Unit Values $ 2.088177
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-2
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Assets and Liabilities (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 Dividend Growth International Small MidCap Fidelity VIP Fidelity
and Growth and Income Advisers Company Fund Equity-Income VIP
Fund Fund Fund Fund Sub-Account Portfolio Overseas
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Portfolio
Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
-------------------------------------------------------------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH
HLS FUND, INC. -- CLASS IA
Shares 5,186,170
Cost $10,813,960
........................................................................................................................
Market Value $10,649,318 $ -- $ -- $ -- $ -- $ -- $ --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD GROWTH AND INCOME
HLS FUND, INC. -- CLASS IA
Shares 2,961,844
Cost $4,038,772
........................................................................................................................
Market Value -- 4,261,042 -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
ADVISERS HLS FUND, INC. --
CLASS IA
Shares 386,985
Cost $487,391
........................................................................................................................
Market Value -- -- 475,840 -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD SMALL COMPANY HLS
FUND, INC. -- CLASS IA
Shares 1,808,038
Cost $3,552,000
........................................................................................................................
Market Value -- -- -- 3,447,890 -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD MIDCAP HLS
FUND, INC. -- CLASS IA
Shares 2,823,096
Cost $6,033,426
........................................................................................................................
Market Value -- -- -- -- 7,411,236 -- --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME
PORTFOLIO
Shares 244,344
Cost $5,878,670
........................................................................................................................
Market Value -- -- -- -- -- 5,996,190 --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS
PORTFOLIO
Shares 190,098
Cost $4,183,903
........................................................................................................................
Market Value -- -- -- -- -- -- 4,136,542
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP II ASSET MANAGER
PORTFOLIO
Shares 165,358
Cost $2,832,037
........................................................................................................................
Market Value -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life &
Annuity Insurance Company 4,242 43,308 2,372 93,067 252,603 -- 14
........................................................................................................................
Receivable from fund shares
sold -- -- -- -- -- 1,188 --
........................................................................................................................
Total Assets 10,653,560 4,304,350 478,212 3,540,957 7,663,839 5,997,378 4,136,556
........................................................................................................................
LIABILITIES:
Due to Hartford Life &
Annuity Insurance Company -- -- -- -- -- 1,326 --
........................................................................................................................
Payable for fund shares
purchased 4,263 43,328 2,375 93,078 252,610 -- --
........................................................................................................................
TOTAL LIABILITIES 4,263 43,328 2,375 93,078 252,610 1,326 --
-------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $10,649,297 $4,261,022 $ 475,837 $3,447,879 $7,411,229 $5,996,052 $4,136,556
-------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 4,132,024 2,994,553 402,202 1,967,006 3,321,369 2,760,780 2,153,983
........................................................................................................................
Unit Values $ 2.577259 $ 1.422924 $ 1.183079 $ 1.752856 $ 2.231378 $ 2.171869 $ 1.920422
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
September 30, 2000 Fidelity
VIP II
Asset
Manager
Portfolio
Sub-Account
-------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments:
-------------------------------------------------------------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH
HLS FUND, INC. -- CLASS IA
Shares 5,186,170
Cost $10,813,960
............................
Market Value $ --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD GROWTH AND INCOME
HLS FUND, INC. -- CLASS IA
Shares 2,961,844
Cost $4,038,772
............................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
ADVISERS HLS FUND, INC. --
CLASS IA
Shares 386,985
Cost $487,391
............................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD SMALL COMPANY HLS
FUND, INC. -- CLASS IA
Shares 1,808,038
Cost $3,552,000
............................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD MIDCAP HLS
FUND, INC. -- CLASS IA
Shares 2,823,096
Cost $6,033,426
............................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME
PORTFOLIO
Shares 244,344
Cost $5,878,670
............................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS
PORTFOLIO
Shares 190,098
Cost $4,183,903
............................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP II ASSET MANAGER
PORTFOLIO
Shares 165,358
Cost $2,832,037
............................
Market Value 2,751,550
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life &
Annuity Insurance Company --
............................
Receivable from fund shares
sold --
............................
Total Assets 2,751,550
............................
LIABILITIES:
Due to Hartford Life &
Annuity Insurance Company 3
............................
Payable for fund shares
purchased --
............................
TOTAL LIABILITIES 3
-------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $2,751,547
-------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 1,415,440
............................
Unit Values $ 1.943951
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-3
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Operations (unaudited)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Bond Stock Money Advisers Capital Mortgage Index
September 30, 2000 Fund Fund Market Fund Appreciation Securities Fund
Sub-Account Sub-Account Fund Sub-Account Fund Fund Sub-Account
Sub-Account Sub-Account Sub-Account
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 38,669 $ 7,409 $1,250,566 $ 40,704 $ 7,511 $ 6,896 $ 3,610
............................................................................................................................
Capital gains income -- 3,059,824 (739) 1,620,074 2,481,806 -- 338,727
............................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
............................................................................................................................
Net realized gain (loss) on
security transactions 26,463 (14,799) -- (29,127) (104,658) 178 (3,364)
............................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 484,317 (3,803,357) -- (1,562,856) 340,063 52,654 (841,310)
............................................................................................................................
Net gain (loss) on investments 510,780 (3,818,156) -- (1,591,983) 235,405 52,832 (844,674)
-----------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $549,449 $ (750,923) $1,249,827 $ 68,795 $2,724,722 $59,728 $(502,337)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended International
September 30, 2000 Opportunities
Fund
Sub-Account
--------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 29,701
................................
Capital gains income 475,725
................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
................................
Net realized gain (loss) on
security transactions 128,103
................................
Net unrealized appreciation
(depreciation) of investments
during the period (1,055,552)
................................
Net gain (loss) on investments (927,449)
---------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ (422,023)
----------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-4
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Operations (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Dividend Growth International Small MidCap Fidelity VIP Fidelity
September 30, 2000 and Growth and Income Advisers Company Fund Equity-Income VIP
Fund Fund Fund Fund Sub-Account Portfolio Overseas
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Portfolio
Sub-Account
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 7,056 $ 172 $ 4,149 $ -- $ -- $ 62,505 $ 37,000
...............................................................................................................................
Capital gains income 774,909 35,805 22,479 317,699 206,296 235,484 233,002
...............................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
...............................................................................................................................
Net realized (loss) gain on
security transactions (25,891) (1,883) 3,557 (60,034) 4,408 8,573 46,578
...............................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (260,045) 20,238 (47,020) (441,236) 996,812 11,852 (530,125)
...............................................................................................................................
Net gain (loss) on investments (285,936) 18,355 (43,463) (501,270) 1,001,220 20,425 (483,547)
--------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 496,029 $54,332 $(16,835) $(183,571) $1,207,516 $318,414 $(213,545)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended Fidelity
September 30, 2000 VIP II
Asset
Manager
Portfolio
Sub-Account
-----------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 59,726
................................
Capital gains income 140,711
................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
................................
Net realized (loss) gain on
security transactions (7,282)
................................
Net unrealized appreciation
(depreciation) of investments
during the period (180,578)
................................
Net gain (loss) on investments (187,860)
----------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 12,577
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-5
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Changes in Net Assets (unaudited)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Bond Stock Money Advisers Capital Mortgage Index
September 30, 2000 Fund Fund Market Fund Appreciation Securities Fund
Sub-Account Sub-Account Fund Sub-Account Fund Fund Sub-Account
Sub-Account Sub-Account Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 38,669 $ 7,409 $ 1,250,566 $ 40,704 $ 7,511 $ 6,896 $ 3,610
........................................................................................................................
Capital gains income -- 3,059,824 (739) 1,620,074 2,481,806 -- 338,727
........................................................................................................................
Net realized gain (loss) on
security transactions 26,463 (14,799) -- (29,127) (104,658) 178 (3,364)
........................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 484,317 (3,803,357) -- (1,562,856) 340,063 52,654 (841,310)
........................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 549,449 (750,923) 1,249,827 68,795 2,724,722 59,728 (502,337)
........................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,419,321 5,005,928 89,228,782 3,284,964 3,394,462 124,742 4,918,736
........................................................................................................................
Net transfers 389,234 11,310,878 (89,798,781) 5,805,901 8,055,227 329,715 9,526,065
........................................................................................................................
Surrenders for benefit payments
and fees (166,647) (724,352) (220,909) (594,986) (418,028) (6,205) (722,957)
........................................................................................................................
Net loan withdrawals (498) (48,818) (246,159) (12,269) (13,190) -- (11,162)
........................................................................................................................
Cost of insurance (308,805) (1,629,859) (3,778,178) (1,175,470) (1,018,489) (29,601) (1,315,478)
........................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 1,332,605 13,913,777 (4,815,245) 7,308,140 9,999,982 418,651 12,395,204
........................................................................................................................
Total increase (decrease) in net
assets 1,882,054 13,162,854 (3,565,418) 7,376,935 12,724,704 478,379 11,892,867
........................................................................................................................
NET ASSETS:
Beginning of period 6,108,286 19,743,987 35,163,968 14,190,580 10,925,211 623,234 27,349,803
-------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $7,990,340 $32,906,841 $31,598,550 $21,567,515 $23,649,915 $1,101,613 $39,242,670
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended International
September 30, 2000 Opportunities
Fund
Sub-Account
-------------------------------------------------------------
OPERATIONS:
Net investment income $ 29,701
................................
Capital gains income 475,725
................................
Net realized gain (loss) on
security transactions 128,103
................................
Net unrealized appreciation
(depreciation) of investments
during the period (1,055,552)
................................
Net increase (decrease) in net
assets resulting from
operations (422,023)
................................
UNIT TRANSACTIONS:
Purchases 701,331
................................
Net transfers 2,643,195
................................
Surrenders for benefit payments
and fees (93,986)
................................
Net loan withdrawals (18,397)
................................
Cost of insurance (187,945)
................................
Net increase (decrease) in net
assets resulting from unit
transactions 3,044,198
................................
Total increase (decrease) in net
assets 2,622,175
................................
NET ASSETS:
Beginning of period 3,052,131
-------------------------------------------------------------------------
END OF PERIOD $5,674,306
-------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-6
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Changes in Net Assets (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Dividend Growth International Small MidCap Fidelity VIP Fidelity
September 30, 2000 and Growth and Income Advisers Company Fund Equity-Income VIP
Fund Fund Fund Fund Sub-Account Portfolio Overseas
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Portfolio
Sub-Account
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 7,056 $ 172 $ 4,149 $ -- $ -- $ 62,505 $ 37,000
............................................................................................................................
Capital gains income 774,909 35,805 22,479 317,699 206,296 235,484 233,002
............................................................................................................................
Net realized (loss) gain on
security transactions (25,891) (1,883) 3,557 (60,034) 4,408 8,573 46,578
............................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (260,045) 20,238 (47,020) (441,236) 996,812 11,852 (530,125)
............................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 496,029 54,332 (16,835) (183,571) 1,207,516 318,414 (213,545)
............................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,683,743 443,409 72,525 521,781 632,345 1,147,605 350,805
............................................................................................................................
Net transfers 2,577,823 1,884,807 184,552 2,015,679 3,771,845 1,394,607 2,207,599
............................................................................................................................
Surrenders for benefit payments
and fees (191,278) (44,688) (9,615) (17,036) (73,941) (116,176) (60,874)
............................................................................................................................
Net loan withdrawals (9,476) (11,044) -- (8,799) (9,099) (22,320) (39)
............................................................................................................................
Cost of insurance (362,741) (211,119) (17,135) (173,961) (285,913) (268,584) (136,408)
............................................................................................................................
Net increase in net assets
resulting from unit
transactions 3,698,071 2,061,365 230,327 2,337,664 4,035,237 2,135,132 2,361,083
............................................................................................................................
Total increase in net assets 4,194,100 2,115,697 213,492 2,154,093 5,242,753 2,453,546 2,147,538
............................................................................................................................
NET ASSETS:
Beginning of period 6,455,197 2,145,325 262,345 1,293,786 2,168,476 3,542,506 1,989,018
-----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $10,649,297 $4,261,022 $475,837 $3,447,879 $7,411,229 $5,996,052 $4,136,556
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended Fidelity
September 30, 2000 VIP II
Asset
Manager
Portfolio
Sub-Account
-------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 59,726
................................
Capital gains income 140,711
................................
Net realized (loss) gain on
security transactions (7,282)
................................
Net unrealized appreciation
(depreciation) of investments
during the period (180,578)
................................
Net increase (decrease) in net
assets resulting from
operations 12,577
................................
UNIT TRANSACTIONS:
Purchases 257,110
................................
Net transfers 1,045,311
................................
Surrenders for benefit payments
and fees (292,178)
................................
Net loan withdrawals --
................................
Cost of insurance (82,276)
................................
Net increase in net assets
resulting from unit
transactions 927,967
................................
Total increase in net assets 940,544
................................
NET ASSETS:
Beginning of period 1,811,003
-------------------------------------------------------------------------------------------------------------
END OF PERIOD $2,751,547
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-7
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Assets & Liabilities (unaudited)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 Asia Diversified The George Global Global Growth Health
Pacific Income Putnam Asset Growth and Income Sciences
Growth Sub-Account Fund Allocation Sub-Account Sub-Account Sub-Account
Sub-Account of Boston Sub-Account
Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
-------------------------------------------------------------------------------------------------------------------------
PUTNAM VT ASIA PACIFIC GROWTH
FUND
Shares 53,737
Cost $676,738
........................................................................................................................
Market Value: $603,461 $ -- $ -- $ -- $ -- $ -- $ --
-------------------------------------------------------------------------------------------------------------------------
PUTNAM VT DIVERSIFIED INCOME FUND
Shares 72,469
Cost $724,439
........................................................................................................................
Market Value: -- 668,164 -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
PUTNAM VT THE GEORGE PUTNAM FUND
OF BOSTON
Shares 54,369
Cost $550,851
........................................................................................................................
Market Value: -- -- 567,073 -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL ASSET ALLOCATION
FUND
Shares 80,109
Cost $1,424,352
........................................................................................................................
Market Value: -- -- -- 1,377,082 -- -- --
-------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL GROWTH FUND
Shares 391,945
Cost $8,586,251
........................................................................................................................
Market Value: -- -- -- -- 8,548,311 -- --
-------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GROWTH AND INCOME FUND
Shares 672,947
Cost $17,627,510
........................................................................................................................
Market Value: -- -- -- -- -- 16,689,093 --
-------------------------------------------------------------------------------------------------------------------------
PUTNAM VT HEALTH SCIENCES FUND
Shares 170,361
Cost $2,079,288
........................................................................................................................
Market Value: -- -- -- -- -- -- 2,509,424
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company - 3,432 2 15 40,817 7,574 (1,065)
........................................................................................................................
Receivable from fund shares sold 132,954 -- -- -- -- -- --
........................................................................................................................
Total Assets 736,415 671,596 567,075 1,377,097 8,589,128 16,696,667 2,510,489
........................................................................................................................
LIABILITIES
Due to Hartford Life Insurance
Company 133,025 -- -- -- -- -- -
........................................................................................................................
Payable for fund shares purchased - 3,432 -- - 41,194 7,374 1,454
........................................................................................................................
TOTAL LIABILITIES 133,025 3,432 -- -- 41,194 7,374 1,454
-------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $603,390 $ 668,164 $567,075 $1,377,097 $8,547,934 $16,689,293 $2,509,035
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-8
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Assets & Liabilities (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 High Yield Income International International International Investors
Sub-Account Sub-Account Growth Growth and New Sub-Account
Sub-Account Income Opportunities
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT HIGH YIELD FUND
Shares 511,936
Cost $5,583,696
.......................................................................................................................
Market Value: $4,904,343 $ -- $ -- $ -- $ -- $ --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INCOME FUND
Shares 231,713
Cost $2,966,496
.......................................................................................................................
Market Value: -- 2,836,164 -- -- -- --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH
FUND
Shares 220,398
Cost $4,213,319
.......................................................................................................................
Market Value: -- -- 3,980,394 -- -- --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH
AND INCOME FUND
Shares 145,826
Cost $1,953,064
.......................................................................................................................
Market Value: -- -- -- 1,859,287 -- --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL NEW
OPPORTUNITIES FUND
Shares 194,967
Cost $3,628,350
.......................................................................................................................
Market Value: -- -- -- -- 3,285,202 --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INVESTORS FUND
Shares 301,733
Cost $4,198,515
.......................................................................................................................
Market Value: -- -- -- -- -- 4,384,188
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT MONEY MARKET FUND
Shares 1,865,766
Cost $1,865,766
.......................................................................................................................
Market Value: -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company 407 5 55,704 -- 1,535 1,279
.......................................................................................................................
Receivable from fund shares sold -- -- -- -- -- --
.......................................................................................................................
Total Assets 4,904,750 2,836,169 4,036,098 1,859,287 3,286,737 4,385,467
.......................................................................................................................
LIABILITIES
Due to Hartford Life Insurance
Company -- -- -- 11 -- --
.......................................................................................................................
Payable for fund shares purchased 387 -- 55,212 -- 1,625 1,255
.......................................................................................................................
TOTAL LIABILITIES 387 -- 55,212 11 1,625 1,255
------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $4,904,363 $2,836,169 $3,980,886 $1,859,276 $3,285,112 $4,384,212
------------------------------------------------------------------------------------------------------------------------
<S> <C>
September 30, 2000 Money
Market
Sub-Account
--------------------------------------------------------------
ASSETS
Investments:
----------------------------------------------------------------------------
PUTNAM VT HIGH YIELD FUND
Shares 511,936
Cost $5,583,696
................................
Market Value: $ --
------------------------------------------------------------------------------------------
PUTNAM VT INCOME FUND
Shares 231,713
Cost $2,966,496
................................
Market Value: --
--------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH
FUND
Shares 220,398
Cost $4,213,319
................................
Market Value: --
----------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH
AND INCOME FUND
Shares 145,826
Cost $1,953,064
................................
Market Value: --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL NEW
OPPORTUNITIES FUND
Shares 194,967
Cost $3,628,350
................................
Market Value: --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INVESTORS FUND
Shares 301,733
Cost $4,198,515
................................
Market Value: --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT MONEY MARKET FUND
Shares 1,865,766
Cost $1,865,766
................................
Market Value: 1,865,766
------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company --
................................
Receivable from fund shares sold 8,683
................................
Total Assets 1,874,449
................................
LIABILITIES
Due to Hartford Life Insurance
Company 8,401
................................
Payable for fund shares purchased --
................................
TOTAL LIABILITIES 8,401
------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $1,866,048
------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-9
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Assets & Liabilities (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 New New Value OTC & Utilities Vista Voyager
Opportunities Sub-Account Emerging Growth Sub-Account Sub-Account
Sub-Account Growth and Income
Sub-Account Sub-Account
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
---------------------------------------------------------------------------------------------------------------
PUTNAM VT NEW OPPORTUNITIES FUND
Shares 248,033
Cost $8,610,079
..............................................................................................................
Market Value: $10,409,949 $ -- $ -- $ -- $ -- $ --
---------------------------------------------------------------------------------------------------------------
PUTNAM VT NEW VALUE FUND
Shares 153,610
Cost $1,823,205
..............................................................................................................
Market Value: -- 1,894,009 -- -- -- --
---------------------------------------------------------------------------------------------------------------
PUTNAM VT OTC & EMERGING GROWTH
FUND
Shares 121,450
Cost $2,395,820
..............................................................................................................
Market Value: -- -- 2,252,891 -- -- --
---------------------------------------------------------------------------------------------------------------
PUTNAM VT UTILITIES GROWTH &
INCOME FUND
Shares 122,181
Cost $2,034,678
..............................................................................................................
Market Value: -- -- -- 2,161,388 -- --
---------------------------------------------------------------------------------------------------------------
PUTNAM VT VISTA FUND
Shares 139,778
Cost $3,056,914
..............................................................................................................
Market Value: -- -- -- -- 3,465,099 --
---------------------------------------------------------------------------------------------------------------
PUTNAM VT VOYAGER FUND
Shares 364,702
Cost $19,441,087
..............................................................................................................
Market Value: -- -- -- -- -- 20,864,578
---------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company -- 136 655 4,226 12,573 37,843
..............................................................................................................
Receivable from fund shares sold 191,561 -- -- -- -- --
..............................................................................................................
Total Assets 10,601,510 1,894,145 2,253,546 2,165,614 3,477,672 20,902,421
..............................................................................................................
LIABILITIES
Due to Hartford Life Insurance
Company 191,149 -- -- -- -- --
..............................................................................................................
Payable for fund shares purchased -- -- -- 4,290 12,177 34,539
..............................................................................................................
TOTAL LIABILITIES 191,149 -- -- 4,290 12,177 34,539
---------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $10,410,361 $1,894,145 $2,253,546 $2,161,324 $3,465,495 $20,867,882
---------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-10
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Assets & Liabilities (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 Units Unit Contract
Owned by Price Liability
Participants
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Variable life contracts:
Asia Pacific Growth Fund 40,400 $14.935338 $ 603,390
...................................................................................
Diversified Income Fund 50,953 13.113302 668,164
...................................................................................
George Putnam Fund of Boston 51,363 11.040569 567,075
...................................................................................
Global Asset Allocation Fund 60,359 22.815002 1,377,097
...................................................................................
Global Growth Fund 259,185 32.980056 8,547,934
...................................................................................
Growth and Income Fund 620,729 26.886600 16,689,293
...................................................................................
Health Sciences Fund 165,596 15.151502 2,509,035
...................................................................................
High Yield Fund 304,351 16.114172 4,904,363
...................................................................................
Income Fund 187,848 15.098227 2,836,169
...................................................................................
International Growth Fund 275,242 14.463235 3,980,886
...................................................................................
International Growth and Income Fund 156,999 11.842557 1,859,276
...................................................................................
International New Opportunities Fund 219,783 14.947040 3,285,112
...................................................................................
Investors Fund 314,281 13.949961 4,384,212
...................................................................................
Money Market Fund 1,315,863 1.418117 1,866,048
...................................................................................
New Opportunities Fund 260,454 39.970028 10,410,361
...................................................................................
New Value Fund 159,245 11.894540 1,894,145
...................................................................................
OTC & Emerging Growth Fund 112,430 20.043914 2,253,546
...................................................................................
Utilities Growth and Income Fund 87,628 24.664702 2,161,324
...................................................................................
Vista Fund 176,299 19.656868 3,465,495
...................................................................................
Voyager Fund 466,936 44.691134 20,867,882
...................................................................................
GRAND TOTAL: $95,130,807
------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-11
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Operations (unaudited)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Asia Diversified The George Global Global Growth Health
September 30, 2000 Pacific Income Putnam Asset Growth and Income Sciences
Growth Sub-Account Fund Allocation Sub-Account Sub-Account Sub-Account
Sub-Account of Boston Sub-Account
Sub-Account
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 27,228 $ 42,580 $ -- $ 12,034 $ 52,321 $ 219,766 $ --
......................................................................................................................
Capital gains income -- -- -- 62,848 1,303,909 1,034,713 --
......................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
......................................................................................................................
Net realized gain (loss) on
security transactions 994 1,202 (15) 54 (35,632) (26,064) (10,267)
......................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (299,791) (37,982) 23,766 (93,212) (2,738,089) (542,870) 401,443
......................................................................................................................
Net (loss) gain on investments (298,797) (36,780) 23,751 (93,158) (2,773,721) (568,934) 391,176
-----------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS: $(271,569) $ 5,800 $23,751 $(18,276) $(1,417,491) $ 685,545 $391,176
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-12
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Operations (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended High Yield Income International International International Investors
September 30, 2000 Sub-Account Sub-Account Growth Growth and New Sub-Account
Sub-Account Income Opportunities
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 466,428 $183,713 $ 40,512 $ 32,920 $ 471 $ --
.......................................................................................................................
Capital gains income -- -- 175,715 72,162 44,254 --
------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
.......................................................................................................................
Net realized (loss) gain on
security transactions (7,217) (11,048) 14,964 25,712 231,244 (9,911)
.......................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (571,009) (42,201) (503,625) (133,232) (534,588) (129,450)
.......................................................................................................................
Net (loss) gain on investments (578,226) (53,249) (488,661) (107,520) (303,344) (139,361)
------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS: $(111,798) $130,464 $(272,434) $ (2,438) $(258,619) $(139,361)
------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended Money
September 30, 2000 Market
Sub-Account
--------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 98,605
................................
Capital gains income --
----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
................................
Net realized (loss) gain on
security transactions --
................................
Net unrealized (depreciation)
appreciation of investments
during the period --
................................
Net (loss) gain on investments --
------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS: $ 98,605
--------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-13
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Operations (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended New New OTC & Utilities Vista Voyager
September 30, 2000 Opportunities Value Emerging Growth Sub-Account Sub-Account
Sub-Account Sub-Account Growth and
Sub-Account Income
Sub-Account
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ 13,729 $ -- $ 44,777 $ -- $ 4,464
............................................................................................................
Capital gains income 585,307 48,619 12,177 79,045 15,030 1,894,262
-------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
............................................................................................................
Net realized (loss) gain on
security transactions (101,488) (5,820) (15,039) (16,860) (20,259) 1,416
............................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (298,837) 87,169 (352,082) 119,606 265,990 (2,334,093)
............................................................................................................
Net (loss) gain on investments (400,325) 81,349 (367,121) 102,746 245,731 (2,332,677)
-------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS: $ 184,982 $143,697 $(354,944) $226,568 $260,761 $ (433,951)
-------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-14
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Changes in Net Assets (unaudited)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Asia Diversified The George Global Asset Global Growth Health
September 30, 2000 Pacific Income Putnam Fund Allocation Growth and Income Sciences
Growth Sub-Account of Boston Sub-Account Sub-Account Sub-Account Sub-Account
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 27,228 $ 42,580 $ -- $ 12,034 $ 52,321 $ 219,766 $ --
.............................................................................................................................
Capital gains income -- -- -- 62,848 1,303,909 1,034,713 --
.............................................................................................................................
Net realized gain (loss) on
security transactions 994 1,202 (15) 54 (35,632) (26,064) (10,267)
.............................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (299,791) (37,982) 23,766 (93,212) (2,738,089) (542,870) 401,443
.............................................................................................................................
Net (decrease) increase in net
assets resulting from
operations (271,569) 5,800 23,751 (18,276) (1,417,491) 685,545 391,176
.............................................................................................................................
UNIT TRANSACTIONS:
Purchases 82,533 51,287 89,619 181,242 1,867,759 2,689,788 263,170
.............................................................................................................................
Net transfers 63,445 153,866 235,062 647,733 1,028,982 4,697,316 1,409,194
.............................................................................................................................
Surrenders for benefit payments
and fees (9,343) (89,908) (10,095) (14,905) (457,308) (306,181) (64,926)
.............................................................................................................................
Net loan activity -- -- -- -- (18,965) (5,793) (18)
.............................................................................................................................
Cost of insurance (29,558) (31,555) (29,554) (45,757) (293,928) (745,281) (98,454)
.............................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 107,077 83,690 285,032 768,313 2,126,540 6,329,849 1,508,966
.............................................................................................................................
Total (decrease) increase in net
assets (164,492) 89,490 308,783 750,037 709,049 7,015,394 1,900,142
.............................................................................................................................
NET ASSETS:
Beginning of period 767,882 578,674 258,292 627,060 7,838,885 9,673,899 608,893
------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $603,390 $ 668,164 $567,075 $1,377,097 $8,547,934 $16,689,293 $2,509,035
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-15
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Changes in Net Assets (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended High Yield Income International International International Investors
September 30, 2000 Sub-Account Sub-Account Growth Growth and New Sub-Account
Sub-Account Income Opportunities
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 466,428 $ 183,713 $ 40,512 $ 32,920 $ 471 $ --
.......................................................................................................................
Capital gains income -- -- 175,715 72,162 44,254 --
.......................................................................................................................
Net realized (loss) gain on
security transactions (7,217) (11,048) 14,964 25,712 231,244 (9,911)
.......................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (571,009) (42,201) (503,625) (133,232) (534,588) (129,450)
.......................................................................................................................
Net (decrease) increase in net
assets resulting from
operations (111,798) 130,464 (272,434) (2,438) (258,619) (139,361)
.......................................................................................................................
UNIT TRANSACTIONS:
Purchases 660,989 424,515 543,168 162,724 160,642 747,207
.......................................................................................................................
Net transfers 904,849 116,012 2,974,374 1,347,458 2,943,281 2,137,151
.......................................................................................................................
Surrenders for benefit payments
and fees (103,086) (111,646) 2,433 (17,264) (20,699) (71,350)
.......................................................................................................................
Net loan activity (3,862) (8,019) (4,947) -- (36) --
.......................................................................................................................
Cost of insurance (172,670) (89,743) (236,632) (87,140) (105,607) (220,426)
.......................................................................................................................
Net increase in net assets
resulting from unit
transactions 1,286,220 331,119 3,278,396 1,405,778 2,977,581 2,592,582
.......................................................................................................................
Total increase in net assets 1,174,422 461,583 3,005,962 1,403,340 2,718,962 2,453,221
.......................................................................................................................
NET ASSETS:
Beginning of period 3,729,941 2,374,586 974,924 455,936 566,150 1,930,991
------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $4,904,363 $2,836,169 $3,980,886 $1,859,276 $3,285,112 $4,384,212
------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended Money
September 30, 2000 Market
Sub-Account
----------------------------------------------------------
OPERATIONS:
Net investment income $ 98,605
................................
Capital gains income --
................................
Net realized (loss) gain on
security transactions --
................................
Net unrealized (depreciation)
appreciation of investments
during the period --
................................
Net (decrease) increase in net
assets resulting from
operations 98,605
................................
UNIT TRANSACTIONS:
Purchases 117,227
................................
Net transfers 401,082
................................
Surrenders for benefit payments
and fees (42,984)
................................
Net loan activity --
................................
Cost of insurance (86,251)
................................
Net increase in net assets
resulting from unit
transactions 389,074
................................
Total increase in net assets 487,679
................................
NET ASSETS:
Beginning of period 1,378,369
----------------------------------------------------------------------
END OF PERIOD $1,866,048
----------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-16
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Changes in Net Assets (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended New New OTC & Utilities Vista Voyager
September 30, 2000 Opportunities Value Emerging Growth Sub-Account Sub-Account
Sub-Account Sub-Account Growth and Income
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ -- $ 13,729 $ -- $ 44,777 $ -- $ 4,464
.................................................................................................................
Capital gains income 585,307 48,619 12,177 79,045 15,030 1,894,262
.................................................................................................................
Net realized (loss) gain on
security transactions (101,488) (5,820) (15,039) (16,860) (20,259) 1,416
.................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (298,837) 87,169 (352,082) 119,606 265,990 (2,334,093)
.................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 184,982 143,697 (354,944) 226,568 260,761 (433,951)
.................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,355,586 250,944 264,746 508,388 173,596 2,783,437
.................................................................................................................
Net transfers 4,031,551 877,026 1,990,616 285,523 2,442,307 8,104,533
.................................................................................................................
Surrenders for benefit payments
and fees (399,833) (18,080) (80,381) (24,901) (83,445) (610,462)
.................................................................................................................
Net loan activity (35,150) (8) (6,794) (71) (8,887) (47,515)
.................................................................................................................
Cost of insurance (503,463) (84,963) (118,140) (70,565) (80,000) (886,786)
.................................................................................................................
Net increase in net assets
resulting from unit
transactions 4,448,691 1,024,919 2,050,047 698,374 2,443,571 9,343,207
.................................................................................................................
Total increase in net assets 4,633,673 1,168,616 1,695,103 924,942 2,704,332 8,909,256
.................................................................................................................
NET ASSETS:
Beginning of period 5,776,688 725,529 558,443 1,236,382 761,163 11,958,626
------------------------------------------------------------------------------------------------------------------
END OF PERIOD $10,410,361 $1,894,145 $2,253,546 $2,161,324 $3,465,495 $20,867,882
------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life and Annuity Insurance Company
Separate Account VL II 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 VL II (Bond Fund,
Stock Fund, Money Market Fund, Advisers Fund, Capital Appreciation Fund,
Mortgage Securities Fund, Index Fund, International Opportunities Fund, Dividend
and Growth Fund, Growth and Income Fund, International Advisers Fund, Small
Company Fund, MidCap Fund, Fidelity VIP Equity-Income Portfolio, Fidelity VIP
Overseas Portfolio and Fidelity VIP II Asset Manager Portfolio) (collectively,
the Account) as of December 31, 1999, and the related statements of operations
and the statements of changes in net assets for the periods presented. These
financial statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1999, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 17, 2000 ARTHUR ANDERSEN LLP
SA-1
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES
--------------------------------------------------------------------------------
<TABLE>
December 31, 1999 Bond Fund Stock Fund Money Advisers Capital Mortgage Index Fund
Sub-Account Sub-Account Market Fund Fund Appreciation Securities Sub-Account
Sub-Account Sub-Account Fund Fund
Sub-Account Sub-Account
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
---------------------------------------------------------------------------------------------------------------------------
HARTFORD BOND HLS FUND, INC. -
CLASS IA
Shares 6,146,042
Cost $6,517,756
..........................................................................................................................
Market Value $6,108,317 $ -- $ -- $ -- $ -- $ -- $ --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD STOCK HLS FUND, INC. -
CLASS IA
Shares 2,762,395
Cost $17,713,082
..........................................................................................................................
Market Value -- 19,743,908 -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS
FUND, INC. - CLASS IA
Shares 35,162,986
Cost $35,162,986
..........................................................................................................................
Market Value -- -- 35,162,986 -- -- -- --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD ADVISERS HLS FUND, INC.
-CLASS IA
Shares 4,786,407
Cost $13,734,488
..........................................................................................................................
Market Value -- -- -- 14,190,615 -- -- --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION HLS
FUND, INC. - CLASS IA
Shares 1,792,395
Cost $8,630,428
..........................................................................................................................
Market Value -- -- -- -- 10,925,342 -- --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD MORTGAGE SECURITIES HLS
FUND, INC. - CLASS IA
Shares 599,557
Cost $655,939
..........................................................................................................................
Market Value -- -- -- -- -- 623,234 --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD INDEX HLS FUND, INC. -
CLASS IA
Shares 6,529,463
Cost $22,457,967
..........................................................................................................................
Market Value -- -- -- -- -- -- 27,350,486
---------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
OPPORTUNITIES HLS FUND, INC. -
CLASS IA
Shares 1,627,053
Cost $2,292,796
..........................................................................................................................
Market Value -- -- -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life and
Annuity Insurance Company -- 54,616 463,281 2,393 28,816 -- 23,192
..........................................................................................................................
Receivable from fund shares sold 1,238 -- -- -- -- -- --
..........................................................................................................................
Total Assets 6,109,555 19,798,524 35,626,267 14,193,008 10,954,158 623,234 27,373,678
..........................................................................................................................
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company 1,269 -- -- -- -- -- --
..........................................................................................................................
Payable for fund shares purchased -- 54,537 462,299 2,428 28,947 -- 23,875
..........................................................................................................................
Total Liabilities 1,269 54,537 462,299 2,428 28,947 -- 23,875
---------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $6,108,286 $19,743,987 $35,163,968 $14,190,580 $10,925,211 $ 623,234 $27,349,803
---------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 4,197,044 5,253,119 25,709,955 5,287,048 3,222,333 426,305 7,630,809
Unit Values $ 1.455378 $ 3.758526 $ 1.367718 $ 2.684027 $ 3.390466 $ 1.461942 $ 3.584129
---------------------------------------------------------------------------------------------------------------------------
<S> <C>
December 31, 1999 International
Opportunities
Fund
Sub-Account
------------------------------------------------------------
ASSETS:
Investments:
------------------------------------------------------------------------
HARTFORD BOND HLS FUND, INC. -
CLASS IA
Shares 6,146,042
Cost $6,517,756
................................
Market Value $ --
------------------------------------------------------------------------------------
HARTFORD STOCK HLS FUND, INC. -
CLASS IA
Shares 2,762,395
Cost $17,713,082
................................
Market Value --
------------------------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS
FUND, INC. - CLASS IA
Shares 35,162,986
Cost $35,162,986
................................
Market Value --
------------------------------------------------------------------------------------------------------------
HARTFORD ADVISERS HLS FUND, INC.
-CLASS IA
Shares 4,786,407
Cost $13,734,488
................................
Market Value --
------------------------------------------------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION HLS
FUND, INC. - CLASS IA
Shares 1,792,395
Cost $8,630,428
................................
Market Value --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD MORTGAGE SECURITIES HLS
FUND, INC. - CLASS IA
Shares 599,557
Cost $655,939
................................
Market Value --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD INDEX HLS FUND, INC. -
CLASS IA
Shares 6,529,463
Cost $22,457,967
................................
Market Value --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
OPPORTUNITIES HLS FUND, INC. -
CLASS IA
Shares 1,627,053
Cost $2,292,796
................................
Market Value 3,052,245
---------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life and
Annuity Insurance Company --
................................
Receivable from fund shares sold --
................................
Total Assets 3,052,245
................................
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company 114
................................
Payable for fund shares purchased --
................................
Total Liabilities 114
---------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $3,052,131
---------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 1,284,374
Unit Values $ 2.376357
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-2
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
December 31, 1999 Dividend Growth and International Small MidCap Fund Fidelity Fidelity
and Growth Income Fund Advisers Company Sub-Account VIP VIP
Fund Sub-Account Fund Fund Equity- Overseas
Sub-Account Sub-Account Sub-Account Income Portfolio
Portfolio Sub-Account
Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
-------------------------------------------------------------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH HLS
FUND, INC. - CLASS IA
Shares 3,004,060
Cost $6,359,805
........................................................................................................................
Market Value $6,455,208 $ -- $ -- $ -- $ -- $ -- $ --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD GROWTH AND INCOME HLS
FUND, INC. - CLASS IA
Shares 1,498,531
Cost $1,943,326
........................................................................................................................
Market Value -- 2,145,358 -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL ADVISERS
HLS FUND, INC. - CLASS IA
Shares 187,834
Cost $226,878
........................................................................................................................
Market Value -- -- 262,345 -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD SMALL COMPANY HLS
FUND, INC. - CLASS IA
Shares 591,371
Cost $956,662
........................................................................................................................
Market Value -- -- -- 1,293,787 -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD MIDCAP HLS FUND, INC. -
CLASS IA
Shares 1,055,994
Cost $1,787,486
........................................................................................................................
Market Value -- -- -- -- 2,168,483 -- --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME
PORTFOLIO
Shares 137,789
Cost $3,436,883
........................................................................................................................
Market Value -- -- -- -- -- 3,542,551 --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO
Shares 72,487
Cost $1,506,287
........................................................................................................................
Market Value -- -- -- -- -- -- 1,989,051
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP II ASSET MANAGER
PORTFOLIO
Shares 97,000
Cost $1,710,904
........................................................................................................................
Market Value -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life and
Annuity Insurance Company 577 2,326 -- 6,539 7,866 5,465 8,224
........................................................................................................................
Receivable from fund shares sold -- -- -- -- -- -- --
........................................................................................................................
Total Assets 6,455,785 2,147,684 262,345 1,300,326 2,176,349 3,548,016 1,997,275
........................................................................................................................
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company -- -- -- -- -- -- --
........................................................................................................................
Payable for fund shares purchased 588 2,359 -- 6,540 7,873 5,510 8,257
........................................................................................................................
TOTAL LIABILITIES 588 2,359 -- 6,540 7,873 5,510 8,257
........................................................................................................................
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $6,455,197 $2,145,325 $ 262,345 $1,293,786 $2,168,476 $3,542,506 $1,989,018
-------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 2,634,320 1,529,997 211,426 724,835 1,294,214 1,700,502 911,992
Unit Values $ 2.450422 $ 1.402176 $1.240838 $1.784939 $ 1.675516 $ 2.083213 $ 2.180961
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
December 31, 1999 Fidelity
VIP II
Asset
Manager
Portfolio
Sub-Account
----------------------------------------------------------
ASSETS:
Investments:
----------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH HLS
FUND, INC. - CLASS IA
Shares 3,004,060
Cost $6,359,805
................................
Market Value $ --
----------------------------------------------------------------------------------
HARTFORD GROWTH AND INCOME HLS
FUND, INC. - CLASS IA
Shares 1,498,531
Cost $1,943,326
................................
Market Value --
----------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL ADVISERS
HLS FUND, INC. - CLASS IA
Shares 187,834
Cost $226,878
................................
Market Value --
----------------------------------------------------------------------------------------------------------
HARTFORD SMALL COMPANY HLS
FUND, INC. - CLASS IA
Shares 591,371
Cost $956,662
................................
Market Value --
----------------------------------------------------------------------------------------------------------------------
HARTFORD MIDCAP HLS FUND, INC. -
CLASS IA
Shares 1,055,994
Cost $1,787,486
................................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME
PORTFOLIO
Shares 137,789
Cost $3,436,883
................................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO
Shares 72,487
Cost $1,506,287
................................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP II ASSET MANAGER
PORTFOLIO
Shares 97,000
Cost $1,710,904
................................
Market Value 1,810,995
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life and
Annuity Insurance Company 303
................................
Receivable from fund shares sold --
................................
Total Assets 1,811,298
................................
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company --
................................
Payable for fund shares purchased 295
................................
TOTAL LIABILITIES 295
................................
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $1,811,003
-------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 930,804
Unit Values $ 1.945633
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-3
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Bond Fund Stock Fund Money Advisers Capital Mortgage Index Fund
December 31, 1999 Sub-Account Sub-Account Market Fund Appreciation Securities Sub-Account
Fund Sub-Account Fund Fund
Sub-Account Sub-Account Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 333,423 $ 131,640 $800,903 $ 289,143 $ 32,940 $ 34,905 $ 240,349
........................................................................................................................
Capital gains income 13,422 523,019 257 362,974 255,982 -- 235,278
........................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
........................................................................................................................
Net realized (loss) gain on
security transactions (10,936) (1,322) -- 201 (11,561) (16) (2,132)
........................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (395,236) 1,470,668 -- 228,460 1,988,151 (31,744) 3,270,915
........................................................................................................................
Net (loss) gain on investments (406,172) 1,469,346 -- 228,661 1,976,590 (31,760) 3,268,783
-------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $ (59,327) $2,124,005 $801,160 $ 880,778 $2,265,512 $ 3,145 $3,744,410
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended International
December 31, 1999 Opportunities
Fund
Sub-Account
------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 33,938
................................
Capital gains income --
................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
................................
Net realized (loss) gain on
security transactions 110,868
................................
Net unrealized (depreciation)
appreciation of investments
during the period 695,310
................................
Net (loss) gain on investments 806,178
------------------------------------------------------------------------
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $ 840,116
------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-4
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Bond Fund Stock Fund Money Market Advisers Capital Mortgage Index Fund
December 31, 1999 Sub-Account Sub-Account Fund Fund Appreciation Securities Sub-Account
Sub-Account Sub-Account Fund Fund
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 333,423 $ 131,640 $ 800,903 $ 289,143 $ 32,940 $ 34,905 $ 240,349
.............................................................................................................................
Capital gains income 13,422 523,019 257 362,974 255,982 -- 235,278
.............................................................................................................................
Net realized (loss) gain on
security transactions (10,936) (1,322) -- 201 (11,561) (16) (2,132)
.............................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (395,236) 1,470,668 -- 228,460 1,988,151 (31,744) 3,270,915
.............................................................................................................................
Net (decrease) increase in net
assets resulting from
operations (59,327) 2,124,005 801,160 880,778 2,265,512 3,145 3,744,410
.............................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,116,710 3,539,905 97,498,245 2,459,695 2,036,106 39,491 3,166,528
.............................................................................................................................
Net transfers 2,969,489 9,958,243 (72,516,882) 8,314,204 3,727,669 557,329 11,023,584
.............................................................................................................................
Surrenders for benefit payments
and fees (65,653) (426,813) (587,181) (205,445) (262,338) (9,550) (339,245)
.............................................................................................................................
Net loan activity 14,226 (14,597) (595,739) (32,863) (3) -- (48,709)
.............................................................................................................................
Cost of insurance (171,351) (629,327) (2,417,385) (483,197) (313,821) (10,668) (624,639)
.............................................................................................................................
Net increase in net assets
resulting from unit
transactions 3,863,421 12,427,411 21,381,058 10,052,394 5,187,613 576,602 13,177,519
.............................................................................................................................
Net increase in net assets 3,804,094 14,551,416 22,182,218 10,933,172 7,453,125 579,747 16,921,929
.............................................................................................................................
NET ASSETS:
Beginning of period 2,304,192 5,192,571 12,981,750 3,257,408 3,472,086 43,487 10,427,874
------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $6,108,286 $19,743,987 $ 35,163,968 $14,190,580 $10,925,211 $ 623,234 $27,349,803
------------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended International
December 31, 1999 Opportunities
Fund
Sub-Account
------------------------------------------------------------
OPERATIONS:
Net investment income $ 33,938
................................
Capital gains income --
................................
Net realized (loss) gain on
security transactions 110,868
................................
Net unrealized (depreciation)
appreciation of investments
during the period 695,310
................................
Net (decrease) increase in net
assets resulting from
operations 840,116
................................
UNIT TRANSACTIONS:
Purchases 585,350
................................
Net transfers 324,908
................................
Surrenders for benefit payments
and fees (65,954)
................................
Net loan activity 5,695
................................
Cost of insurance (108,222)
................................
Net increase in net assets
resulting from unit
transactions 741,777
................................
Net increase in net assets 1,581,893
................................
NET ASSETS:
Beginning of period 1,470,238
------------------------------------------------------------------------
END OF PERIOD $3,052,131
------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-6
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Dividend Growth and International Small MidCap Fidelity Fidelity
December 31, 1999 and Growth Income Fund Advisers Company Fund Fund VIP Equity- VIP
Fund Sub-Account Fund Sub-Account Sub-Account Income Overseas
Sub-Account Sub-Account Portfolio Portfolio
Sub-Account Sub-Account
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 100,615 $ 5,788 $ 4,605 $ -- $ -- $ 23,696 $ 16,232
...........................................................................................................................
Capital gains income 118,987 13,333 -- 1,692 82,187 52,380 26,180
...........................................................................................................................
Net realized (loss) gain on
security transactions (461) (274) 1 2,003 (2,189) (4,629) 112,350
...........................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (25,993) 197,340 31,108 324,664 372,819 31,327 438,753
...........................................................................................................................
Net increase in net assets
resulting from operations 193,148 216,187 35,714 328,359 452,817 102,774 593,515
...........................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,379,402 378,405 10,899 67,151 231,734 626,931 332,337
...........................................................................................................................
Net transfers 2,970,543 1,558,447 144,272 848,771 1,448,161 1,672,590 248,522
...........................................................................................................................
Surrenders for benefit payments
and fees (155,404) (16,145) (4,694) (13,485) (16,009) (105,540) (67,389)
...........................................................................................................................
Net loan activity (5,150) -- -- (4) (4) -- --
...........................................................................................................................
Cost of insurance (207,847) (34,387) (4,204) (21,813) (37,372) (126,745) (73,427)
...........................................................................................................................
Net increase in net assets
resulting from unit
transactions 3,981,544 1,886,320 146,273 880,620 1,626,510 2,067,236 440,043
...........................................................................................................................
Net increase in net assets 4,174,692 2,102,507 181,987 1,208,979 2,079,327 2,170,010 1,033,558
...........................................................................................................................
NET ASSETS:
Beginning of period 2,280,505 42,818 80,358 84,807 89,149 1,372,496 955,460
----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $6,455,197 $2,145,325 $262,345 $1,293,786 $2,168,476 $3,542,506 $1,989,018
----------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended Fidelity
December 31, 1999 VIP II
Asset
Manager
Portfolio
Sub-Account
------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 13,958
................................
Capital gains income 17,680
................................
Net realized (loss) gain on
security transactions 548
................................
Net unrealized (depreciation)
appreciation of investments
during the period 82,405
................................
Net increase in net assets
resulting from operations 114,591
................................
UNIT TRANSACTIONS:
Purchases 305,467
................................
Net transfers 1,086,533
................................
Surrenders for benefit payments
and fees (46,507)
................................
Net loan activity --
................................
Cost of insurance (37,787)
................................
Net increase in net assets
resulting from unit
transactions 1,307,706
................................
Net increase in net assets 1,422,297
................................
NET ASSETS:
Beginning of period 388,706
------------------------------------------------------------------------------------------------------------
END OF PERIOD $1,811,003
------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-7
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Bond Fund Stock Fund Money Market Advisers Capital Mortgage Index Fund
December 31, 1998 Sub-Account Sub-Account Fund Fund Appreciation Securities Sub-Account
Sub-Account Sub-Account Fund Fund
Sub-Account Sub-Account
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 106,052 $ 38,074 $ 178,529 $ 63,199 $ 17,887 $ 2,575 $ 79,420
............................................................................................................................
Capital gains income -- 18,418 -- 11,531 30,576 -- 12,992
............................................................................................................................
Net realized gain (loss) on
security transactions 746 (2,645) -- 1,768 (3,241) (114) 14,698
............................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (16,930) 557,352 -- 224,740 308,545 147 1,617,496
............................................................................................................................
Net increase in net assets
resulting from operations 89,868 611,199 178,529 301,238 353,767 2,608 1,724,606
............................................................................................................................
UNIT TRANSACTIONS:
Purchases 219,212 486,207 44,552,053 332,157 483,397 7,687 443,474
............................................................................................................................
Net transfers 1,873,633 4,031,316 (32,394,672) 2,418,661 2,506,371 (37,994) 8,055,206
............................................................................................................................
Surrenders for benefit payments
and fees (22,489) (93,425) (423,409) (40,763) (79,406) (1,565) (110,057)
............................................................................................................................
Net loan activity (63,707) (57) (6,910) (23,103) -- -- --
............................................................................................................................
Cost of insurance (39,274) (74,817) (362,173) (28,973) (51,821) (4,367) (60,585)
............................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 1,967,375 4,349,224 11,364,889 2,657,979 2,858,541 (36,239) 8,328,038
............................................................................................................................
Net increase (decrease) in net
assets 2,057,243 4,960,423 11,543,418 2,959,217 3,212,308 (33,631) 10,052,644
............................................................................................................................
NET ASSETS:
Beginning of period 246,949 232,148 1,438,332 298,191 259,778 77,118 375,230
-----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $2,304,192 $5,192,571 $ 12,981,750 $3,257,408 $3,472,086 $ 43,487 $10,427,874
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended International
December 31, 1998 Opportunities
Fund
Sub-Account
------------------------------------------------------------
OPERATIONS:
Net investment income $ 18,410
................................
Capital gains income 17,744
................................
Net realized gain (loss) on
security transactions 77
................................
Net unrealized (depreciation)
appreciation of investments
during the period 73,152
................................
Net increase in net assets
resulting from operations 109,383
................................
UNIT TRANSACTIONS:
Purchases 286,640
................................
Net transfers 1,011,184
................................
Surrenders for benefit payments
and fees (27,008)
................................
Net loan activity (17,916)
................................
Cost of insurance (39,292)
................................
Net increase (decrease) in net
assets resulting from unit
transactions 1,213,608
................................
Net increase (decrease) in net
assets 1,322,991
................................
NET ASSETS:
Beginning of period 147,247
------------------------------------------------------------------------
END OF PERIOD $1,470,238
------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-8
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Dividend Growth and International Small MidCap Fidelity Fidelity
December 31, 1998 and Growth Income Fund Advisers Company Fund Fund VIP Equity- VIP
Fund Sub-Account* Fund Sub-Account* Sub-Account* Income Overseas
Sub-Account Sub-Account* Portfolio Portfolio
Sub-Account Sub-Account
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 33,160 $ 138 $ -- $ -- $ -- $ 1,864 $ 540
...........................................................................................................................
Capital gains income 8,141 -- -- -- -- 6,635 1,592
...........................................................................................................................
Net realized gain (loss) on
security transactions 63 21 308 (148) 19 (1,856) 89
...........................................................................................................................
Net unrealized appreciation of
investments during the period 117,405 4,692 4,361 12,462 8,178 70,207 44,647
...........................................................................................................................
Net increase in net assets
resulting from operations. 158,769 4,851 4,669 12,314 8,197 76,850 46,868
...........................................................................................................................
UNIT TRANSACTIONS:
Purchases 250,584 1,000 1,000 10,618 1,000 213,483 152,670
...........................................................................................................................
Net transfers 1,838,934 37,221 75,134 62,509 80,559 1,066,683 770,437
...........................................................................................................................
Surrenders for benefit payments
and fees (49,049) (181) (356) (439) (361) (28,144) (16,660)
...........................................................................................................................
Net loan activity -- -- -- -- -- -- --
...........................................................................................................................
Cost of insurance (41,259) (73) (89) (195) (246) (15,372) (19,327)
...........................................................................................................................
Net increase in net assets
resulting from unit
transactions 1,999,210 37,967 75,689 72,493 80,952 1,236,650 887,120
...........................................................................................................................
Net increase in net assets 2,157,979 42,818 80,358 84,807 89,149 1,313,500 933,988
...........................................................................................................................
NET ASSETS:
Beginning of period 122,526 -- -- -- -- 58,996 21,472
----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $2,280,505 $ 42,818 $80,358 $ 84,807 $ 89,149 $1,372,496 $955,460
----------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended Fidelity
December 31, 1998 VIP II
Asset
Manager
Portfolio
Sub-Account
------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 5,839
................................
Capital gains income 17,517
................................
Net realized gain (loss) on
security transactions (16)
................................
Net unrealized appreciation of
investments during the period 15,814
................................
Net increase in net assets
resulting from operations. 39,154
................................
UNIT TRANSACTIONS:
Purchases 54,314
................................
Net transfers 134,602
................................
Surrenders for benefit payments
and fees (10,808)
................................
Net loan activity --
................................
Cost of insurance (5,833)
................................
Net increase in net assets
resulting from unit
transactions 172,275
................................
Net increase in net assets 211,429
................................
NET ASSETS:
Beginning of period 177,277
------------------------------------------------------------------------------------------------------------
END OF PERIOD $388,706
------------------------------------------------------------------------------------------------------------------------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-9
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Notes to Financial Statements
December 31, 1999
1. ORGANIZATION:
Separate Account VL II (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). Realized gains and losses on
the sales of securities are computed on the basis of identified cost of the fund
shares sold. Dividend and capital gains income is accrued as of the ex-dividend
date. Capital gains income represents 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, 1999.
C) UNIT TRANSACTIONS -- Unit transactions are executed based on the unit values
calculated at the close of the business day.
D) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no federal
income taxes are payable with respect to the operations of the Account.
E) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
A) 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 which the terms of the
contracts, are deducted through termination of units of interest from the
applicable contractholders' accounts.
SA-10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life and Annuity Insurance Company Separate Account VL II 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 VL II (Asia Pacific
Growth, Diversified Income, The George Putnam Fund of Boston, Global Asset
Allocation, Global Growth, Growth and Income, Health Sciences, High Yield,
Income, International Growth, International Growth and Income, International New
Opportunities, Investors, Money Market, New Opportunities, New Value, OTC &
Emerging Growth, Utilities Growth and Income, Vista, and Voyager sub-accounts),
(collectively, the Account) as of December 31, 1999, and the related statements
of operations and the statements of changes in net assets for the periods
presented. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1999, and the results of its operations and the changes in its net assets for
the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 11, 2000 ARTHUR ANDERSEN LLP
SA-11
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1999 Asia Pacific Diversified The George Global Asset Global Growth Health
Growth Income Putnam Fund Allocation Growth and Income Sciences
Sub-Account Sub-Account of Boston Sub-Account Sub-Account Sub-Account Sub-Account
Sub-Account
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments:
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT ASIA PACIFIC GROWTH
FUND
Shares 44,412
Cost $541,366
................................................................................................................................
Market Value: $767,881 $ -- $ -- $ -- $ -- $ -- $ --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT DIVERSIFIED INCOME
FUND
Shares 58,275
Cost $596,967
................................................................................................................................
Market Value: -- 578,674 -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT THE GEORGE PUTNAM
FUND OF BOSTON
Shares 25,881
Cost $265,835
................................................................................................................................
Market Value: -- -- 258,291 -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL ASSET
ALLOCATION FUND
Shares 31,976
Cost $581,099
................................................................................................................................
Market Value: -- -- -- 627,040 -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL GROWTH FUND
Shares 257,107
Cost $5,139,043
................................................................................................................................
Market Value: -- -- -- -- 7,839,192 -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GROWTH AND INCOME
FUND
Shares 360,961
Cost $10,069,295
................................................................................................................................
Market Value: -- -- -- -- -- 9,673,749 --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT HEALTH SCIENCES FUND
Shares 57,991
Cost $580,209
................................................................................................................................
Market Value: -- -- -- -- -- -- 608,902
---------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life
Insurance Company 30,001 -- 1 20 9,719 18,900 --
................................................................................................................................
Receivable from fund shares
sold -- -- -- -- -- -- --
................................................................................................................................
TOTAL ASSETS 797,882 578,674 258,292 627,060 7,848,911 9,692,649 608,902
................................................................................................................................
LIABILITIES
Due to Hartford Life Insurance
Company -- -- -- -- -- -- 9
................................................................................................................................
Payable for fund shares
purchased 30,000 -- -- -- 10,026 18,750 --
................................................................................................................................
TOTAL LIABILITIES 30,000 -- -- -- 10,026 18,750 9
---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $767,882 $578,674 $258,292 $627,060 $7,838,885 $9,673,899 $608,893
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-12
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1999 High Yield Income International International International Investors Money
Sub-Account Sub-Account Growth Growth and New Sub-Account Market
Sub- Income Opportunities Sub-Account
Account Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments:
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT HIGH YIELD FUND
Shares 336,333
Cost $3,838,275
................................................................................................................................
Market Value: $3,729,931 $ -- $ -- $ -- $ -- $ -- $ --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INCOME FUND
Shares 189,663
Cost $2,462,713
................................................................................................................................
Market Value: -- 2,374,582 -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL
GROWTH FUND
Shares 45,031
Cost $704,229
................................................................................................................................
Market Value: -- -- 974,929 -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL
GROWTH AND INCOME FUND
Shares 29,898
Cost $416,492
................................................................................................................................
Market Value: -- -- -- 455,947 -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL
NEW OPPORTUNITIES FUND
Shares 24,288
Cost $374,709
................................................................................................................................
Market Value: -- -- -- -- 566,149 -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INVESTORS FUND
Shares 127,372
Cost $1,615,839
................................................................................................................................
Market Value: -- -- -- -- -- 1,930,961 --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT MONEY MARKET
FUND
Shares 1,378,310
Cost $1,378,310
................................................................................................................................
Market Value: -- -- -- -- -- -- 1,378,310
---------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life
Insurance Company -- 4 5,393 -- 1 3,638 --
................................................................................................................................
Receivable from fund
shares sold 20 -- -- -- -- -- 280
................................................................................................................................
TOTAL ASSETS 3,729,951 2,374,586 980,322 455,947 566,150 1,934,599 1,378,590
................................................................................................................................
LIABILITIES
Due to Hartford Life
Insurance Company 10 -- -- 11 -- -- 221
................................................................................................................................
Payable for fund shares
purchased -- -- 5,398 -- -- 3,608 --
................................................................................................................................
TOTAL LIABILITIES 10 -- 5,398 11 -- 3,608 221
---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $3,729,941 $2,374,586 $974,924 $455,936 $566,150 $1,930,991 $1,378,369
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-13
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1999 New New OTC & Utilities Vista Voyager
Opportunities Value Emerging Growth Sub-Account Sub-Account
Sub-Account Sub-Account Growth and Income
Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments:
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT NEW OPPORTUNITIES FUND
Shares 132,675
Cost $3,677,974
................................................................................................................................
Market Value: $5,776,681 $ -- $ -- $ -- $ -- $ --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT NEW VALUE FUND
Shares 61,174
Cost $741,893
................................................................................................................................
Market Value: -- 725,528 -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT OTC & EMERGING GROWTH FUND
Shares 24,505
Cost $349,307
................................................................................................................................
Market Value: -- -- 558,460 -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT UTILITIES GROWTH & INCOME FUND
Shares 72,857
Cost $1,229,280
................................................................................................................................
Market Value: -- -- -- 1,236,384 -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT VISTA FUND
Shares 36,807
Cost $618,966
................................................................................................................................
Market Value: -- -- -- -- 761,162 --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT VOYAGER FUND
Shares 180,504
Cost $8,200,788
................................................................................................................................
Market Value: -- -- -- -- -- 11,958,371
---------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance Company 8,780 1 9,793 -- 2,686 17,930
................................................................................................................................
Receivable from fund shares sold -- -- -- 1,253 -- --
................................................................................................................................
TOTAL ASSETS 5,785,461 725,529 568,253 1,237,637 763,848 11,976,301
................................................................................................................................
LIABILITIES
Due to Hartford Life Insurance Company -- -- -- 1,255 -- --
................................................................................................................................
Payable for fund shares purchased 8,773 -- 9,810 -- 2,685 17,675
................................................................................................................................
TOTAL LIABILITIES 8,773 -- 9,810 1,255 2,685 17,675
---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE CONTRACT
LIABILITIES) $5,776,688 $725,529 $558,443 $1,236,382 $761,163 $11,958,626
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-14
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1999 Units Unit Contract
Owned by Price Liability
Participants
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------
Variable life contracts:
Asia Pacific Growth Fund 34,596 $22.195777 $ 767,882
....................................................................................................
Diversified Income Fund 44,505 13.002362 578,674
....................................................................................................
George Putnam Fund of Boston 24,450 10.564227 258,292
....................................................................................................
Global Asset Allocation Fund 26,963 23.255993 627,060
....................................................................................................
Global Growth Fund 201,512 38.900326 7,838,885
....................................................................................................
Growth and Income Fund 373,182 25.922728 9,673,899
....................................................................................................
Health Sciences Fund 56,377 10.800460 608,893
....................................................................................................
High Yield Fund 226,074 16.498765 3,729,941
....................................................................................................
Income Fund 164,884 14.401541 2,374,586
....................................................................................................
International Growth Fund 62,217 15.669625 974,924
....................................................................................................
International Growth and Income Fund 37,465 12.169641 455,936
....................................................................................................
International New Opportunities Fund 28,600 19.795791 566,150
....................................................................................................
Investors Fund 132,670 14.554810 1,930,991
....................................................................................................
Money Market Fund 1,014,621 1.358506 1,378,369
....................................................................................................
New Opportunities Fund 149,987 38.514515 5,776,688
....................................................................................................
New Value Fund 68,192 10.639520 725,529
....................................................................................................
OTC & Emerging Growth Fund 22,885 24.402281 558,443
....................................................................................................
Utilities Growth and Income Fund 57,523 21.493623 1,236,382
....................................................................................................
Vista Fund 46,906 16.227448 761,163
....................................................................................................
Voyager Fund 262,107 45.624980 11,958,626
....................................................................................................
GRAND TOTAL: $52,781,313
-----------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-15
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended Asia Pacific Diversified The George Global Asset Global Growth Health
December 31, 1999 Growth Income Putnam Allocation Growth and Income Sciences
Sub-Account Sub-Account Fund Sub-Account Sub-Account Sub-Account Sub-Account
of Boston
Sub-Account
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ -- $ 23,061 $ 5,950 $ 6,496 $ 10,324 $ 82,679 $ 519
................................................................................................................................
Capital gains income -- -- 319 18,235 214,984 412,587
................................................................................................................................
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
................................................................................................................................
Net realized gain (loss) on
security transactions 677 (296) 27 273 (8,555) (19,393) 849
................................................................................................................................
Net unrealized appreciation
(depreciation) of
investments during the
period 226,183 (11,756) (9,563) 29,249 2,479,211 (561,127) 23,736
................................................................................................................................
Net gain (loss) on
investments 226,860 (12,052) (9,536) 29,522 2,470,656 (580,520) 24,585
---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $226,860 $ 11,009 $(3,267) $54,253 $2,695,964 $ (85,254) $25,104
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-16
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended High Yield Income International International International Investors Money Market
December 31, 1999 Sub-Account Sub-Account* Growth Growth and New Sub-Account Sub-Account
Sub-Account Income Opportunities
Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 188,019 $ 57,563 $ -- $ -- $ 13 $ -- $ 36,485
................................................................................................................................
Capital gains income -- 17,173 -- -- -- -- --
................................................................................................................................
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
................................................................................................................................
Net realized (loss) gain on
security transactions (4,621) (1,612) 55,875 14,000 167,282 285 --
................................................................................................................................
Net unrealized
(depreciation)
appreciation of
investments during the
period (56,566) (103,792) 268,792 38,658 191,201 305,881 --
................................................................................................................................
Net (loss) gain on
investments (61,187) (105,404) 324,667 52,658 358,483 306,166 --
---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS $ 126,832 $ (30,668) $ 324,667 $ 52,658 $ 358,496 $ 306,166 $ 36,485
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Formerly Putnam U.S. Government and High Quality Bond Sub-Account, change
effective on April 9, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-17
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended New New OTC & Utilities Growth Vista Voyager
December 31, 1999 Opportunities Value Emerging and Income Sub-Account Sub-Account
Sub-Account Sub-Account Growth Sub-Account
Sub-Account
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ -- $ 2 $ -- $ 17,021 $ -- $ 3,744
.............................................................................................................................
Capital gains income 21,300 410 1,285 17,875 53,041 300,222
.............................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
.............................................................................................................................
Net realized (loss) gain on
security transactions (74,118) (42) 194 (5,144) 340 3,384
.............................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 1,903,919 (17,299) 201,676 (28,195) 141,175 3,398,379
.............................................................................................................................
Net gain (loss) on investments 1,829,801 (17,341) 201,870 (33,339) 141,515 3,401,763
------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $1,851,101 $(16,929) $203,155 $ 1,557 $194,556 $3,705,729
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-18
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended Asia Pacific Diversified The George Global Asset Global Growth and Health
December 31, 1999 Growth Income Putnam Fund Allocation Growth Income Sub- Sciences
Sub-Account Sub-Account of Boston Sub-Account Sub-Account Account Sub-Account
Sub-Account
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ -- $ 23,061 $ 5,950 $ 6,496 $ 10,324 $ 82,679 $ 519
...............................................................................................................................
Capital gains income -- -- 319 18,235 214,984 412,587 --
...............................................................................................................................
Net realized gain (loss)
on security
transactions 677 (296) 27 273 (8,555) (19,393) 849
...............................................................................................................................
Net unrealized
appreciation
(depreciation) of
investments during the
period 226,183 (11,756) (9,563) 29,249 2,479,211 (561,127) 23,736
...............................................................................................................................
Net increase (decrease)
in net assets resulting
from operations 226,860 11,009 (3,267) 54,253 2,695,964 (85,254) 25,104
...............................................................................................................................
UNIT TRANSACTIONS:
Purchases 11,544 51,671 61,898 127,321 927,414 1,931,571 45,376
...............................................................................................................................
Net transfers 534,285 325,503 121,681 154,876 2,582,332 5,598,828 530,101
...............................................................................................................................
Surrenders for benefit
payments and fees (8,845) (13,076) (7,613) (20,284) (113,107) (186,185) (16,861)
...............................................................................................................................
Net loan activity -- -- -- -- (42,601) 4,745 (3)
...............................................................................................................................
Cost of insurance (4,531) (20,872) (13,604) (21,379) (139,949) (391,660) (19,700)
...............................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 532,453 343,226 162,362 240,534 3,214,089 6,957,299 538,913
...............................................................................................................................
Total increase (decrease)
in net assets 759,313 354,235 159,095 294,787 5,910,053 6,872,045 564,017
...............................................................................................................................
NET ASSETS:
Beginning of period 8,569 224,439 99,197 332,273 1,928,832 2,801,854 44,876
--------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $767,882 $578,674 $258,292 $627,060 $7,838,885 $9,673,899 $608,893
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-19
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended High Yield Income International International International Investors Money
December 31, 1999 Sub-Account Sub- Growth Growth and New Sub-Account Market
Account* Sub-Account Income Opportunities Sub-Account
Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 188,019 $ 57,563 $ -- $ -- $ 13 $ -- $ 36,485
..............................................................................................................................
Capital gains income -- 17,173 -- -- -- -- --
..............................................................................................................................
Net realized gain (loss) on
security transactions (4,621) (1,612) 55,875 14,000 167,282 285 --
..............................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (56,566) (103,792) 268,792 38,658 191,201 305,881 --
..............................................................................................................................
Net increase (decrease) in
net assets resulting from
operations 126,832 (30,668) 324,667 52,658 358,496 306,166 36,485
..............................................................................................................................
UNIT TRANSACTIONS:
Purchases 757,124 368,161 97,192 52,504 14,025 172,801 185,196
..............................................................................................................................
Net transfers 2,282,146 1,315,129 588,502 357,272 209,334 1,432,571 1,058,352
..............................................................................................................................
Surrenders for benefit
payments and fees (63,031) (40,709) (13,235) (12,129) (7,540) (30,687) (18,664)
..............................................................................................................................
Net loan activity (31,040) -- (4) -- -- --
..............................................................................................................................
Cost of insurance (93,855) (50,346) (42,836) (16,228) (11,827) (44,912) (24,680)
..............................................................................................................................
Net increase (decrease) in
net assets resulting from
unit transactions 2,851,344 1,592,235 629,619 381,419 203,992 1,529,773 1,200,204
..............................................................................................................................
Total increase (decrease) in
net assets 2,978,176 1,561,567 954,286 434,077 562,488 1,835,939 1,236,689
..............................................................................................................................
NET ASSETS:
Beginning of period 751,765 813,019 20,638 21,859 3,662 95,052 141,680
-------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $3,729,941 $2,374,586 $ 974,924 $ 455,936 $ 566,150 $1,930,991 $1,378,369
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Formerly Putnam U.S. Government and High Quality Bond Sub-Account, change
effective on April 9, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-20
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended New New OTC & Utilities Vista Voyager
December 31, 1999 Opportunities Value Emerging Growth Sub-Account Sub-Account
Sub-Account Sub-Account Growth and Income
Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ -- $ 2 $ -- $ 17,021 $ -- $ 3,744
......................................................................................................................
Capital gains income 21,300 410 1,285 17,875 53,041 300,222
......................................................................................................................
Net realized gain (loss) on
security transactions (74,118) (42) 194 (5,144) 340 3,384
......................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 1,903,919 (17,299) 201,676 (28,195) 141,175 3,398,379
......................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 1,851,101 (16,929) 203,155 1,557 194,556 3,705,729
......................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,084,027 55,882 35,239 211,762 45,420 1,775,053
......................................................................................................................
Net transfers 1,897,800 705,264 314,874 658,887 532,694 4,254,791
......................................................................................................................
Surrenders for benefit payments
and fees (129,321) (10,254) (8,673) (34,570) (11,139) (237,711)
......................................................................................................................
Net loan activity (5,580) (3) (9) -- (4) (8,610)
......................................................................................................................
Cost of insurance (145,610) (17,973) (13,596) (43,706) (7,815) (244,692)
......................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 2,701,316 732,916 327,835 792,373 559,156 5,538,831
......................................................................................................................
Total increase (decrease) in net
assets 4,552,417 715,987 530,990 793,930 753,712 9,244,560
......................................................................................................................
NET ASSETS
Beginning of period 1,224,271 9,542 27,453 442,452 7,451 2,714,066
-----------------------------------------------------------------------------------------------------------------------
END OF PERIOD $5,776,688 $725,529 $558,443 $1,236,382 $761,163 $11,958,626
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-21
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended Asia Pacific Diversified The George Global Asset Global Growth Health
December 31, 1998 Growth Income Putnam Fund Allocation Growth and Income Sciences
Sub-Account* Sub-Account of Boston Sub-Account Sub-Account Sub-Account Sub-Account*
Sub-Account*
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ -- $ 3,629 $ 778 $ 2,857 $ 10,284 $ 6,912 $ 38
...............................................................................................................................
Capital gains income -- 1,541 -- 12,271 51,418 45,119 --
...............................................................................................................................
Net realized gain (loss)
on security
transactions 1 21 2 16 2,284 (64) (1)
...............................................................................................................................
Net unrealized
appreciation
(depreciation) of
investments during the
period 331 (6,773) 2,018 15,297 222,508 157,616 4,957
...............................................................................................................................
Net increase (decrease)
in net assets resulting
from operations 332 (1,582) 2,798 30,441 286,494 209,583 4,994
...............................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,000 18,359 1,018 15,068 322,831 341,341 1,000
...............................................................................................................................
Net transfers 7,366 130,020 95,712 264,595 1,095,109 2,215,815 39,704
...............................................................................................................................
Surrenders for benefit
payments and fees (106) (3,807) 42 (10,473) (47,555) (85,000) (308)
...............................................................................................................................
Cost of insurance (23) (3,546) (373) (6,166) (30,391) (35,272) (514)
...............................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 8,237 141,026 96,399 263,024 1,339,994 2,436,884 39,882
...............................................................................................................................
Total increase (decrease)
in net assets 8,569 139,444 99,197 293,465 1,626,488 2,646,467 44,876
...............................................................................................................................
NET ASSETS
Beginning of period -- 84,995 -- 38,808 302,344 155,387 --
--------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $8,569 $224,439 $99,197 $332,273 $1,928,832 $2,801,854 $44,876
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*From inception, August 3, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-22
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended High Yield Income International International International Investors Money
December 31, 1998 Sub-Account Sub-Account** Growth Growth and New Sub-Account* Market
Sub-Account* Income Opportunities Sub-Account
Sub-Account* Sub-Account*
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 10,447 $ 10,911 $ 66 $ 206 $ -- $ 112 $ 1,123
...............................................................................................................................
Capital gains income 1,639 284 -- 496 -- -- --
...............................................................................................................................
Net realized gain (loss)
on security
transactions 5,348 (1,150) 11 8 5 14 --
...............................................................................................................................
Net unrealized
appreciation
(depreciation) of
investments during the
period (52,560) 12,055 1,909 796 239 9,241 --
...............................................................................................................................
Net increase (decrease)
in net assets resulting
from operations (35,126) 22,100 1,986 1,506 244 9,367 1,123
...............................................................................................................................
UNIT TRANSACTIONS:
Purchases 295,001 11,794 1,018 5,809 1,000 7,115 49,306
...............................................................................................................................
Net transfers 484,563 574,461 18,763 14,788 2,548 79,363 88,070
...............................................................................................................................
Surrenders for benefit
payments and fees (33,428) (10,223) (618) (143) (104) (437) (3,369)
...............................................................................................................................
Cost of insurance (6,247) (8,204) (511) (101) (26) (356) (1,780)
...............................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 739,889 567,828 18,652 20,353 3,418 85,685 132,227
...............................................................................................................................
Total increase (decrease)
in net assets 704,763 589,928 20,638 21,859 3,662 95,052 133,350
...............................................................................................................................
NET ASSETS
Beginning of period 47,002 223,091 -- -- -- -- 8,330
--------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $ 751,765 $ 813,019 $ 20,638 $ 21,859 $ 3,662 $ 95,052 $ 141,680
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*From inception, August 3, 1998, to December 31, 1998.
**Formerly Putnam U.S. Government and High Quality Bond Sub-Account, change
effective on April 9, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-23
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended New New OTC & Utilities Vista Voyager
December 31, 1998 Opportunities Value Emerging Growth Sub- Sub-Account
Sub-Account Sub-Account* Growth and Income Account*
Sub- Sub-Account
Account*
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ -- $ 98 $ 10 $ 1,849 $ -- $ 896
.......................................................................................................................
Capital gains income 4,296 19 -- 3,187 -- 21,866
.......................................................................................................................
Net realized gain (loss) on
security transactions (21,117) 15 21 58 11 (5,975)
.......................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 190,762 934 7,477 31,421 1,020 350,909
.......................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 173,941 1,066 7,508 36,515 1,031 367,696
.......................................................................................................................
UNIT TRANSACTIONS:
Purchases 258,118 1,525 3,676 12,990 1,000 364,335
.......................................................................................................................
Net transfers 690,830 7,543 17,238 379,093 5,651 1,952,698
.......................................................................................................................
Surrenders for benefit payments
and fees (36,267) (191) (314) (5,423) (223) (51,533)
.......................................................................................................................
Cost of insurance (34,620) (401) (655) (6,554) (8) (28,004)
.......................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 878,061 8,476 19,945 380,106 6,420 2,237,496
.......................................................................................................................
Total increase (decrease) in net
assets 1,052,002 9,542 27,453 416,621 7,451 2,605,192
.......................................................................................................................
NET ASSETS:
Beginning of period 172,269 -- -- 25,831 -- 108,874
------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $1,224,271 $9,542 $27,453 $442,452 $7,451 $2,714,066
------------------------------------------------------------------------------------------------------------------------
</TABLE>
*From inception, August 3, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-24
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1. ORGANIZATION:
Separate Account VL II (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
policyowners of the Company in the various mutual funds (the Funds) as directed
by the policyowners.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the Account,
which are in accordance with generally accepted accounting principles in the
investment company industry:
A) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade date
(date the order to buy or sell is executed). Realized gains and losses on the
sales of securities are computed on the basis of identified cost of the fund
shares sold. Dividend and capital gains income is accrued as of the ex-dividend
date. Capital gains income represents dividends from the Funds which are
characterized as capital gains under tax regulations.
B) SECURITY VALUATION -- The investments in shares of the Funds are valued at
the closing net asset value per share as determined by the appropriate Fund as
of December 31, 1999.
C) UNIT TRANSACTIONS -- Unit transactions are executed based on the unit values
calculated at the close of the business day. All unit transactions are executed
at fair value.
D) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and are
taxed with, the total operations of the Company, which is taxed as an insurance
company under the Internal Revenue Code. Under current law, no federal income
taxes are payable with respect to the operations of the Account.
E) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
A) COST OF INSURANCE -- In accordance with terms of the policies, the Company
assesses deductions for costs of insurance charges 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 life
policies, provides the mortality and expense undertakings and, with respect to
the Account, receives a maximum annual fee of 0.80% of the Account's average
daily net assets. These charges are reflected in surrenders for benefit payments
and fees on the accompanying statements of changes in net assets.
C) ADMINISTRATIVE 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 services and
varies based on the face amount of the underlying policy, among other factors.
These charges are reflected in surrenders for benefit payments and fees 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 policyowners' accounts,
in accordance with the terms of the policies. These charges are reflected in
surrenders for benefit payments and fees on the accompanying statements of
changes in net assets.
SA-25
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
BALANCE SHEETS
(STATUTORY BASIS)
(IN THOUSANDS)
(UNAUDITED)
--------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
<S> <C> <C>
-----------------------------------------------------------------------------------
<CAPTION>
2000 1999
-----------------------------------------------------------------------------------
<S> <C> <C>
<CAPTION>
(UNAUDITED)
ASSETS
<S> <C> <C>
Bonds $ 1,226,915 $ 1,465,815
Common stocks 38,701 42,430
Mortgage loans 34,380 63,784
Policy loans 75,857 59,429
Cash and short-term investments 213,302 267,579
-----------------------------------------------------------------------------------
Other invested assets 18,836 2,892
-----------------------------------------------------------------------------------
Total cash and invested assets 1,607,991 1,901,929
Investment income due and accrued 20,344 21,069
Other assets 41,486 39,576
Separate account assets 47,812,204 44,865,042
-----------------------------------------------------------------------------------
TOTAL ASSETS $49,482,025 $46,827,616
-----------------------------------------------------------------------------------
LIABILITIES
Aggregate reserves for future benefits $ 615,263 $ 591,621
Policy and contract claim liabilities 11,835 7,677
Liability for premium and other deposit funds 1,583,921 1,969,262
Asset valuation reserve 3,647 4,935
Payable to affiliates 22,829 14,084
Accrued expense allowances and other amounts due
from separate account (1,392,483) (1,377,927)
Remittances and items not allocated 135,641 111,582
Other liabilities 152,799 118,464
Separate account liabilities 47,812,204 44,865,042
-----------------------------------------------------------------------------------
TOTAL LIABILITIES 48,945,656 46,304,740
-----------------------------------------------------------------------------------
CAPITAL AND SURPLUS
Common stock 2,500 2,500
Gross paid-in and contributed surplus 226,043 226,043
Unassigned funds 307,826 294,333
-----------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS 536,369 522,876
-----------------------------------------------------------------------------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $49,482,025 $46,827,616
-----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-1
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(STATUTORY BASIS)
(IN THOUSANDS)
(UNAUDITED)
--------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
<S> <C> <C>
----------------------------------------------------------------------------
<CAPTION>
2000 1999
----------------------------------------------------------------------------
<S> <C> <C>
REVENUES
Premiums and annuity considerations $ 564,487 $ 407,330
Annuity and other fund deposits 3,213,811 2,745,707
Net investment income 82,766 92,321
Commissions and expense allowances on
reinsurance ceded 96,524 243,448
Reserve adjustment on reinsurance ceded 1,022,716 702,323
Fee income 618,388 455,917
Other revenues 3,847 7,887
----------------------------------------------------------------------------
TOTAL REVENUES 5,602,539 4,654,933
----------------------------------------------------------------------------
BENEFITS AND EXPENSES
Death and annuity benefits 42,004 34,403
Disability and other benefits 4,228 4,583
Surrenders and other fund withdrawals 2,654,640 858,280
Commissions 363,369 353,077
Increase (Decrease) in aggregate reserves for
future benefits 23,431 (650)
(Decrease) Increase in liability for premium and
other deposit funds (384,393) 2,232
General insurance expenses 182,679 115,771
Net transfers to separate accounts 2,597,386 3,231,911
Other expenses 22,881 16,734
----------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 5,506,225 4,616,341
----------------------------------------------------------------------------
NET GAIN FROM OPERATIONS
Before federal income tax expense 96,314 38,592
Federal income tax expense 71,591 13,144
----------------------------------------------------------------------------
NET GAIN FROM OPERATIONS 24,723 25,448
Net realized capital losses, after tax (514) (36,258)
----------------------------------------------------------------------------
NET INCOME (LOSS) $ 24,209 $ (10,810)
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-2
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
(STATUTORY BASIS)
(IN THOUSANDS)
(UNAUDITED)
--------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
<S> <C> <C>
----------------------------------------------------------------------------
<CAPTION>
2000 1999
----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK
Beginning and end of year $ 2,500 $ 2,500
----------------------------------------------------------------------------
GROSS PAID-IN AND CONTRIBUTED SURPLUS
Beginning and end of year $226,043 $226,043
----------------------------------------------------------------------------
UNASSIGNED FUNDS
Balance, beginning of year $294,333 $247,969
Net income (loss) 24,209 (10,810)
Change in net unrealized capital gains (losses)
on common stocks and other invested assets (3,702) 1,489
Change in asset valuation reserve 1,288 18,079
Change in non-admitted assets (3,126) 2,773
Credit on reinsurance ceded (5,176) (2,716)
----------------------------------------------------------------------------
Balance, end of year $307,826 $256,784
----------------------------------------------------------------------------
CAPITAL AND SURPLUS
End of year $536,369 $485,327
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-3
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(STATUTORY BASIS)
(IN THOUSANDS)
(UNAUDITED)
--------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
<S> <C> <C>
----------------------------------------------------------------------------
<CAPTION>
2000 1999
----------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Premiums and annuity considerations $3,776,739 $3,152,996
Investment income 83,130 93,174
Fee income 618,388 455,917
Other income 1,114,139 949,553
----------------------------------------------------------------------------
Total income 5,592,396 4,651,640
----------------------------------------------------------------------------
Benefits paid 2,697,533 896,755
Federal income taxes (recoveries) payments (3,299) 24,000
Net transfers to separate accounts 2,597,386 3,231,911
Other expenses 585,737 552,191
----------------------------------------------------------------------------
Total benefits and expenses 5,877,357 4,704,857
----------------------------------------------------------------------------
NET CASH USED BY OPERATING ACTIVITIES (284,961) (53,217)
----------------------------------------------------------------------------
INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD
Bonds 508,750 634,564
Common stocks 614 754
Mortgage loans 33,312 30,292
Other -- 1,351
----------------------------------------------------------------------------
NET INVESTMENT PROCEEDS 542,676 666,961
----------------------------------------------------------------------------
COST OF INVESTMENTS ACQUIRED
Bonds 274,569 727,958
Common stocks 468 166
Mortgage loans 3,681 56,013
Other 32,356 39,099
----------------------------------------------------------------------------
TOTAL INVESTMENTS ACQUIRED 311,074 823,236
----------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) INVESTING
ACTIVITIES 231,602 (156,275)
----------------------------------------------------------------------------
FINANCING AND MISCELLANEOUS ACTIVITIES
Net other cash used (918) (24,952)
----------------------------------------------------------------------------
NET CASH USED FOR FINANCING AND MISCELLANEOUS
ACTIVITIES (918) (24,952)
----------------------------------------------------------------------------
Net change in cash and short-term investments (54,277) (234,444)
Cash and short-term investments, beginning of
period 267,579 469,955
----------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 213,302 $ 235,511
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(STATUTORY BASIS)
(DOLLAR AMOUNTS IN MILLIONS UNLESS OTHERWISE STATED)
(Unaudited)
--------------------------------------------------------------------------------
1. BASIS OF PRESENTATION:
The accompanying unaudited financial statements of Hartford Life and Annuity
Insurance Company (the Company) have been prepared in conformity with statutory
accounting practices prescribed by the National Association of Insurance
Commissioners and the Connecticut Department of Insurance. Certain information
and note disclosures which are normally included in financial statements
prepared in accordance with statutory accounting practices have been condensed
or omitted, although the Company believes that the disclosures made are adequate
to make the information presented not misleading. In the opinion of management,
these statements include all adjustments which were normal recurring adjustments
necessary to present fairly the financial position, results of operations and
cash flows for the periods presented in accordance with statutory accounting
practices. For a description of significant accounting policies, see Note 1 of
Notes to Financial Statements in Hartford Life and Annuity Insurance Company's
1999 statutory basis financial statements.
Certain reclassifications have been made to prior year financial information to
conform to the current year classification of transactions and accounts.
2. INVESTMENTS:
In October 1998, the Company became aware of allegations of improper activities
at Commercial Financial Services Inc. (CFS), a securitizer and servicer of asset
backed securities. On December 11, 1998, CFS filed for protection under Chapter
11 of the Bankruptcy Code and, in June 1999, CFS ceased operations. In August
1999, the Company sold all of its CFS holdings recognizing a $36, after tax,
realized capital loss.
F-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------------------
To the Board of Directors of
Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory balance sheets of Hartford Life and
Annuity Insurance Company (a Connecticut Corporation and wholly owned subsidiary
of Hartford Life Insurance Company) (the Company) as of December 31, 1999 and
1998, and the related statutory statements of operations, changes in capital and
surplus, and cash flows for each of the three years in the period ended December
31, 1999. These statutory financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statutory financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 2 of notes to statutory financial
statements. When financial statements are presented for purposes other than for
filing with a regulatory agency, auditing standards generally accepted in the
United States require that an auditors' report on them state whether they are
presented in conformity with accounting principles generally accepted in the
United States. The accounting practices used by the Company vary from accounting
principles generally accepted in the United States as explained and quantified
in Note 2.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the statutory financial statements referred to above do not present
fairly, in conformity with accounting principles generally accepted in the
United States, the financial position of the Company as of December 31, 1999 and
1998, or the results of its operations or its cash flows for each of the three
years in the period ended December 31, 1999.
In our opinion, the statutory financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with statutory accounting practices as described in Note 2.
Hartford, Connecticut
January 31, 2000 ARTHUR ANDERSEN LLP
F-1
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
BALANCE SHEETS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
<S> <C> <C>
------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998
------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Bonds $ 1,465,815 $ 1,453,792
Common stocks 42,430 40,650
Mortgage loans 63,784 59,548
Policy loans 59,429 47,212
Cash and short-term investments 267,579 469,955
------------------------------------------------------------------------------------------------
Other invested assets 2,892 2,188
------------------------------------------------------------------------------------------------
Total cash and invested assets 1,901,929 2,073,345
Investment income due and accrued 21,069 20,126
Other assets 39,576 45,691
Separate account assets 44,865,042 32,876,278
------------------------------------------------------------------------------------------------
TOTAL ASSETS $46,827,616 $35,015,440
------------------------------------------------------------------------------------------------
LIABILITIES
Aggregate reserves for future benefits $ 591,621 $ 579,140
Policy and contract claim liabilities 7,677 5,667
Liability for premium and other deposit funds 1,969,262 2,011,672
Asset valuation reserve 4,935 21,782
Payable to affiliates 14,084 19,271
Accrued expense allowances and other amounts due from
separate accounts (1,377,927) (1,173,513)
Remittances and items not allocated 111,582 87,449
Other liabilities 118,464 111,182
Separate account liabilities 44,865,042 32,876,278
------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 46,304,740 34,538,928
------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS
Common stock 2,500 2,500
Gross paid-in and contributed surplus 226,043 226,043
Unassigned funds 294,333 247,969
------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS 522,876 476,512
------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $46,827,616 $35,015,440
------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-2
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums and annuity considerations $ 621,789 $ 469,343 $ 296,645
Annuity and other fund deposits 2,991,363 2,051,251 1,981,246
Net investment income 122,322 129,982 102,285
Commissions and expense allowances on reinsurance ceded 379,905 444,241 396,921
Reserve adjustment on reinsurance ceded 1,411,342 3,185,590 3,672,076
Fee income 647,565 448,260 290,675
Other revenues 842 9,930 (2,043)
-------------------------------------------------------------------------------------------------------
TOTAL REVENUES 6,175,128 6,738,597 6,737,805
-------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Death and annuity benefits 47,372 43,152 65,961
Disability and other benefits 6,270 6,352 7,532
Surrenders and other fund withdrawals 1,250,813 739,663 454,417
Commissions 467,338 435,994 470,334
Increase (Decrease) in aggregate reserves for future
benefits 12,481 (10,711) 33,213
(Decrease) Increase in liability for premium and other
deposit funds (47,852) 218,642 640,840
General insurance expenses 192,196 190,979 77,237
Net transfers to separate accounts 4,160,501 4,956,007 4,914,980
Other expenses 35,385 22,091 15,671
-------------------------------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 6,124,504 6,602,169 6,680,185
-------------------------------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS
Before federal income tax (benefit) expense 50,624 136,428 57,620
Federal income tax (benefit) expense (10,231) 35,887 (14,878)
-------------------------------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS 60,855 100,541 72,498
Net realized capital (losses) gains, after tax (36,428) 2,085 1,544
-------------------------------------------------------------------------------------------------------
NET INCOME $ 24,427 $ 102,626 $ 74,042
-------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-3
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Beginning and end of year $ 2,500 $ 2,500 $ 2,500
-------------------------------------------------------------------------------------------------
GROSS PAID-IN AND CONTRIBUTED SURPLUS
Beginning and end of year 226,043 226,043 226,043
-------------------------------------------------------------------------------------------------
UNASSIGNED FUNDS
Balance, beginning of year 247,969 143,257 74,570
Net income 24,427 102,626 74,042
Change in net unrealized capital gains on common stocks
and other invested assets 2,258 1,688 2,186
Change in asset valuation reserve 16,847 (8,112) (6,228)
Change in non-admitted assets 6,557 (1,277) (1,313)
Credit on reinsurance ceded (3,725) 9,787 --
-------------------------------------------------------------------------------------------------
Balance, end of year 294,333 247,969 143,257
-------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS,
End of year $522,876 $476,512 $371,800
-------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-4
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums and annuity considerations $3,613,217 $2,520,655 $2,277,874
Net investment income 122,998 127,425 101,991
Fee income 647,565 448,260 290,675
Other income 1,799,323 3,644,704 4,091,043
-------------------------------------------------------------------------------------------------------
Total income 6,183,103 6,741,044 6,761,583
-------------------------------------------------------------------------------------------------------
Benefits paid 1,303,801 790,051 529,733
Federal income tax (recoveries) payments (8,815) 25,780 (14,499)
Net transfers to separate accounts 4,364,914 5,222,144 5,199,354
Other expenses 669,525 626,240 547,692
-------------------------------------------------------------------------------------------------------
Total benefits and expenses 6,329,425 6,664,215 6,262,280
-------------------------------------------------------------------------------------------------------
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES (146,322) 76,829 499,303
-------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD
Bonds 753,358 633,926 614,413
Common stocks 939 34,010 11,481
Mortgage loans 53,704 85,275 --
Other 1,490 19,990 152
-------------------------------------------------------------------------------------------------------
NET INVESTMENT PROCEEDS 809,491 773,201 626,046
-------------------------------------------------------------------------------------------------------
COST OF INVESTMENTS ACQUIRED
Bonds 804,947 586,913 848,267
Common stocks 464 7,012 28,302
Mortgage loans 57,665 59,702 85,103
Other 14,211 11,847 26,227
-------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS ACQUIRED 877,287 665,474 987,899
-------------------------------------------------------------------------------------------------------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES $ (67,796) $ 107,727 $ (361,853)
-------------------------------------------------------------------------------------------------------
FINANCING AND MISCELLANEOUS ACTIVITIES
Net other cash provided (used) 11,742 (24,033) (4,848)
-------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) FINANCING
AND MISCELLANEOUS ACTIVITIES 11,742 (24,033) (4,848)
-------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and short-term investments (202,376) 160,523 132,602
Cash and short-term investments, beginning of year 469,955 309,432 176,830
-------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF YEAR $ 267,579 $ 469,955 $ 309,432
-------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(STATUTORY BASIS)
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
--------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS:
Hartford Life and Annuity Insurance Company (the "Company") is a wholly owned
subsidiary of Hartford Life Insurance Company ("HLIC"), which is an indirect
subsidiary of Hartford Life, Inc. ("HLI"). HLI is indirectly majority owned by
The Hartford Financial Services Group, Inc. ("The Hartford"). On February 10,
1997, HLI filed a registration statement, as amended, with the Securities and
Exchange Commission relating to the initial public offering of HLI Class A
Common Stock (the "Offering"). Pursuant to the Offering on May 22, 1997, HLI
sold to the public 26 million shares, representing approximately 18.6% of the
equity ownership of HLI.
In 1998, the Company changed its name to Hartford Life and Annuity Insurance
Company from ITT Hartford Life and Annuity Insurance Company.
The Company offers a complete line of fixed and variable annuities, as well as
variable, universal and traditional individual life insurance.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying statutory basis financial statements of the Company were
prepared in conformity with statutory accounting practices prescribed or
permitted by the National Association of Insurance Commissioners ("NAIC") and
the State of Connecticut Department of Insurance. Certain reclassifications have
been made to prior year financial information to conform to the current year
presentation.
Current prescribed statutory accounting practices include accounting
publications of the NAIC, as well as state laws, regulations and general
administrative rules. Permitted statutory accounting practices encompass
accounting practices approved by state insurance departments. The Company does
not follow any permitted statutory accounting practices that have a material
effect on statutory surplus, statutory net income or risk-based capital.
The preparation of financial statements in conformity with statutory accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reported periods. Actual results could
differ from those estimates. The most significant estimates include those used
in determining the liability for aggregate reserves for future benefits and the
liability for premium and other deposit funds. Although some variability is
inherent in these estimates, management believes the amounts provided are
adequate.
STATUTORY ACCOUNTING PRACTICES VERSUS GAAP
Statutory accounting practices and generally accepted accounting principles
("GAAP") differ in certain significant respects. These differences principally
involve:
(1) treatment of policy acquisition costs (commissions, underwriting and selling
expenses, etc.) which are charged to expense when incurred for statutory
purposes rather than on a pro-rata basis over the expected life and gross
profit stream of the policy for GAAP purposes;
(2) recognition of premium revenues, which for statutory purposes are generally
recorded as collected or when due during the premium paying period of the
contract and which for GAAP purposes, for universal life policies and
investment products, generally only consist of charges assessed to policy
account balances for cost of insurance, policy administration and
surrenders. When policy charges received relate to coverage or services to
be provided in the future, the charges are recognized as revenue on a
pro-rata basis over the expected life and gross profit stream of the policy.
Also, for GAAP purposes, premiums for traditional life insurance policies
are recognized as revenues when they are due from policyholders;
(3) development of liabilities for future policy benefits, which for statutory
purposes predominantly use interest rate and mortality assumptions
prescribed by the NAIC which may vary considerably from interest and
mortality assumptions used under GAAP;
(4) providing for income taxes based on current taxable income only for
statutory purposes, rather than establishing additional assets or
liabilities for deferred Federal income taxes to recognize the tax effect
related to reporting revenues and expenses in different periods for
financial reporting and tax return purposes or required under GAAP;
(5) excluding certain assets designated as non-admitted assets (e.g., negative
Interest Maintenance Reserve, and past due agents' balances) from the
balance sheet for statutory purposes by directly charging surplus;
(6) the calculation of post retirement benefits obligation which, for statutory
accounting, excludes non-vested employees whereas GAAP liabilities include a
provision for such employees; statutory and GAAP accounting permit either
immediate recognition of the liability or straight-line amortization of the
liability over a period not to exceed 20 years. For GAAP, The Hartford's
obligation was immediately recognized, whereas for statutory accounting, the
obligation is being recognized ratably over a 20 year period;
F-6
<PAGE>
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve) for statutory purposes; as well as the deferral and
amortization of realized gains and losses, caused by changes in interest
rates during the period the asset is held, into income over the remaining
life to maturity of the asset sold (Interest Maintenance Reserve) for
statutory purposes; whereas on a GAAP basis, no such formula reserve is
required and realized gains and losses are recognized in the period the
asset is sold;
(8) the reporting of reserves and benefits net of reinsurance ceded for
statutory purposes; whereas on a GAAP basis, reserves are reported gross of
reinsurance with reserve credits presented as recoverable assets;
(9) the reporting of fixed maturities at amortized cost for statutory purposes,
whereas GAAP requires that fixed maturities be classified as
"held-to-maturity," "available-for-sale" or "trading," based on the
Company's intentions with respect to the ultimate disposition of the
security and its ability to affect those intentions. The Company's bonds
were classified on a GAAP basis as available-for-sale and accordingly, those
investments and common stocks were reflected at fair value with the
corresponding impact included as a separate component of Stockholder's
Equity; as well as the change in the basis of the Company's other invested
assets, which consist primarily of limited partnership investments, which is
recognized as income under GAAP and as a change in surplus under statutory
accounting; and
(10) statutory accounting calculates separate account liabilities using
prescribed actuarial methodologies, which approximate the market value of
separate account assets less applicable surrender charges. The separate
account surplus generated by these reserving methods is recorded as an
amount due to or from the separate account on the statutory basis balance
sheet, with changes reflected in the statutory basis results of operations.
On a GAAP basis, separate account assets and liabilities are held at fair
value.
As of and for the years ended December 31, the significant differences between
Statutory and GAAP basis net income and capital and surplus for the Company are
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
----------------------------------------
GAAP Net Income $ 75,654 $ 74,525 $ 58,050
Deferral and amortization of policy
acquisition costs, net (272,171) (331,882) (345,657)
Change in unearned revenue reserve (64,915) 23,118 4,058
Deferred taxes 57,833 2,476 47,092
Separate account expense allowance 214,388 259,287 282,818
Asset impairments and write-downs (17,250) 17,250 --
Benefit reserve adjustment 11,491 5,360 24,666
Gain on commutation of reinsurance
(Note 4) -- 52,026 --
Prepaid reinsurance premium (3,524) -- --
Statutory voluntary reserve (6,286) -- --
Other, net 29,207 466 3,015
----------------------------------------
STATUTORY NET INCOME $ 24,427 $ 102,626 $ 74,042
----------------------------------------
GAAP Stockholder's Equity $ 676,428 $ 648,097 $ 570,469
Deferred policy acquisition costs (1,887,824) (1,615,653) (1,283,771)
Unearned revenue reserve 95,965 160,951 134,789
Deferred taxes 122,105 68,936 64,522
Separate account expense allowance 1,398,030 1,183,642 924,355
Asset impairments and write-downs -- 17,250 --
Unrealized losses (gains) on
investments 26,292 (24,955) (21,451)
Benefit reserve adjustment 81,111 69,233 16,378
Asset valuation reserve (4,935) (21,782) (13,670)
Adjustment relating to Lyndon
contribution (Note 4) -- -- (23,671)
Prepaid reinsurance premium (7,728) (4,204) --
Statutory voluntary reserve (6,286) -- --
Other, net 29,718 (5,003) 3,850
----------------------------------------
STATUTORY CAPITAL AND SURPLUS $ 522,876 $ 476,512 $ 371,800
----------------------------------------
</TABLE>
F-7
<PAGE>
AGGREGATE RESERVES FOR FUTURE BENEFITS AND LIABILITY FOR PREMIUM AND OTHER
DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits were
computed in accordance with applicable actuarial standards. Reserves for life
insurance policies are generally based on the 1958 and 1980 Commissioner's
Standard Ordinary Mortality Tables and various valuation rates ranging from 2.5%
to 6%. Accumulation and on-benefit annuity reserves are based principally on
individual annuity tables at various rates ranging from
2.5% to 8.75% and using the Commissioners Annuity Reserve Valuation Method
("CARVM").
The Company has established separate accounts to segregate the assets and
liabilities of certain life insurance and annuity contracts that must be
segregated from the Company's general assets under the terms of its contracts.
The assets consist primarily of marketable securities and are reported at market
value. Premiums, benefits and expenses of these contracts are reported in the
statutory basis statements of operations.
An analysis of Annuity Actuarial Reserves and Deposit Liabilities by Withdrawal
Characteristics as of December 31, 1999 (including general and separate account
liabilities) is as follows:
<TABLE>
<CAPTION>
% of
Amount Total
<S> <C> <C>
--------------------
Subject to discretionary withdrawal:
--------------------
With market value adjustment $ 4,564 0.0%
At book value less current surrender charge of 5% or more 1,427,302 3.2%
At market value 42,431,996 95.4%
--------------------
Total with adjustment or at market value 43,863,862 98.6%
At book value without adjustment (minimal or no charge or
adjustment): 573,583 1.3%
Not subject to discretionary withdrawal: 34,816 0.1%
--------------------
Total, gross 44,472,261 100.0%
Reinsurance ceded --
------------
Total, net $44,472,261
------------
</TABLE>
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds that are deemed
ineligible to be held at amortized cost by the NAIC Securities Valuation Office
("SVO") are carried at the appropriate SVO published value. When a reduction in
the value of a security is deemed to be unrecoverable, the decline in value is
reported as a realized loss and the carrying value is adjusted accordingly.
Short-term investments consist of money market funds and are stated at cost,
which approximates fair value. Common stocks are carried at fair value with the
current year change in the difference from cost reflected in surplus. Mortgage
loans, which are carried at cost and approximate fair value, include investments
in assets backed by mortgage loan pools. Other invested assets are generally
recorded at fair value.
The Asset Valuation Reserve ("AVR") is designed to provide a standardized
reserving process for realized and unrealized losses due to default and equity
risks associated with invested assets. The AVR balances were $4,935 and $21,782
as of December 31, 1999 and 1998, respectively. Additionally, the Interest
Maintenance Reserve ("IMR") captures net realized capital gains and losses, net
of applicable income taxes, resulting from changes in interest rates and
amortizes these gains or losses into income over the life of the bond or
mortgage sold. The IMR balance as of December 31, 1999 is an asset balance of
$981 and is reflected as a component of non-admitted assets in Unassigned Funds
in accordance with statutory accounting practices. The IMR balance as of
December 31, 1998 is a liability balance of $452 and is reflected as an other
liability. The net capital (losses) gains transferred to the IMR in 1999, 1998
and 1997 were $(1,255), $852 and $(719), respectively. The amount of income
(expense) amortized from the IMR in 1999, 1998 and 1997 included in the
Company's Statements of Operations, was $178, $(207), and $(85), respectively.
Realized capital gains and losses, net of taxes, not included in the IMR are
reported in the statutory basis statements of operations. Realized investment
gains and losses are determined on a specific identification basis.
CODIFICATION
The NAIC adopted the Codification of Statutory Accounting Principles in March
1998. The proposed effective date for this statutory accounting guidance is
January 1, 2001. It is expected that Connecticut, the Company's domiciliary
state, will adopt these accounting standards and, therefore, the Company will
make the necessary accounting and reporting changes required for implementation.
The Company has not yet determined the impact that these new accounting
standards will have on its statutory basis financial statements.
F-8
<PAGE>
3. INVESTMENTS:
(a) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
-----------------------------
Interest income from bonds and short-term investments $113,646 $123,370 $100,475
Interest income from policy loans 3,494 3,133 1,958
Interest and dividends from other investments 6,371 4,482 1,005
-----------------------------
Gross investment income 123,511 130,985 103,438
Less: investment expenses 1,189 1,003 1,153
-----------------------------
NET INVESTMENT INCOME $122,322 $129,982 $102,285
-----------------------------
</TABLE>
(b) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND
SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
-----------------------------
Gross unrealized capital gains $ 561 $ 10,905 $23,357
Gross unrealized capital losses (6,441) (833) (1,906)
-----------------------------
Net unrealized capital (losses) gains (5,880) 10,072 21,451
Balance, beginning of year 10,072 21,451 7,979
-----------------------------
CHANGE IN NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND
SHORT-TERM INVESTMENTS $(15,952) $(11,379) $13,472
-----------------------------
</TABLE>
(c) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON COMMON STOCKS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Gross unrealized capital gains $2,508 $ 2,204 $ 537
Gross unrealized capital losses (24) (1,871) (1,820)
--------------------------
Net unrealized capital gains (losses) 2,484 333 (1,283)
Balance, beginning of year 333 (1,283) (3,447)
--------------------------
CHANGE IN NET UNREALIZED CAPITAL GAINS ON COMMON STOCKS $2,151 $ 1,616 $ 2,164
--------------------------
</TABLE>
(d) COMPONENTS OF NET REALIZED CAPITAL (LOSSES) GAINS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Bonds and short-term investments $(37,959) $1,314 $ (120)
Common stocks 104 1,624 421
Other invested assets 172 (1) (307)
--------------------------
Realized capital (losses) gains (37,683) 2,937 (6)
Capital gains benefit -- -- (831)
--------------------------
Net realized capital (losses) gains (37,683) 2,937 825
Less: amounts transferred to the IMR (1,255) 852 (719)
--------------------------
NET REALIZED CAPITAL (LOSSES) GAINS $(36,428) $2,085 $1,544
--------------------------
</TABLE>
Sales and maturities of investments in bonds and short-term investments for the
years ended December 31, 1999, 1998 and 1997 resulted in proceeds of $1,367,027,
$1,354,563 and $1,435,820, gross realized capital gains of $1,106, $1,705, and
$964 and gross realized capital losses of $39,065, $391, and $1,084,
respectively, before transfers to the IMR. Sale of common stocks for the years
ended December 31, 1999, 1998 and 1997 resulted in proceeds of $939, $33,088,
and $10,168, gross realized capital gains of $115, $1,688, and $421 and gross
realized capital losses of $11, $64, and $0, respectively.
(e) DERIVATIVE INVESTMENTS
The Company had no significant derivative holdings as of December 31, 1999, 1998
or 1997.
(f) CONCENTRATION OF CREDIT RISK
Excluding U.S. government and government agency investments, the Company is not
exposed to any significant concentrations of credit risk in fixed maturities of
a single issuer greater than 10% of capital and surplus as of December 31, 1999.
F-9
<PAGE>
(g) BONDS, SHORT-TERM INVESTMENTS AND COMMON STOCKS
<TABLE>
<CAPTION>
1999
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
----------------------------------------------
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored $ 4,768 $ 1 $ (37) $ 4,732
-- Guaranteed and sponsored -- asset backed 170,746 -- -- 170,746
States, municipalities and political subdivisions 10,401 -- (48) 10,353
International governments 7,351 94 (15) 7,430
Public utilities 18,413 92 (73) 18,432
All other corporate -- excluding asset-backed 592,233 374 (6,194) 586,413
All other corporate -- asset-backed 539,688 -- -- 539,688
Short-term investments 228,105 -- -- 228,105
Certificates of deposit 5,158 -- (74) 5,084
Parents, subsidiaries and affiliates 117,057 -- -- 117,057
----------------------------------------------
TOTAL BONDS AND SHORT-TERM INVESTMENTS $1,693,920 $561 $(6,441) $1,688,040
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------
Common stock -- unaffiliated $ 4,562 $1,105 $ (24) $ 5,643
Common stock -- affiliated 35,384 1,403 -- 36,787
--------------------------------------------
TOTAL COMMON STOCKS $39,946 $2,508 $ (24) $42,430
--------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1998
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
----------------------------------------------
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored $ 4,982 $ 35 $ (2) $ 5,015
-- Guaranteed and sponsored -- asset-backed 75,615 -- -- 75,615
States, municipalities and political subdivisions 10,402 415 -- 10,817
International governments 7,466 568 -- 8,034
Public utilities 94,475 1,330 (39) 95,766
All other corporate -- excluding asset-backed 607,679 8,473 (792) 615,360
All other corporate -- asset-backed 505,900 -- -- 505,900
Short-term investments 343,783 -- -- 343,783
Certificates of deposit 130,216 84 -- 130,300
Parents, subsidiaries and affiliates 117,057 -- -- 117,057
----------------------------------------------
TOTAL BONDS AND SHORT-TERM INVESTMENTS $1,897,575 $10,905 $(833) $1,907,647
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------
Common stock -- unaffiliated $ 4,933 $ 290 $ (50) $ 5,173
Common stock -- affiliated 35,384 1,914 (1,821) 35,477
--------------------------------------------
TOTAL COMMON STOCKS $40,317 $2,204 $(1,871) $40,650
--------------------------------------------
</TABLE>
The amortized cost and estimated fair value of bonds and short-term investments
as of December 31, 1999 by estimated maturity year are shown below. Asset-backed
securities, including mortgage-backed securities and collaterialized mortgage
obligations, are distributed to maturity year based on the Company's estimates
of the rate of
F-10
<PAGE>
future prepayments of principal over the remaining lives of the securities.
Expected maturities differ from contractual maturities due to call or prepayment
provisions.
<TABLE>
<CAPTION>
Amortized Estimated
Maturity Cost Fair Value
<S> <C> <C>
--------------------------
One year or less $ 545,290 $ 543,397
Over one year through five years 692,881 690,476
Over five years through ten years 370,835 369,548
Over ten years 84,914 84,619
--------------------------
TOTAL $1,693,920 $1,688,040
--------------------------
</TABLE>
Bonds with a carrying value of $10,457 were on deposit as of December 31, 1999
with various regulatory authorities as required.
(h) FAIR VALUE OF FINANCIAL INSTRUMENTS-BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1999 1998
-------------------------- --------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
------------------------------------------------------
ASSETS
Bonds and short-term investments $1,694 $1,688 $1,898 $1,908
Common stocks 42 42 41 41
Policy loans 59 59 47 47
Mortgage loans 64 64 60 60
Other invested assets 3 3 2 2
LIABILITIES
Deposit funds and other benefits $2,051 $2,017 $2,078 $2,053
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments: fair value of bonds, short-term
investments, common stock, and other invested assets approximate those
quotations published by the NAIC; policy loans and mortgage loans carrying
amounts approximates fair value; and fair value of liabilities on deposit funds
and other benefits is determined by forecasting future cash flows and
discounting the forecasted cash flows at current market rates.
4. REINSURANCE:
The Company cedes insurance to other insurers in order to limit its maximum
losses. Such transfer does not relieve the Company of its primary liability to
the policyholder. Failure of reinsurers to honor their obligations could result
in losses to the Company. The Company reduces this risk by evaluating the
financial condition of reinsurers and monitoring for possible concentrations of
credit risk.
The Company cedes significant portions of its variable annuity business written
since 1994 to RGA Reinsurance Company ("RGA"). Certain core annuity products
were excluded from this reinsurance arrangement beginning in the second quarter
of 1999 and, as such, the amounts ceded to RGA have declined significantly.
In 1995, The Hartford was "spun-off" from ITT Industries, Inc. and became its
own, autonomous entity. In conjunction with this spin-off, the assets and
liabilities of Lyndon Insurance Company (Lyndon) were merged into the Company.
The statutory net assets contributed to the Company as a result of this
transaction were approximately $112 million and were reflected as an increase in
Gross Paid-In and Contributed Surplus at December 31, 1995. This amount was
approximately $41 million lower than the value of net assets contributed on a
GAAP basis.
The majority of the business written in Lyndon was assumed from an unaffiliated
insurer. In 1998, this unaffiliated insurer recaptured the inforce blocks of
business it had been ceding to the Company through Lyndon. In conjunction with
this commutation transaction, the Company transferred statutory basis reserves
of $26,404. Additionally, the Company received fair value consideration for the
bonds it transferred which exceeded the statutory statement value of these
assets by $25,622. As a result of this activity, the Company recognized a
pre-tax gain from this transaction of $52,026 in its 1998 Statements of
Operations.
There were no material reinsurance recoverables from reinsurers outstanding as
of and for the years ended, December 31, 1999 and 1998.
F-11
<PAGE>
The effect of reinsurance as of and for the years ended December 31, is
summarized as follows:
<TABLE>
<CAPTION>
1999 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 784,502 $ 53 $ (192,934) $ 591,621
Policy and Contract Claim
Liabilities $ 7,827 $ 203 $ (353) $ 7,677
Premium and Annuity Considerations $ 674,219 $ 1,261 $ (53,691) $ 621,789
Annuity and Other Fund Deposits $6,195,917 $ -- $(3,204,554) $2,991,363
Death, Annuity, Disability and
Other Benefits $ 65,251 $ 1,104 $ (12,713) $ 53,642
Surrenders $2,541,449 $ -- $(1,290,636) $1,250,813
</TABLE>
<TABLE>
<CAPTION>
1998 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 713,375 $ 50 $ (134,285) $ 579,140
Policy and Contract Claim
Liabilities $ 5,895 $ 85 $ (313) $ 5,667
Premium and Annuity Considerations $ 483,328 $24,954 $ (38,939) $ 469,343
Annuity and Other Fund Deposits $6,461,470 $ -- $(4,410,219) $2,051,251
Death, Annuity, Disability and
Other Benefits $ 64,331 $ 1,574 $ (16,401) $ 49,504
Surrenders $1,481,797 $ -- $ (742,134) $ 739,663
</TABLE>
<TABLE>
<CAPTION>
1997 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Premium and Annuity Considerations $ 266,427 $51,630 $ (21,412) $ 296,645
Annuity and Other Fund Deposits $6,515,347 $ -- $(4,534,101) $1,981,246
Death, Annuity, Disability and
Other Benefits $ 79,779 $ 839 $ (7,126) $ 73,492
Surrenders $ 882,094 $ -- $ (427,677) $ 454,417
</TABLE>
5. RELATED PARTY TRANSACTIONS:
Transactions between the Company and its affiliates, relate principally to tax
settlements, reinsurance, insurance coverages, rental and service fees, capital
contributions and payments of dividends. In addition, certain affiliated
insurance companies purchased group annuity contracts from the Company to fund
pension costs and claim annuities to settle casualty claims. Substantially all
general insurance expenses related to the Company, including rent and benefit
plan expenses, are initially paid by The Hartford. Direct expenses are allocated
using specific identification and indirect expenses are allocated using other
applicable methods. Indirect expenses include those for corporate areas which,
depending on type, are allocated based on either a percentage of direct expenses
or on utilization.
The Company has also invested in bonds of its affiliates, Hartford Financial
Services Corporation and HL Investment Advisors, Inc., and common stock of its
subsidiary, Hartford Life, LTD.
For additional information, see Notes 4, 6, and 8.
6. FEDERAL INCOME TAXES:
The Company and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. Federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were filing separate Federal, state and local
income tax returns.
As long as The Hartford continues to own at least 80% of the combined voting
power and 80% of the value of the outstanding capital stock of HLI, the Company
will be included for Federal income tax purposes in the affiliated group of
which The Hartford is the common parent. The Hartford and its non-life
subsidiaries filed a single consolidated Federal income tax return for 1998 and
1997 and intend to file a separate consolidated Federal income tax return for
1999. The life insurance companies filed a separate consolidated Federal income
tax return for 1998 and 1997 and intend to file a separate consolidated Federal
income tax return for 1999. Federal income taxes (received) paid by the Company
for operations and capital gains (losses) were $(8,815), $25,780, and $(14,499)
in 1999, 1998 and 1997, respectively. The effective tax rate was (73)%, 27%, and
(28)% in 1999, 1998 and 1997, respectively.
F-12
<PAGE>
The following schedule provides a reconciliation of the tax provision (including
realized capital gains(losses)) at the U.S. Federal Statutory rate to Federal
income tax (benefit) expense (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
------------------
Tax provision at U.S. Federal Statutory rate $ 5 $48 $ 20
Tax deferred acquisition costs 31 25 25
Statutory to tax reserve differences (7) 8 1
Investments (31) (60) (61)
Other (8) 15 (1)
------------------
FEDERAL INCOME TAX (BENEFIT) EXPENSE $(10) $36 $(16)
------------------
</TABLE>
7. CAPITAL AND SURPLUS AND SHAREHOLDER DIVIDEND RESTRICTIONS:
The maximum amount of dividends which can be paid to shareholders by Connecticut
domiciled insurance companies, without prior approval, is generally restricted
to the greater of 10% of surplus as of the preceding December 31st or the net
gain from operations for the previous year. Dividends are paid as determined by
the Board of Directors and are not cumulative. No dividends were paid in 1999,
1998 or 1997. The amount available for dividend in 2000 is approximately
$60,855.
8. PENSION, RETIREMENT, AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:
All employees that work for The Hartford's life insurance companies are included
in The Hartford's non-contributory defined benefit pension plans. These plans
provide pension benefits that are based on years of service and the employee's
compensation during the last ten years of employment. The Hartford's funding
policy is to contribute annually an amount between the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974,
as amended, and the maximum amount that can be deducted for U.S. Federal income
tax purposes. Generally, pension costs are funded through the purchase of group
pension contracts sold by affiliates. The costs that were allocated to the
Company for pension related expenses were $762, $1,045 and $840 for 1999, 1998
and 1997, respectively.
Employees of The Hartford's life insurance companies are also provided, through
The Hartford, certain health care and life insurance benefits for eligible
retired employees. The contribution for health care benefits depends on the
retiree's date of retirement and years of service. In addition, this benefit
plan has a defined dollar cap, which limits average company contributions. The
Hartford has prefunded a portion of the health care and life insurance
obligations through trust funds where such prefunding can be accomplished on a
tax effective basis. Postretirement health care and life insurance benefits
expense allocated to the Company was not material to the results of operations
for 1999, 1998 or 1997.
The assumed rate in the per capita cost of health care (the health care trend
rate) was 7.1% for 1999, decreasing ratably to 5.0% in the year 2003. Increasing
the health care trend rates by one percent per year would have an immaterial
impact on the accumulated postretirement benefit obligation and the annual
expense. To the extent that the actual experience differs from the inherent
assumptions, the effect will be amortized over the average future service of
covered employees.
Substantially all of The Hartford's life insurance companies' employees are
eligible to participate in The Hartford's Investment and Savings Plan. Under
this plan, designated contributions, which may be invested in Class A Common
Stock of HLI or certain other investments, are matched to a limit of 3% of
compensation.
9. SEPARATE ACCOUNTS:
The Company maintains separate account assets totaling $44.9 billion and $32.9
billion as of December 31, 1999 and 1998, respectively. Separate account assets
are segregated from other investments and reported at fair value. Separate
account liabilities are determined in accordance with prescribed actuarial
methodologies, which approximate the market value less applicable surrender
charges. The resulting surplus is recorded in the general account statement of
operations as a component of Net Transfers to Separate Accounts. The Company's
separate accounts are non-guaranteed, wherein the policyholder assumes
substantially all the investment risk and rewards. Investment income (including
investment gains and losses) and interest credited to policyholders on separate
account assets are not separately reflected in the statutory statements of
operations.
Separate account management fees, net of minimum guarantees, were $493 million,
$363 million, and $252 million in 1999, 1998 and 1997, respectively, and are
recorded as a component of fee income on the Company's statutory basis
Statements of Operations.
F-13
<PAGE>
10. COMMITMENTS AND CONTINGENT LIABILITIES:
(a) LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for alleged economic and punitive damages
have been asserted. Some of these cases have been filed as purported class
actions and some cases have been filed in certain jurisdictions that permit
punitive damage awards disproportionate to the actual damages incurred. Although
there can be no assurances, at the present time, the Company does not anticipate
that the ultimate liability, arising from such pending or threatened litigation,
will have a material adverse effect on the statutory capital and surplus of the
Company.
(b) GUARANTY FUNDS
Under insurance guaranty fund laws in each state, the District of Columbia and
Puerto Rico, insurers licensed to do business can be assessed by state insurance
guaranty associations for certain obligations of insolvent insurance companies
to policyholders and claimants. Recent regulatory actions against certain large
life insurers encountering financial difficulty have prompted various state
insurance guaranty associations to begin assessing life insurance companies for
the deemed losses. Most of these laws do provide, however, that an assessment
may be excused or deferred if it would threaten an insurer's solvency and
further provide annual limits on such assessments. Part of the assessments paid
by the Company pursuant to these laws may be used as credits for a portion of
the associated premium taxes. The Company paid guaranty fund assessments of
approximately $523, $1,043 and $1,544 in 1999, 1998, and 1997, respectively, of
which $318, $995, and $548 in 1999, 1998 and 1997, respectively were estimated
to be creditable against premium taxes.
(c) TAX MATTERS
The Company's Federal income tax returns are routinely audited by the Internal
Revenue Service ("IRS"). The Company's 1997 and 1996 Federal income tax returns
are currently under audit by the IRS. As of March 31, 2000, the audit was in its
initial stage and no material issues had been raised.
F-14
<PAGE>
<TABLE>
<S> <C>
HARTFORD SELECT LEADERS LAST SURVIVOR
VARIABLE UNIVERSAL LIFE INSURANCE
SEPARATE ACCOUNT VL II
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 2999
HARTFORD, CONNECTICUT 06104-2999
TELEPHONE: (800) 231-5453 [LOGO]
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
This Prospectus describes information you should know before you purchase
Hartford Select Leaders Last Survivor variable universal life insurance policy.
Please read it carefully.
Hartford Select Leaders 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 after February 15,
2001:
<TABLE>
<CAPTION>
SUB-ACCOUNT PURCHASES SHARES OF:
<S> <C>
Money Market Sub-Account Class Y shares of Money Market Portfolio of the
Morgan Stanley Dean Witter Select Dimensions
Investment Series
Diversified Income Sub-Account Class Y shares of Diversified Income Portfolio of
the Morgan Stanley Dean Witter Select Dimensions
Investment Series
Balanced Growth Sub-Account Class Y shares of Balanced Growth Portfolio of the
Morgan Stanley Dean Witter Select Dimensions
Investment Series
Utilities Sub-Account Class Y shares of Utilities Portfolio of the
Morgan Stanley Dean Witter Select Dimensions
Investment Series
Dividend Growth Sub-Account Class Y shares of Dividend Growth Portfolio of the
Morgan Stanley Dean Witter Select Dimensions
Investment Series
Value-Added Market Sub-Account Class Y shares of Value-Added Market Portfolio of
the Morgan Stanley Dean Witter Select Dimensions
Investment Series
Growth Sub-Account Class Y shares of Growth Portfolio of the Morgan
Stanley Dean Witter Select Dimensions Investment
Series
American Opportunities Sub-Account Class Y shares of American Opportunities Portfolio
of the Morgan Stanley Dean Witter Select
Dimensions Investment Series
Mid-Cap Equity Sub-Account Class Y shares of Mid-Cap Equity Portfolio of the
Morgan Stanley Dean Witter Select Dimensions
Investment Series
Global Equity Sub-Account Class Y shares of Global Equity Portfolio of the
Morgan Stanley Dean Witter Select Dimensions
Investment Series
Developing Growth Sub-Account Class Y shares of Developing Growth Portfolio of
the Morgan Stanley Dean Witter Select Dimensions
Investment Series
High Yield Sub-Account Shares of High Yield Portfolio of The Universal
Institutional Funds, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUB-ACCOUNT PURCHASES SHARES OF:
<S> <C>
Mid Cap Value Sub-Account Shares of Mid Cap Value Portfolio of The Universal
Institutional Funds, Inc.
Emerging Markets Debt Sub-Account Shares of Emerging Markets Debt Portfolio of The
Universal Institutional Funds, Inc.
Emerging Markets Equity Sub-Account Shares of Emerging Markets Equity Portfolio of The
Universal Institutional Funds, Inc.
Fixed Income Sub-Account Shares of Fixed Income Portfolio of The Universal
Institutional Funds, Inc.
Active International Allocation Sub-Account Shares of Active International Allocation
Portfolio of The Universal Institutional Funds,
Inc.
Technology Sub-Account Shares of Technology Portfolio of The Universal
Institutional Funds, Inc.
Strategic Stock Sub-Account Class II shares of Strategic Stock Portfolio of
the Van Kampen Life Investment Trust
Enterprise Sub-Account Class II shares of Enterprise Portfolio of the Van
Kampen Life Investment Trust
American Funds Global Growth Fund Sub-Account Class 2 shares of the Global Growth Fund of
American Funds Insurance Series ("American Funds
Global Growth Fund")
American Funds Global Small Capitalization Fund Class 2 shares of the Global Small Capitalization
Sub-Account Fund of American Funds Insurance Series ("American
Funds Global Small Capitalization Fund")
American Funds Growth Fund Sub-Account Class 2 shares of the Growth Fund of American
Funds Insurance Series ("American Funds Growth
Fund")
American Funds Growth-Income Fund Sub-Account Class 2 shares of the Growth-Income Fund of
American Funds Insurance Series ("American Funds
Growth-Income Fund")
American Funds International Fund Sub-Account Class 2 shares of the International Fund of
American Funds Insurance Series ("American Funds
International Fund")
MFS Capital Opportunities Series Sub-Account MFS-Registered Trademark- Capital Opportunities
Series of the MFS-Registered Trademark- Variable
Insurance Trust-SM-
MFS Emerging Growth Series Sub-Account MFS-Registered Trademark- Emerging Growth Series
of the MFS-Registered Trademark- Variable
Insurance Trust-SM-
MFS Growth Series Sub-Account MFS-Registered Trademark- Growth Series of the
MFS-Registered Trademark- Variable Insurance
Trust-SM-
MFS Growth with Income Series Sub-Account MFS-Registered Trademark- Growth with Income
Series of the MFS-Registered Trademark- Variable
Insurance Trust-SM-
MFS Total Return Series Sub-Account MFS-Registered Trademark- Total Return Series of
the MFS-Registered Trademark- Variable Insurance
Trust-SM-
Franklin Small Cap Fund Sub-Account Class 2 shares of the Small Cap Fund of the
Franklin Templeton Variable Insurance Products
Trust ("Franklin Small Cap Fund")
Franklin Strategic Income Securities Fund Sub-Account Class 1 shares of the Franklin Strategic Income
(formerly Franklin Strategic Income Investment Fund Securities Fund (formerly Franklin Strategic
Sub-Account) Income Investments Fund) of the Franklin Templeton
Variable Insurance Products
Mutual Shares Securities Fund Sub-Account Class 2 shares of Mutual Shares Securities Fund of
the Franklin Templeton Variable Insurance Products
Trust
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUB-ACCOUNT PURCHASES SHARES OF:
<S> <C>
Templeton Developing Markets Securities Fund Sub-Account Class 1 shares of Templeton Developing Markets
(formerly Templeton Developing Markets Equity Fund Securities Fund (formerly Templeton Developing
Sub-Account) Markets Equity Fund) of the Franklin Templeton
Variable Insurance Trust
Templeton Growth Securities Sub-Account (formerly Class 2 shares of the Templeton Growth Securities
Templeton Global Growth Fund Sub-Account) Fund (formerly Templeton Global Growth Fund) of
the Franklin Templeton Variable Insurance Trust
</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
Commission's website (HTTP://WWW.SEC.GOV).
This life insurance policy IS NOT:
- a bank deposit or obligation;
- federally insured; or
- endorsed by any bank or governmental agency.
--------------------------------------------------------------------------------
PROSPECTUS DATED: JANUARY 2, 2001
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----------------------------------------------------------------------
<S> <C>
SUMMARY OF BENEFITS AND RISKS 5
----------------------------------------------------------------------
FEE TABLES 7
----------------------------------------------------------------------
ABOUT US 12
----------------------------------------------------------------------
Hartford Life and Annuity Insurance Company 12
----------------------------------------------------------------------
Separate Account VL II 12
----------------------------------------------------------------------
The Portfolios 12
----------------------------------------------------------------------
The Fixed Account 16
----------------------------------------------------------------------
CHARGES AND DEDUCTIONS 16
----------------------------------------------------------------------
YOUR POLICY 18
----------------------------------------------------------------------
PREMIUMS 20
----------------------------------------------------------------------
DEATH BENEFITS AND POLICY VALUES 21
----------------------------------------------------------------------
MAKING WITHDRAWALS FROM YOUR POLICY 22
----------------------------------------------------------------------
LOANS 22
----------------------------------------------------------------------
LAPSE AND REINSTATEMENT 23
----------------------------------------------------------------------
TAXES 24
----------------------------------------------------------------------
LEGAL PROCEEDINGS 27
----------------------------------------------------------------------
GLOSSARY OF SPECIAL TERMS 28
----------------------------------------------------------------------
WHERE YOU CAN FIND MORE INFORMATION 29
----------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
--------------------------------------------------------------------------------
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 in force 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, however, it will be no more than the
current Face Amount plus $2.5 million.
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.
DEATH BENEFIT GUARANTEE -- Generally, your death benefit coverage will last as
long as there is enough value in your policy to pay for the monthly charges we
deduct. Since this is a variable life policy, values of your policy will
fluctuate based on the performance of the underlying investment options you have
chosen. Without the Death Benefit Guarantee your policy will lapse if the value
of your policy is insufficient to pay your monthly charges. However, when the
Death Benefit Guarantee feature is in effect, the policy will not lapse,
regardless of the investment performance of the underlying funds.
When you apply for the policy you choose what percentage of the total face
amount that is covered by the Death Benefit Guarantee. The Death Benefit
Guarantee period is the maximum number of policy years that the Death Benefit
Guarantee is available on the policy. The Death Benefit Guarantee period is
individualized based on the issue ages, sexes and risk classes of the insureds
and is provided in the policy. In order to maintain the Death Benefit Guarantee
feature, the cumulative premiums paid into the policy, less withdrawals and
indebtedness, must exceed the Cumulative Death Benefit Guarantee Premium. The
Death Benefit Guarantee is not available in the states of Maryland or New
Jersey.
INVESTMENT CHOICES -- You may invest in up to 9 different investment choices
within your policy, from a choice of 35 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 -- For 10 days after you receive your policy, you
may cancel it without paying a sales charge. A longer period is provided in some
states.
WITHDRAWALS -- You may take money out of your policy once a 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 life 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 withdrawal per month.
Withdrawals will reduce your policy's death benefit, and may be subject to a
surrender charge.
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.
<PAGE>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
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."
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
--------------------------------------------------------------------------------
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>
CHARGE WHEN CHARGE IS DEDUCTED AMOUNT DEDUCTED
<S> <C> <C>
Sales Charge When you pay premium. 6% of premium
Premium Tax Charge When you pay premium. A percent of premium which varies
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.
Surrender Charges When you surrender your policy. Surrender charge varies by policy
When you make certain Face Amount year and equals a percentage times
decreases. the sum of two components: the
When you take certain withdrawals. sales surrender charge and the
underwriting surrender charge. The
sales surrender charge equals the
Death Benefit Guarantee Premium. In
Maryland and New Jersey, the sales
surrender charge is individualized
and based on the initial Face
Amount and the insureds' issue
ages, sexes, insurance classes and
standard ratings. The underwriting
surrender charge equals $1 per
$1000 of initial face amount, but
is at least $500 and no more than
$3000.
The percentage by policy years is
as follows:
POLICY YEAR PERCENTAGE
1 70%
2 70%
3 70%
4 60%
5 50%
6 40%
7 30%
8 20%
9 10%
10 and after 0%
Face Amount Each month for 12 months beginning 1/12 of $1 per month per thousand
Increase Fee on the effective date of any of Face Amount increase.
unscheduled increase in Face Amount Monthly fees charged will not be
you request. less than 1/12 of $500 and will not
exceed 1/12 of $3,000.
Transfer Fees When you make a transfer after the $25 per transfer.
first transfer in any month.
Withdrawal Fee When you take a withdrawal. $10 per withdrawal.
<CAPTION>
CHARGE POLICIES FROM WHICH CHARGE IS DEDUCTED
<S> <C>
Sales Charge All
Premium Tax Charge All
Surrender Charges Policies surrendered during the first
nine policy years.
Policies where the Face Amount is
reduced below the initial Face Amount
during the first nine policy years.
Face Amount Policies where the owner has made an
Increase Fee unscheduled increase.
Transfer Fees Those policies with more than one
transfer per month.
Withdrawal Fee Those policies where the owner has
made a withdrawal.
</TABLE>
<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
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>
CHARGE WHEN CHARGE IS DEDUCTED AMOUNT DEDUCTED
<S> <C> <C>
Cost of Insurance Monthly. The charge is the maximum cost of
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.
Mortality and Expense Monthly. PER THE SUB-ACCOUNT ACCUMULATED
Risk Charge VALUE:
- 1/12 of 0.75% per month for
policy years 1-10.
- 1/12 of 0.60% per month after the
10th policy year.
PER $1000 OF INITIAL FACE AMOUNT
DURING THE FIRST 10 POLICY YEARS:
- individualized based on issue
ages and Death Benefit Guarantee
Amount.
- in Maryland and New Jersey,
individualized based on issue
ages and initial Face Amount. In
Maryland, this charge is known as
an Administrative Charge.
Administrative Charge Monthly. YEARS 1-5:
$30
YEARS 6+:
$10
In New Jersey, this charge is $30
per month for all years.
Rider Charges Monthly. Individualized based on optional
rider selected.
<CAPTION>
CHARGE POLICIES FROM WHICH CHARGE IS DEDUCTED
<S> <C>
Cost of Insurance All
Charges
Mortality and Expense All
Risk Charge
Administrative Charge All
Rider Charges Only those policies with benefits
provided by rider.
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
--------------------------------------------------------------------------------
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 actual
fees and expenses charged by the Funds for the year ended December 31, 1999.
More detail concerning each Fund's fees and expenses is contained in the
prospectus for each Fund.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
OTHER EXPENSES
MANAGEMENT FEES 12B-1 DISTRIBUTION EXPENSES (INCLUDING ANY
(INCLUDING ANY AND/OR SERVICING FEES (INCLUDING ANY WAIVERS AND ANY
WAIVERS) (INCLUDING WAIVERS) REIMBURSEMENTS) REIMBURSEMENTS)
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS
INVESTMENT SERIES:
Money Market Portfolio 0.50% 0.25% 0.04% 0.79%
--------------------------------------------------------------------------------------------------------------------------
Diversified Income Portfolio 0.40% 0.25% 0.08% 0.73%
--------------------------------------------------------------------------------------------------------------------------
Balanced Growth Portfolio 0.60% 0.25% 0.04% 0.89%
--------------------------------------------------------------------------------------------------------------------------
Utilities Portfolio 0.65% 0.25% 0.05% 0.95%
--------------------------------------------------------------------------------------------------------------------------
Dividend Growth Portfolio 0.58% 0.25% 0.02% 0.85%
--------------------------------------------------------------------------------------------------------------------------
Value-Added Market Portfolio 0.50% 0.25% 0.05% 0.80%
--------------------------------------------------------------------------------------------------------------------------
Growth Portfolio 0.80% 0.25% 0.10% 1.15%
--------------------------------------------------------------------------------------------------------------------------
American Opportunities Portfolio 0.62% 0.25% 0.04% 0.91%
--------------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity Portfolio (formerly Mid-Cap
Growth) (1) 0.75% 0.25% 0.17% 1.17%
--------------------------------------------------------------------------------------------------------------------------
Global Equity Portfolio 1.00% 0.25% 0.08% 1.33%
--------------------------------------------------------------------------------------------------------------------------
Developing Growth Portfolio 0.50% 0.25% 0.08% 0.83%
--------------------------------------------------------------------------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.:
High Yield Portfolio (2) 0.50% N/A 0.61% 1.11%
--------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Portfolio (2) 0.75% N/A 0.62% 1.37%
--------------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt Portfolio (2) 0.80% N/A 0.98% 1.78%
--------------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity Portfolio (2) 1.25% N/A 1.37% 2.62%
--------------------------------------------------------------------------------------------------------------------------
Fixed Income Portfolio (2) 0.40% N/A 0.56% 0.96%
--------------------------------------------------------------------------------------------------------------------------
Active International Allocation Portfolio (2) 0.80% N/A 1.83% 2.63%
--------------------------------------------------------------------------------------------------------------------------
Technology Portfolio (2) 0.80% N/A 11.77% 12.57%
--------------------------------------------------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST:
Strategic Stock Portfolio (3) (12) 0.50% 0.25% 0.41% 1.16%
--------------------------------------------------------------------------------------------------------------------------
Enterprise Portfolio (3)(12) 0.50% 0.25% 0.12% 0.87%
--------------------------------------------------------------------------------------------------------------------------
AMERICAN FUNDS INSURANCE SERIES:
American Funds Global Growth Fund 0.68% 0.25% 0.03% 0.96%
--------------------------------------------------------------------------------------------------------------------------
American Funds Global Small Capitalization
Fund 0.79% 0.25% 0.03% 1.07%
--------------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund 0.38% 0.25% 0.01% 0.64%
--------------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income Fund 0.34% 0.25% 0.01% 0.60%
--------------------------------------------------------------------------------------------------------------------------
American Funds International Fund 0.55% 0.25% 0.05% 0.85%
--------------------------------------------------------------------------------------------------------------------------
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE
TRUST:
MFS-Registered Trademark- Capital
Opportunities Series (7)(8) 0.75% N/A 0.16% 0.91%
--------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Emerging Growth
Series (7) 0.75% N/A 0.09% 0.84%
--------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth
Series (7)(8) 0.75% N/A 0.16% 0.91%
--------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth with Income
Series (7) 0.75% N/A 0.13% 0.88%
--------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Total Return
Series (7) 0.75% N/A 0.15% 0.90%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
OTHER EXPENSES
MANAGEMENT FEES 12B-1 DISTRIBUTION EXPENSES (INCLUDING ANY
(INCLUDING ANY AND/OR SERVICING FEES (INCLUDING ANY WAIVERS AND ANY
WAIVERS) (INCLUDING WAIVERS) REIMBURSEMENTS) REIMBURSEMENTS)
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST:
Franklin Small Cap Fund -- Class 2 (4)(5) 0.55% 0.25% 0.27% 1.07%
--------------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income Securities Fund (6) 0.43% N/A 0.32% 0.75%
--------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2
(4)(9) 0.60% 0.25% 0.19% 1.04%
--------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Equity Fund --
Class 1 (10) 1.25% N/A 0.31% 1.56%
--------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2
(4)(11) 0.83% 0.25% 0.05% 1.13%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) With respect to the Mid-Cap Equity Portfolio, the expense information shown
in the table above has been restated to reflect the current fees. Prior to
December 31, 1999, the investment adviser, Morgan Stanley Dean Witter
Advisors, Inc., assumed all expenses of the Portfolio and waived the
compensation provided for the Portfolio in its management agreement with the
Fund.
(2) With respect to the High Yield, Mid-Cap Value, Emerging Markets Debt,
Emerging Markets Equity, Active International Allocation and Fixed Income
Portfolios, the investment advisers have voluntarily agreed to waive their
investment advisory fees and to reimburse certain expenses of the Portfolios
if such fees would cause their respective "Total Fund Operating Expenses" to
exceed certain limits. The expense ratios for the Active International
Allocation Portfolio and Technology Portfolio are annualized. Including
these reductions, it is estimated that "Management Fees", Other Expenses and
"Total Fund Operating Expenses" for the Portfolios would have been as
follows:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
PORTFOLIO MANAGEMENT FEES EXPENSES EXPENSES
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------
High Yield 0.19% 0.61% 0.80%
-----------------------------------------------------------------------------------------------------
Mid-Cap Value 0.43% 0.62% 1.05%
-----------------------------------------------------------------------------------------------------
Emerging Markets Debt 0.45% 0.98% 1.43%
-----------------------------------------------------------------------------------------------------
Emerging Markets Equity 0.42% 1.37% 1.79%
-----------------------------------------------------------------------------------------------------
Fixed Income 0.14% 0.56% 0.70%
-----------------------------------------------------------------------------------------------------
Active International Allocation 0.00% 1.15% 1.15%
-----------------------------------------------------------------------------------------------------
Technology Portfolio 0.00% 1.15% 1.15%
-----------------------------------------------------------------------------------------------------
</TABLE>
(3) With respect to the Strategic Stock Portfolio and the Enterprise Portfolio,
the investment adviser, Van Kampen Asset Management, Inc. has voluntarily
agreed to waive its investment advisory fees and to reimburse the Portfolios
if such fees would cause their respective "Total Fund Operating Expenses" to
exceed those set forth in the table above. Including in the aforementioned
reductions, it is estimated that "Management Fees", "Other Expenses" and
"Total Fund Operating Expenses" for the Portfolios would be:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
PORTFOLIO MANAGEMENT FEES EXPENSES EXPENSES
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------
Strategic Stock 0.24% 0.41% 0.65%
-----------------------------------------------------------------------------------------------------
Enterprise 0.47% 0.13% 0.60%
-----------------------------------------------------------------------------------------------------
</TABLE>
(4) The Fund's Class 2 distribution plan or "Rule 12b-1 Plan" is described in
the Fund's prospectus. While the maximum amount payable under the Fund's
Class 2 Rule 12b-1 Plan is 0.35% per year of the Fund's average daily net
assets, the Board of Trustees of Franklin Templeton Variable Insurance
Products Trust has set the current rate at 0.25% per year through at least
April 30, 2001.
(5) On February 8, 2000, a merger and reorganization was approved that combined
the assets of the Franklin Small Cap Fund with a similar fund of the
Templeton Variable Products Series Fund, effective May 1, 2000. On
February 8, 2000, fund shareholders approved new management fees, which
apply to the combined fund effective May 1, 2000. The table shows restated
total expenses based on the new fees and assets of the fund as of
December 31, 1999, and not the assets of the combined fund. However, if the
table reflected both the new fees and the combined assets, the fund's
expenses after May 1, 2000 would be estimated as: Management Fees 0.55%,
Distribution and Service Fees 0.25%, Other Expenses 0.27%, and Total Fund
Operating Expenses 1.07%.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
--------------------------------------------------------------------------------
(6) The management fees shown are based on the fund's maximum contractual
amount. Other expenses are estimated. The manager and administrator have
agreed in advance to waive or limit their respective fees and the manager to
assume as its own expense certain expenses otherwise payable by the fund so
that total annual fund operating expenses do not exceed 0.75% for the
current fiscal year. After December 31, 2001, the manager and administrator
may end this arrangement at any time. Without this reduction Total Fund
Operating Expenses were:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
Franklin Strategic Income Securities Fund 0.43% N/A 0.52% 0.95%
-------------------------------------------------------------------------------------------------------------
</TABLE>
(7) Each Series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. After these
reductions, the Total Fund Operating Expenses would be:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Capital Opportunities Series 0.75% N/A 0.15% 0.90%
-------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Emerging Growth Series 0.75% N/A 0.08% 0.83%
-------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth Series 0.75% N/A 0.15% 0.90%
-------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth with Income Series 0.75% N/A 0.12% 0.87%
-------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Total Return Series 0.75% N/A 0.14% 0.89%
-------------------------------------------------------------------------------------------------------------
</TABLE>
(8) MFS has contractually agreed, subject to reimbursement, to bear expenses for
these series such that each such series' "Other Expenses" (after taking into
account the expense offset arrangement described above), do not exceed 0.15%
of the average daily net assets of the series during the current fiscal
year. These contractual fee arrangements will continue until at least
May 1, 2001, unless changed with the consent of the board of trustees which
oversees the series. Without this waiver, "Total Fund Operating Expenses"
would have been:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Capital Opportunities Series 0.75% N/A 0.27% 1.02%
-------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth Series 0.75% N/A 0.71 1.46%
-------------------------------------------------------------------------------------------------------------
</TABLE>
(9) On February 8, 2000, a merger and reorganization was approved that combined
the assets of the Templeton Variable Products Series Fund, effective May 1,
2000. The table shows total expenses based on the fund's assets as of
December 31, 1999, and not the assets of the combined fund. However, if the
table reflected combined assets, the fund's expenses after May 1, 2000 would
be estimated as: Management Fees 0.60%, Distribution and Service Fees 0.25%,
Other Expenses 0.19%, and Total Fund Operating Expenses 1.04%.
(10) On February 8, 2000, shareholders approved a merger and a reorganization
that combined the Developing Markets Securities Fund with the Templeton
Developing Markets Equity Fund, effective May 1, 2000. The shareholders of
the new fund had approved new management fees, which apply to the combined
fund effective May 1, 2000. The table shows restated total expenses based on
the new fees and the assets of the fund as of December 31, 1999, and not the
assets of the combined fund. However, if the table reflected both the new
fees and the combined assets, the fund's expenses after May 1, 2000 would be
estimated as: Management Fees 1.25%, Other Expenses 0.29%, and Total Fund
Operating Expenses 1.54%.
(11) On February 8, 2000, a merger and a reorganization was approved that
combined the Templeton Growth Securities Fund with a similar fund of
Templeton Variable Products Series Fund, effective May 1, 2000. The table
shows total expenses based on the fund's assets as of December 31, 1999, and
not the assets of the combined fund. However, if the table reflected the
combined assets, the fund's expenses after May 1, 2000 would be estimated
as: Management Fees 0.80%, Distribution and Service Fees 0.25%, Other
Expenses 0.05%, and Total Fund Operating Expenses 1.10%.
(12) Under the Distribution Plan and Service Plan, the Portfolio may spend up to
a total of 0.35% per year of the Portfolio's average daily net assets with
respect to its Class II Shares. Notwithstanding the foregoing, the
Portfolio's Board of Trustees currently limits the aggregate amount payable
under the Distribution Plan and Service Plan to 0.25% per year of the
Portfolio's average daily net assets with respect to Class II Shares.
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12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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
RATING AGENCY OF RATING RATING BASIS OF RATING
<S> <C> <C> <C>
--------------------------------------------------------------------------------
A.M. Best and
Company, Inc. 4/1/00 A+ Financial performance
--------------------------------------------------------------------------------
Standard & Poor's 8/1/00 AA Insurer financial strength
--------------------------------------------------------------------------------
Fitch 5/1/00 AA+ Financial strength
--------------------------------------------------------------------------------
</TABLE>
These ratings apply to Hartford's ability to meet its obligations under the
Contract. The ratings do not apply to the Separate Account or the underlying
Funds.
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 our
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 PORTFOLIOS
The underlying investment for the Contracts are shares of the portfolios or
funds of Morgan Stanley Dean Witter Select Dimensions Investment Series, The
Universal Institutional Funds, Inc., Van Kampen Life Investment Trust, American
Funds Insurance Series, MFS-Registered Trademark- Variable Insurance Trust-SM-,
and Franklin Templeton Variable Insurance Products Trust, all open-ended
management investment companies. The underlying portfolios or funds
corresponding to each Sub-Account and their investment objectives are described
below. Hartford reserves the right, subject to compliance with the law, to offer
additional portfolios with differing investment objectives. The portfolios may
not be available in all states.
We do not guarantee the investment results of any of the underlying portfolios
or funds. Since each underlying portfolio has different investment objectives,
each is subject to different risks. These risks and the portfolio's expenses are
more fully described in the accompanying Funds' prospectuses and the Statements
of Additional Information. The Funds' prospectuses should be read in conjunction
with this Prospectus before investing.
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES:
MONEY MARKET PORTFOLIO -- Seeks high current income, preservation of capital and
liquidity by investing in the following money market instruments: U.S.
Government securities, obligations of U.S. regulated banks and savings
institutions having total assets of more than $1 billion, or less than
$1 billion if such are fully federally insured as to principal (the interest may
not be insured), repurchase agreements and high grade corporate debt obligations
maturing in thirteen months or less.
DIVERSIFIED INCOME PORTFOLIO -- Seeks, as a primary objective, to earn a high
level of current income and, as a secondary objective, to maximize total return,
but only to the extent consistent with its primary objective, by equally
allocating its assets among three separate groupings of fixed-income securities.
Up to one-third of the securities in which the Diversified Income Portfolio may
invest will include securities rated Baa/BBB or lower. See the Special
Considerations for investments for high yield securities disclosed in the Fund's
prospectus.
BALANCED GROWTH PORTFOLIO -- Seeks to provide capital growth with reasonable
current income by investing, under normal market conditions, at least 60% of its
total assets in a diversified portfolio of common stocks of companies which have
a record of paying dividends and, in the opinion of the Investment Manager, have
the potential for increasing dividends and in securities convertible into common
stock, and at least 25% of its total assets in investment grade fixed-income
(fixed-rate and adjustable-rate) securities such as corporate notes and bonds
and obligations issued or guaranteed by the U.S. Government, its agencies and
its instrumentalities.
UTILITIES PORTFOLIO -- Seeks to provide both capital appreciation and current
income.
DIVIDEND GROWTH PORTFOLIO -- Seeks to provide reasonable current income and
long-term growth of income and capital by investing primarily in common stock of
companies with a record of paying dividends and the potential for increasing
dividends.
VALUE-ADDED MARKET PORTFOLIO -- Seeks to achieve a high level of total return on
its assets through a combination of capital appreciation and current income, by
investing, on an equally-weighted basis, in a diversified portfolio of common
stocks of the companies which are represented in the Standard & Poor's 500
Composite Stock Price Index.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
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GROWTH PORTFOLIO -- Seeks long-term growth of capital by investing primarily in
common stocks and securities convertible into common stocks issued by domestic
and foreign companies.
AMERICAN OPPORTUNITIES PORTFOLIO -- Seeks long-term capital growth consistent
with an effort to reduce volatility, by investing principally in common stock of
companies in industries which, at the time of the investment, are believed to be
attractively valued given their above average relative earnings growth potential
at that time.
MID-CAP EQUITY PORTFOLIO -- Seeks long-term capital growth by investing
primarily in equity securities of medium sized companies (that is, companies
whose equity market capitalization falls within the range of companies
comprising the S&P 400 Index).
GLOBAL EQUITY PORTFOLIO -- Seeks to obtain total return on its assets primarily
through long-term capital growth and, to a lesser extent, from income, through
investments in all types of common stocks and equivalents (such as convertible
securities and warrants), preferred stocks and bonds and other debt obligations
of domestic and foreign companies, governments and international organizations.
DEVELOPING GROWTH PORTFOLIO -- Seeks long-term capital growth by investing
primarily in common stocks of smaller and medium-sized companies that, in the
opinion of the Investment Manager, have the potential for growing more rapidly
than the economy and which may benefit from new products or services,
technological developments or changes in management.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.:
HIGH YIELD PORTFOLIO -- Seeks above-average total return over a market cycle of
three to five years by investing primarily in high yield securities (commonly
referred to as "junk bonds"). The Portfolio also may invest in investment grade
fixed income securities, including U.S. Government securities, corporate bonds
and mortgage securities. The Portfolio may invest to a limited extent in foreign
fixed income securities, including emerging market securities. The Investment
Adviser may use futures, swaps and other types of derivatives in managing the
Portfolio.
MID-CAP VALUE PORTFOLIO -- Seeks above-average total return over a market cycle
of three to five years by investing in common stocks of companies with
capitalizations in the range of companies included in the S&P MidCap 400 Index
(currently $500 million to $6 billion). The Portfolio purchases stocks that
typically do not pay dividends. The Investment Adviser analyzes securities to
identify stocks that are undervalued, and measures the relative attractiveness
of the PortfolIo's current holdings against potential purchases.
EMERGING MARKETS DEBT PORTFOLIO -- Seeks high total return by investing
primarily in fixed income securities of government and government-related
issuers and, to a lesser extent, of corporate issuers located in emerging market
countries. The Investment Adviser seeks high total return by investing in a
portfolio of emerging market debt that offers low correlation to many other
asset classes. Using macroeconomic and fundamental analysis, the Investment
Adviser seeks to identify developing countries that are undervalued and have
attractive or improving fundamentals. After the country allocation is
determined, the sector and security selection is made within each county.
EMERGING MARKETS EQUITY PORTFOLIO -- Seeks long-term capital appreciation by
investing primarily in equity securities of issuers in emerging market
countries. The Investment Adviser seeks to maximize returns by investing in
growth-oriented equity securities in emerging markets. The Investment Adviser's
investment approach combines top-down country allocation with bottom-up stock
selection. Investment selection criteria include attractive growth
characteristics, reasonable valuations and managements with a strong shareholder
value orientation.
FIXED INCOME PORTFOLIO -- Seeks above-average total return over a market cycle
of three to five years by investing primarily in a diversified mix of dollar
denominated investment grade fixed income securities, particularly U.S.
Government, corporate and mortgage securities. The Portfolio ordinarily will
maintain an average weighted maturity in excess of five years. The Portfolio may
invest opportunistically in non-dollar denominated securities and below
investment grade securities; and it may use futures, swaps and other types of
derivatives in managing the Portfolio.
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO -- Seeks long-term capital
appreciation by investing primarily in accordance with country and sector
weightings determined by the investment adviser in equity securities of non-U.S.
issuers which, in the aggregate, replicate broad-market indices. The Investment
Adviser seeks to maintain a diversified portfolio of international equity
ecurities based on a top-down approach that emphasizes country and sector
selection and weighting rather than individual stock selection. The Investment
Adviser capitalizes on the significance of country and sector selection in
international equity portfolio returns by over and underweighting countries
based on three factors: (i) valuation; (ii) fundamental change; and
(iii) short-term market momentum/technicals.
TECHNOLOGY PORTFOLIO -- Seeks long-term capital appreciation by investing
primarily in equity securities of companies that the Investment Adviser expects
will benefit from their involvement in technology and technology-related
industries. The Investment Adviser seeks to identify significant long-term
technology trends and invest primarily in companies the Investment Adviser
believes are positioned to benefit materially from these trends.
VAN KAMPEN LIFE INVESTMENT TRUST:
STRATEGIC STOCK PORTFOLIO -- Seeks an above average total return through a
combination of potential capital appreciation and dividend income, consistent
with the preservation of invested capital. Under normal market conditions, the
Portfolio's investment adviser seeks to achieve the investment objectives by
investing in a portfolio of high dividend yielding equity securities
<PAGE>
14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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of companies included in the Dow Jones Industrial Average or in the Morgan
Stanley Capital International USA Index.
ENTERPRISE PORTFOLIO -- Seeks capital appreciation through investments in
securities believed by the Portfolio's investment adviser to have above average
potential for capital appreciation.
AMERICAN FUNDS INSURANCE SERIES:
AMERICAN FUNDS GLOBAL GROWTH FUND -- Seeks long-term growth of capital by
investing primarily in common stocks of issuers domiciled around the world.
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION FUND -- Seeks long-term growth of
capital by investing primarily in equity securities of smaller companies located
around the world that typically have market capitalizations of $50 million to
$1.5 billion.
AMERICAN FUNDS GROWTH FUND -- Seeks long-term growth of capital by investing
primarily in common stocks which demonstrate the potential for appreciation.
AMERICAN FUNDS GROWTH-INCOME FUND -- Seeks growth of capital and income by
investing primarily in common stocks or other securities which demonstrate the
potential for appreciation and/or dividends.
AMERICAN FUNDS INTERNATIONAL FUND -- Seeks long-term growth of capital by
investing primarily in common stocks of issuers domiciled outside of the United
States.
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST:
MFS-REGISTERED TRADEMARK- CAPITAL OPPORTUNITIES SERIES -- Seeks capital
appreciation.
MFS-REGISTERED TRADEMARK- EMERGING GROWTH SERIES -- Seeks to provide long-term
growth of capital.
MFS-REGISTERED TRADEMARK- GROWTH SERIES -- Seeks to provide long-term growth of
capital and future income rather than current income.
MFS-REGISTERED TRADEMARK- GROWTH WITH INCOME SERIES -- Seeks to provide
reasonable current income and long-term growth of capital and income.
MFS-REGISTERED TRADEMARK- TOTAL RETURN SERIES -- Seeks primarily to provide
above-average income (compared to a portfolio invested in equity securities)
consistent with the prudent employment of capital, and secondarily to provide a
reasonable opportunity for growth of capital and income.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST:
FRANKLIN SMALL CAP FUND -- Seeks long-term capital growth.
FRANKLIN STRATEGIC INCOME SECURITIES FUND -- Seeks to earn a high level of
current income. Its secondary goal is long-term capital appreciation.
MUTUAL SHARES SECURITIES FUND -- Seeks capital appreciation. Its secondary goal
is income.
TEMPLETON DEVELOPING MARKETS SECURITIES FUND -- Seeks long-term capital
appreciation.
TEMPLETON GROWTH SECURITIES FUND -- Seeks long-term capital growth.
INVESTMENT ADVISERS -- Morgan Stanley Dean Witter Advisors Inc. ("MSDW
Advisors"), a Delaware Corporation, whose address is Two World Trade Center, New
York, New York 10048, is the Investment Manager for the Money Market Portfolio,
the North American Government Securities Portfolio, the Diversified Income
Portfolio, the Balanced Growth Portfolio, the Utilities Portfolio, the Dividend
Growth Portfolio, the Value-Added Market Portfolio, the Growth Portfolio, the
American Value Portfolio, the Mid-Cap Equity Portfolio, the Global Equity
Portfolio, the Developing Growth Portfolio, and the Emerging Markets Portfolio
of the Morgan Stanley Dean Witter Select Dimensions Investment Series (the
"Morgan Stanley Dean Witter Portfolios"). MSDW Advisors was incorporated in
July, 1992 and is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
("MSDW"). Morgan Stanley Dean Witter Portfolios offer both Class X and Class Y
shares. Only Class Y shares are available in this Contract.
MSDW Advisors provides administrative services, manages the Morgan Stanley Dean
Witter Portfolios' business affairs and manages the investment of the Morgan
Stanley Dean Witter Portfolios' assets, including the placing of orders for the
purchase and sales of portfolio securities. MSDW Advisors has retained Morgan
Stanley Dean Witter Services Company Inc., its wholly-owned subsidiary, to
perform the aforementioned administrative services for the Morgan Stanley Dean
Witter Portfolios. For its services, the Morgan Stanley Dean Witter Portfolios
pay MSDW Advisors a monthly fee. See the accompanying Fund prospectus for a more
complete description of MSDW Advisors and the respective fees of the Morgan
Stanley Dean Witter Portfolios. With regard to the Mid-Cap Equity Portfolio, TCW
Investment Management Company ("TCW"), under a Sub-Advisory Agreement with MSDW
Advisors, provides these Portfolios with investment advice and portfolio
management, in each case subject to the overall supervision of the MSDW
Advisors. TCW's address is 865 South Figueroa Street, Suite 1800, Los Angeles,
California 90017.
With regard to the Growth Portfolio, Morgan Stanley Dean Witter Investment
Management Inc. ("MSDW Investment Management"),* under a Sub-Advisory Agreement
with MSDW Advisors, provides the Growth Portfolio with investment advice and
portfolio management, subject to the overall supervision of MSDW Advisors. MSDW
Investment Management, like MSDW Advisors, is a wholly-owned subsidiary of MSDW.
MSDW Investment Management's address is 1221 Avenue of the Americas, New York,
New York 10020.
In addition to acting as the Sub-Adviser for the Growth Portfolio, MSDW
Investment Management, pursuant to an Investment Advisory Agreement with The
Universal Institutional Funds, Inc., is the investment adviser for the Emerging
Markets Debt Portfolio,
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
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Emerging Markets Equity Portfolio, Active International Allocation Portfolio and
Technology Portfolio. As the investment adviser, MSDW Investment Management
provides investment advice and portfolio management services for Emerging
Markets Debt Portfolio, Emerging Markets Equity Portfolio, Active International
Allocation Portfolio and Technology Portfolio subject to the supervision of The
Universal Institutional Funds, Inc.'s Board of Directors.
The investment adviser for the High Yield Portfolio, Fixed Income Portfolio, and
the Mid Cap Value Portfolio is Miller Anderson & Sherrerd, LLP ("MAS"). MAS is a
Pennsylvania limited liability partnership founded in 1969 with its principal
offices at One Tower Bridge, West Conshohocken, Pennsylvania 19428. MAS provides
investment advisory services to employee benefit plans, endowment portfolios,
foundations and other institutional investors and has served as an investment
adviser to several open-end investment companies. MAS is an indirect wholly-
owned subsidiary of MSDW.
The Investment Adviser with respect to the Strategic Stock Portfolio and the
Enterprise Portfolio is Van Kampen Asset Management Inc., a wholly owned
subsidiary of Van Kampen Investments Inc. Van Kampen Investments Inc. is an
indirect wholly owned subsidiary of MSDW. Van Kampen Investments Inc. is a
diversified asset management company with more than two million retail investor
accounts, extensive capabilities for managing institutional portfolios, and more
than $90 billion under management or supervision as of December 31, 1999. Van
Kampen Investments Inc.'s more than 50 open-end and 39 closed-end funds and more
than 2,700 unit investment trusts are professionally distributed by leading
authorized dealers nationwide. The Van Kampen Life Investment Trust offers
Class I and Class II shares. Only Class II shares are available in this
Contract.
The American Fund Global Growth Fund, American Funds Global Small Capitalization
Fund, American Funds Growth Fund, American Funds Growth-Income Fund and American
Funds International Fund are all part of American Funds Insurance Series.
American Funds Insurance Series is a fully managed, diversified, open-end
investment company organized as a Massachusetts business trust in 1983. American
Funds Insurance Series offers two classes of fund shares: Class 1 shares and
Class 2 shares. This Contract invests only in Class 2 shares of American Funds
Insurance Series. The investment adviser for each of the funds of American Funds
Insurance Series is Capital Research and Management Company located at 333 South
Hope Street, Los Angeles, California 90071. Capital Research and Management
Company is a wholly owned subsidiary of The Capital Group Companies, Inc.
The MFS-Registered Trademark- Capital Opportunities Series,
MFS-Registered Trademark- Emerging Growth Series, MFS-Registered Trademark-
Growth Series, MFS-Registered Trademark- Growth with Income Series,
MFS-Registered Trademark- Total Return Series are series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-. The MFS Variable
Insurance Trust-SM- is a professionally managed open-end management investment
company. The MFS Variable Insurance Trust-SM- is registered as a Massachusetts
business trust. MFS Investment Management-Registered Trademark- serves as the
investment adviser to each of the Series of the MFS-Registered Trademark-
Variable Insurance Trust-SM-. MFS Investment Management-Registered Trademark- is
located at 500 Boylston Street, Boston, Massachusetts 02116.
Franklin Small Cap Fund, Franklin Strategic Income Securities Fund, Mutual
Shares Securities Fund, Templeton Developing Markets Securities Fund, and
Templeton Growth Securities Fund are all part of the Franklin Templeton Variable
Insurance Products Trust. The Franklin Templeton Variable Insurance Products
Trust is an open-end managed investment company which was organized as a
Massachusetts business trust on April 26, 1988. Franklin Templeton Variable
Insurance Products Trust currently offers Class 1 and Class 2 shares. Class 2
shares of each Fund are available in this Contract, except that Class 1 shares
of Franklin Strategic Income Securities Fund and Templeton Developing Markets
Securities Fund are available. The investment manager of the Franklin Small Cap
Fund and the Franklin Strategic Income Securities Fund is Franklin Advisers,
Inc. located at 777 Mariners Island Blvd. P.O. Box 7777, San Mateo, California
94403-777. The investment manager of Mutual Shares Securities Fund is Franklin
Mutual Advisers, LLC, located at 51 John F. Kennedy Parkway, Short Hills, New
Jersey, 07078. The investment manager of Templeton Growth Securities Fund is
Templeton Global Advisers Limited, located at Lyford Cay, Nassau, N.P. Bahamas.
The investment manager of Templeton Developing Markets Securities Fund is
Templeton Asset Management Ltd., located at 7 Temasek Blvd. #38-03, Suntec Tower
One, Singapore, 038987.
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
* ON DECEMBER 1, 1998, MORGAN STANLEY ASSET MANAGEMENT INC. CHANGED ITS NAME TO
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC. BUT CONTINUES TO DO
BUSINESS IN CERTAIN INSTANCES USING THE NAME MORGAN STANLEY ASSET MANAGEMENT.
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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the same proportion as shares for which we received instructions.
ADMINISTRATIVE SERVICES -- Hartford has entered into agreements with the
investment advisers or distributors of many of the Funds. Under the terms of
these agreements, Hartford provides administrative services and the Funds pay a
fee to Hartford that is usually based on an annual percentage of the average
daily net assets of the Funds. These agreements may be different for each Fund
or each Fund family.
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 3.5% per year. We are not obligated to, but
may, credit more than 3.5% 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 3.5%.
The Fixed Account is not available in New Jersey or Texas.
CHARGES AND DEDUCTIONS
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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.
FRONT-END SALES LOAD -- We deduct a sales load from each premium you pay. The
current sales load is 4% of premium. The maximum sales load under the policy is
6% of premium.
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%.
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 monthly administrative charge;
- the mortality and expense risk charge;
- any Face Amount increase fee;
- any charges for additional benefits provided by rider;
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:
- the cost of insurance rate per $1,000, multiplied by
- the amount at risk, divided by
- $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. 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.
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.
MONTHLY ADMINISTRATIVE CHARGE -- We deduct a monthly administrative charge from
your Account Value to compensate us for issue and administrative costs of the
policy. During the first 5 years of the policy, the charge is $30 per month.
After 5 years, the charge is $10 per month. In New Jersey, this charge is $30
per month for all years.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
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MORTALITY AND EXPENSE RISK CHARGE -- We deduct a mortality and expense risk
charge each month from your Account Value. There are two components to the
mortality and expense risk charge. Part of the charge is assessed according to
your Account Value attributable to the Sub-Accounts, and the other part is
assessed based on the initial Face Amount of your policy. The mortality and
expense risk charge each month is equal to the sum of (a) and (b) where
(a) equals:
- the monthly accumulated value mortality and expense risk rate; multiplied by
- the sum of your accumulated values in the Sub-Accounts on the Monthly Activity
Date, prior to assessing the Monthly Deduction Amount.
and
(b) equals:
- the monthly mortality and expense risk rate per $1,000; multiplied by
- the initial Face Amount; divided by
- $1,000.
During the first 10 years, the current and maximum accumulated value mortality
and expense risk rate is 1/12 of 0.75% per month. Thereafter, the maximum is
1/12 of 0.60% per month. After the 10th policy year, the current accumulated
value mortality and expense risk rate is 1/12 of 0.50% per month on the first
$1,000,000 of accumulated value in the Sub-Accounts plus 1/12 of 0.25% per month
on the accumulated value in the Sub-Accounts that exceeds $1,000,000. The
maximum rate is 1/12 of 0.60% per month.
During the first 10 years, the Face Amount mortality and expense risk rate per
$1,000 of initial Face Amount is individualized based on issue ages and death
benefit guarantee, and is provided in the policy. In Maryland and New Jersey
this charge is individualized based on issue ages and initial Face Amount and is
provided in the policy. Thereafter, there is no charge.
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 the cost it incurs and the charges it
collects.
FACE AMOUNT INCREASE FEE -- We deduct a dollar amount from your Account Value
for an unscheduled increase of the Face Amount on your policy. We deduct the fee
each month for twelve months after the increase. The fee is 1/12 of $1.00 per
month per $1,000 of unscheduled increase in the Face Amount. The fee will not be
less than 1/12 of $500 per month, but will not exceed 1/12 of $3,000 per month.
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."
SURRENDER CHARGE -- During the first 9 policy years, surrender charges will be
deducted from your Account Value if:
- you surrender your policy;
- you decrease the Face Amount to an amount lower than it has ever been; or
- you take a withdrawal that causes the Face Amount to fall below the lowest
previous Face Amount.
The amount of surrender charge is individualized based on your issue ages,
sexes, insurance classes, duration, Face Amount and Death Benefit Guarantee
Amount. In Maryland and New Jersey the Death Benefit Guarantee amount is not
taken into account in the determination of the Surrender Charge. The charge
compensates us for expenses incurred in issuing the policy and the recovery of
acquisition costs. Hartford may keep any difference between the cost it incurs
and the charges it collects. For partial surrender charges applicable to a
decrease in the Face Amount or withdrawal, see "Unscheduled Increases and
Decreases in the Face Amount." The amount of surrender charge varies by policy
year and equals a percentage times the sum of two components: the sales
surrender charge and the underwriting surrender charge. The sales surrender
charge equals the Death Benefit Guarantee Premium. In Maryland and New Jersey
the sales Surrender Charge is based on the initial Face Amount. The underwriting
surrender charge equals $1 per $1000 of initial face amount, but is at least
$500 and no more than $3000.
The percentage by policy years is as follows:
<TABLE>
<CAPTION>
POLICY YEAR RATE
<S> <C> <C>
--------------------------
1 70%
--------------------------
2 70%
--------------------------
3 70%
--------------------------
4 60%
--------------------------
5 50%
--------------------------
6 40%
--------------------------
7 30%
--------------------------
8 20%
--------------------------
9 10%
--------------------------
10 and
after 0%
--------------------------
</TABLE>
CHARGES FOR THE FUNDS
The investment performance of each Fund reflects the management fee that the
Fund pays to its investment 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.
<PAGE>
18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
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; otherwise, it will be paid 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:
- the current Account Value, Cash Surrender Value and Face Amount;
- the premiums paid, monthly deduction amounts and any loans since your last
statement;
- the amount of any Indebtedness;
- any notifications required by the provisions of your policy; and
- 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 attributable to 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.
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 choices in
accordance with your premium allocation instructions. The dollar amount will be
allocated to the investment choices 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.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
--------------------------------------------------------------------------------
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 choices 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.
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 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 both insureds, subject to the conditions stated in the rider. This
rider is only available in Maryland and New Jersey.
- 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.
- 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.
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 3.5% 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 3.5% 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.
BENEFITS AT MATURITY -- The scheduled maturity date is the last date on which
you may elect to make premium payments. Unless you elect to continue the policy
beyond this date, the policy will terminate and any Cash Surrender Value will be
paid to you.
If elected, the policy may continue in force after the scheduled maturity date
if (a) the policy was in force on the scheduled maturity date; and (b) the owner
of the policy (including any assignee of record) agrees in writing to this
continuation.
At the scheduled maturity date:
- the death benefit will be reduced to the Account Value;
- the Account Value, if any, will continue to fluctuate with investment
performance
- any loans will continue to accrue interest and become part of Indebtedness
- no future Monthly Deduction Amounts will be deducted
- no further premium payments will be accepted.
All additional benefits provided by rider will deem to have terminated at the
scheduled maturity date.
Otherwise, the policy will terminate on the scheduled maturity date.
CLASS OF PURCHASERS
REDUCED CHARGES FOR ELIGIBLE GROUPS -- Certain charges and deductions described
above may be reduced for policies
<PAGE>
20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
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, i.e. 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 Face Amount. Policies generally
will be issued only on the lives of insureds between the ages of 20 and 85 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
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
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
--------------------------------------------------------------------------------
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, (i.e. 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 benefit described below, the death benefit under
each option is as follows:
- Under Option A, the current Face Amount.
- 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.
- Under Option C, the current Face Amount plus the lesser of: (a) the sum of the
premiums paid; or (b) $2.5 million.
DEATH BENEFIT OPTION CHANGES -- You may change your death benefit option. You
must notify us of the change in writing. You may change Option C or Option B to
Option A. If you do, the Face Amount will become that amount available as a
death benefit immediately prior to the option change. You may change Option A to
Option B. If you do, 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. Any resulting decrease in the Face Amount may be
subject to a partial surrender charge.
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> <C>
--------------------------------------------------------
Face Amount $100,000 $100,000
--------------------------------------------------------
Account Value 46,500 34,000
--------------------------------------------------------
Specified Percentage 250% 250%
--------------------------------------------------------
Death Benefit Option Level Level
--------------------------------------------------------
</TABLE>
<PAGE>
22 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
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%).
UNSCHEDULED INCREASES AND DECREASES IN FACE AMOUNT -- At any time after the
first policy year, you may request in writing to change the Face Amount. The
minimum amount by which the Face Amount can be increased or decreased is based
on our rules then in effect.
We reserve the right to limit the number of increases or decreases made under a
policy to no more than one in any 12 month period.
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 Monthly Activity Date shown on the new policy specifications
page, provided that the Monthly Deduction Amount for the first month after the
effective date of the increase is made. Each unscheduled increase in Face Amount
is subject to an increase fee of 1/12 of $1 per $1,000 of each increase per
month for the first twelve months from the effective date of each increase. This
amount will not be less than 1/12 of $500 but not greater than 1/12 of $3,000.
A decrease in the Face Amount will be effective on the Monthly Activity Date
following the date we receive your request in writing. The remaining Face Amount
must not be less than that specified in our minimum rules then in effect. If
during the surrender charge period, you decrease your Face Amount to an amount
lower than it has ever been, a partial surrender charge will be assessed.
The surrender charge assessed will be:
- the surrender charge applicable to the then current policy year, if any;
multiplied by
- the percentage described below.
The percentage will be determined by:
- subtracting the new Face Amount from the lowest previous Face Amount; and
- dividing that difference by the lowest previous Face Amount.
The surrender charge assessed will be deducted from your Account Value on the
Monthly Activity Date on which the decrease becomes effective. We will also
reduce the surrender charges applicable to future policy years and provide you a
revised schedule of surrender charges.
CHARGES AND POLICY VALUES -- Your policy values decrease due to the deduction of
policy charges. Policy 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 policy lapses, the policy 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. In such case you may be subject to a surrender charge, see
"Surrender Charge." 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.
WITHDRAWALS -- One withdrawal is allowed per calendar month. Withdrawals may be
subject to a surrender charge, see "Surrender Charge." You may request a
withdrawal in writing. The minimum withdrawal allowed is $500. The maximum
partial withdrawal is the Cash Surrender Value, minus $1000. If the death
benefit option then in effect is Option A or Option C, the Face Amount will be
reduced by the amount of any partial withdrawal. Unless specified, the
withdrawal will be deducted on a pro rata basis from the Fixed Account and the
Sub-Accounts. You may be assessed a charge of up to $10 for each partial
withdrawal.
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
begins on the day you get your policy and ends ten days after you get it (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.
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 the Cash Surrender
Value on the date we grant a loan. The minimum loan amount that we will allow is
$500.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
--------------------------------------------------------------------------------
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 Cash 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.
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 3.5%.
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 -- The table below shows the interest rates we will charge on
your Indebtedness.
<TABLE>
<CAPTION>
INTEREST RATE
PORTION OF CHARGED
DURING POLICY YEARS INDEBTEDNESS EQUALS 3.5% PLUS:
<S> <C> <C>
----------------------------------------------------------
1-10 All 2%
----------------------------------------------------------
11 and later Preferred 0%
Non-Preferred 1%
----------------------------------------------------------
</TABLE>
LAPSE AND REINSTATEMENT
--------------------------------------------------------------------------------
During the first policy year, the policy will go into default on any Monthly
Activity Date on which the Account Value less Indebtedness is not sufficient to
cover the Monthly Deduction Amount.
During the second policy year, the policy will go into default on any Monthly
Activity Date on which the Account Value less Indebtedness less 1/2 of the
surrender charge for the second policy year is not sufficient to cover the
Monthly Deduction Amount.
During the third policy year and thereafter, the policy will go into default on
any Monthly Activity Date if the Cash Surrender Value is not sufficient to cover
the Monthly Deduction Amount.
If the policy goes into default, we will send you a lapse notice warning you
that the policy is in danger of terminating. That lapse notice will tell you the
minimum premium required to keep the policy from terminating. This minimum
premium equals the amount to pay three Monthly Deduction Amounts as of the day
the policy grace period began. That notice will be mailed both to you on the
first day the policy goes into default, at your last know address, and to any
assignee of record.
GRACE PERIOD -- We will keep your policy in force for the 61 day period
following the date your policy goes into default. We call that period the policy
Grace Period. However, if we have not received the required premiums (specified
in your lapse notice) by the end of the policy Grace Period, the policy will
terminate unless the Death Benefit Guarantee is in effect. If the last surviving
insured dies during the Grace Period, we will pay the death benefit.
DEATH BENEFIT GUARANTEE -- The policy will remain in force at the end of the
policy Grace Period as long as the Death Benefit Guarantee is available, as
described below.
The Death Benefit Guarantee is available as long as:
- the policy is in the Death Benefit Guarantee Period; and
- on each Monthly Activity Date during that period, the cumulative premiums paid
into the policy, less Indebtedness and less withdrawals from the policy, equal
or exceed an amount known as the Cumulative Death Benefit Guarantee Premium.
The Death Benefit Guarantee Period is determined at issue, based on each
insured's age, sex and risk classification. Some states may limit the maximum
length of the Death Benefit Guarantee Period. In Massachusetts, the maximum
length of the Death Benefit Guarantee Period is five (5) years. The Cumulative
Death Benefit Guarantee Premium is the premium required to maintain the Death
Benefit Guarantee.
If the Death Benefit Guarantee is available and you fail to pay the required
premium as defined in your lapse notice by the end of
<PAGE>
24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
the policy grace period, the Death Benefit Guarantee will then go into effect.
The policy will remain in force, however:
- all riders will terminate;
- the Death Benefit Option becomes Level;
- the Face Amount will be reduced to the Death Benefit Guarantee Amount; and
- any future scheduled increases in the Face Amount will be canceled.
The Death Benefit Guarantee Amount is the amount selected by you at the time you
apply for the policy. It is the death benefit while the Death Benefit Guarantee
is in effect.
As long as the policy remains in default and the Death Benefit Guarantee is
available, the Death Benefit Guarantee will remain in effect on each subsequent
Monthly Activity Dates. You may be required to make premium payments to keep the
Death Benefit Guarantee available, as described above.
If during the Death Benefit Guarantee Period, the Face Amount is decreased below
the current Death Benefit Guarantee Amount, the Death Benefit Guarantee Amount
will become the new Face Amount. A new monthly Death Benefit Guarantee Premium
will be calculated. We will send you a notice of the new Monthly Death Benefit
Guarantee Premium, which will be used in calculating the Cumulative Death
Benefit Guarantee Premium in subsequent months.
DEATH BENEFIT GUARANTEE GRACE PERIOD -- If, on each Monthly Activity Date during
the Death Benefit Guarantee Period, the cumulative premiums paid into the
policy, less Indebtedness and less withdrawals from the policy, do not equal or
exceed the Cumulative Death Benefit Guarantee Premium on that date, a Death
Benefit Guarantee Grace Period of 61 days will begin. We will mail to you and
any assignee a notice. That notice will warn you that you are in danger of
losing the Death Benefit Guarantee and will tell you the amount of premium you
need to pay to continue the Death Benefit Guarantee.
The Death Benefit Guarantee will be removed from the policy if the required
premium is not paid by the end of the Death Benefit Guarantee Grace Period. You
will receive a written notification of the change and the Death Benefit
Guarantee will never again be available or in effect on the policy. If the Death
Benefit Guarantee was in effect, the policy will terminate at the end of the
Death Benefit Guarantee Grace Period.
REINSTATEMENT -- Unless the policy has been surrendered for its Cash Surrender
Value, the policy may be reinstated prior to the maturity date, provided:
- the insureds alive at the end of the grace period are also alive on the date
of reinstatement;
- You make your request in writing within five years from the date the policy
lapsed;
- You submit to us satisfactory evidence of insurability;
- any policy Indebtedness is repaid or carried over to the reinstated policy;
and
- 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:
- the Cash Value at the time of termination; plus
- Net Premiums derived from premiums paid at the time of reinstatement; minus
- the Monthly Deduction Amounts that were due and unpaid during the policy Grace
Period; plus
- the Surrender Charge at the time of reinstatement.
The surrender charge will be based on the duration from the original policy date
as though the policy had never lapsed.
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
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
--------------------------------------------------------------------------------
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 policy 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 7702 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 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.
<PAGE>
26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
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.
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 policy 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
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
--------------------------------------------------------------------------------
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 $675,000 (for 2000) from
the estate and gift tax. The Taxpayer Relief Act of 1997 gradually raises the
credit over the next six years to $1,000,000. In addition, an unlimited marital
deduction may be available for federal 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 NON-RESIDENT 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.
<PAGE>
28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
GLOSSARY OF SPECIAL TERMS
ACCOUNT VALUE: the total of all amounts in the Fixed Account, Loan Account and
Sub-Accounts.
CASH SURRENDER VALUE: the Cash Value less all Indebtedness.
CASH VALUE: the Account Value less any applicable Surrender Charges.
DEATH BENEFIT GUARANTEE AMOUNT: a benefit amount selected by you at the time you
apply for the policy. This is the death benefit that will apply to your policy
while the Death Benefit Guarantee is in effect.
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.
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: a subdivision of the Separate Account.
SURRENDER CHARGE: a charge that may be assessed if you surrender your policy or
the Face Amount is decreased.
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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
--------------------------------------------------------------------------------
WHERE YOU CAN FIND MORE INFORMATION
You can call us at 1-800-231-5453 to ask us questions. 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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
SEPARATE ACCOUNT VL II
This Statement of Additional Information is not a prospectus. To obtain a
prospectus, write us at P.O. Box 2999, Hartford, CT 06104-2999, or call us at
1-800-231-5453.
DATE OF PROSPECTUS: JANUARY 2, 2001
DATE OF STATEMENT OF ADDITIONAL INFORMATION: JANUARY 2, 2001
<PAGE>
2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
GENERAL INFORMATION AND HISTORY 3
----------------------------------------------------------------------
SERVICES 5
----------------------------------------------------------------------
EXPERTS 5
----------------------------------------------------------------------
DISTRIBUTION OF THE POLICIES 5
----------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT CHARGES 7
----------------------------------------------------------------------
ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES AND CASH
SURRENDER VALUES 8
----------------------------------------------------------------------
FINANCIAL STATEMENTS SA-1
----------------------------------------------------------------------
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION 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:
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS PROFESSION,
HARTFORD; VOCATION OR EMPLOYMENT FOR PAST
NAME YEAR OF ELECTION FIVE YEARS; OTHER DIRECTORSHIPS
<S> <C> <C>
-----------------------------------------------------------------------------------------------------------------
David A. Carlson Vice President, 1999 Assistant Vice President and Director of Taxes
(1998-1999), Hartford; CIGNA Corporation (1975-1998).
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),
Hartford Life Insurance Company.
Timothy M. Fitch Vice President, 1995 Vice President (1995-Present); Actuary (1994-Present);
Actuary, 1997 Assistant 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.
Mary Jane B. Fortin Vice President & Chief Vice President & Chief Accounting Office (1998-Present),
Accounting 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, Chief Senior Vice President (1998-present), Vice President
Financial Officer & (1998), Assistant Vice President (1995-1998), Hartford;
Treasurer, 1998 Senior Vice President (1998-Present), Hartford Life and
Director, 1999* Accident Insurance Company; Director, Strategic Planning
Corporate Finance (1995-1996), IA Product Development
(1994-1995), Hartford; Various Actuarial Roles
(1989-1993), Milliman & Robertson.
Lois W. Grady Senior Vice President, 1998 Vice President (1994-1998), Hartford; Senior Vice
Vice President, 1994 President (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.
</TABLE>
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
<TABLE>
-----------------------------------------------------------------------------------------------------------------
<CAPTION>
POSITION WITH OTHER BUSINESS PROFESSION,
HARTFORD; VOCATION OR EMPLOYMENT FOR PAST
NAME YEAR OF ELECTION FIVE YEARS; OTHER DIRECTORSHIPS
<S> <C> <C>
Stephen T. Joyce Senior Vice President, 1999 Vice President (1997-1999), Assistant Vice President
(1995-1997), Hartford; Assistant Vice President
(1994-1997), Hartford Life and Accident Insurance Company;
Vice President (1997-Present); Vice President (1997-1999);
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.
Robert A. Kerzner Senior Vice President, 1998 Director of Individual Life (1998-Present); Vice President
(1994-1998), Hartford; Senior Vice President
(1998-Present); Vice President (1994-1997); Regional Vice
President (1991-1994), Hartford Life Insurance Company.
Thomas M. Marra President, 2000 Executive Vice President (1996-2000), Senior Vice
Director, 1994* President (1993-1996); Hartford; Director (1994-Present);
Executive Vice President (1995-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); Senior Vice President (1994-1995); Vice
President (1989-1994); Actuary (1987-1995), Hartford Life
Insurance Company; Chief Operating Officer (2000-Present),
Executive Vice President, Individual Life and Annuities
(1997-2000), Hartford Life, Inc.
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.
Christine Hayer Senior Vice President, General Associate General Counsel (1998-2000), Assistant Corporate
Repasy Counsel, Corporate Secretary, Secretary (2000), Vice President (1999-2000), Assistant
Director 2001 Vice President (1997-1999), Hartford; Associate General
Counsel (1998-2000), Assistant Corporate Secretary (2000),
Vice President (1999-2000), Assistant Vice President
(1997-1999), Hartford Life Insurance Company
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION 5
--------------------------------------------------------------------------------
<TABLE>
-----------------------------------------------------------------------------------------------------------------
<CAPTION>
POSITION WITH OTHER BUSINESS PROFESSION,
HARTFORD; VOCATION OR EMPLOYMENT FOR PAST
NAME YEAR OF ELECTION FIVE YEARS; OTHER DIRECTORSHIPS
<S> <C> <C>
Lowndes A. Smith Chief Executive Officer, 1997 President (1989-2000), Chief Operating Officer
Director, 1985* (1989-1997), Hartford; Director (1981-Present); President
(1989-Present); Chief Executive Officer (1997-Present);
Chief Operating Officer (1989-1997), Hartford Life and
Accident Insurance Company; Director (1985-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.
John C. Walters Executive Vice President, Program Leader, Wheat First Securities, Inc./First Union
Director 2000 Capital Markets Corp., (1984-1999)
David M. Znamierowski Senior Vice President & Chief Vice President (1997); Senior Vice President (1997);
Investment Officer, 1997 Director, Risk Management Strategy (1996); Director
Director, 1998 (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.
Unless otherwise indicated, the principal business address of each of the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
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 Thomas P. Kalmbach, FSA, MAAA,
Actuary for Hartford, and are included in reliance upon his opinion as to their
reasonableness.
DISTRIBUTION OF THE 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
<PAGE>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
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 effect 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 POSITIONS AND OFFICES
<S> <C>
--------------------------------------------------------------------
David A. Carlson Vice President
--------------------------------------------------------------------
Peter W. Cummins Senior Vice President
--------------------------------------------------------------------
David T. Foy Treasurer
--------------------------------------------------------------------
J. Richard Garrett Vice President
--------------------------------------------------------------------
Christine Hayer Repasy Senior Vice President, General Counsel
and Corporate Secretary, Director
--------------------------------------------------------------------
George R. Jay Controller
--------------------------------------------------------------------
Robert A. Kerzner Executive Vice President, Director
--------------------------------------------------------------------
Joseph F. Mahoney Executive Vice President
--------------------------------------------------------------------
Thomas M. Marra President, Director
--------------------------------------------------------------------
Lowndes A. Smith Chief Executive Officer
--------------------------------------------------------------------
John C. Walters Executive Vice President
--------------------------------------------------------------------
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION 7
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT CHARGES
SALES LOAD -- The maximum sales load under the policy is 6% of premium in order
to cover expenses related to the sale and distribution of the Policy.
REDUCED CHARGES FOR ELIGIBLE GROUPS -- Certain 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, i.e. 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.
UNDERWRITING PROCEDURES -- To purchase a policy you must submit an application
to us. Within limits, you may choose the initial Face Amount. Policies generally
will be issued only on the lives of insureds between the ages of 20 and 85 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.
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 preferred and standard risks, the cost of insurance
rate 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. Special risk
classes are used when mortality experience in excess of the standard risk
classes is expected. These substandard risks will be charged a higher cost of
insurance rate 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.
INCREASES IN FACE AMOUNT -- At any time after the first policy year, you may
request in writing to change the Face Amount. The minimum amount by which the
Face Amount can be increased is based on our rules then in effect.
We reserve the right to limit the number of increases or decreases made under a
policy to no more than one in any 12 month period.
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 Monthly Activity Date shown on the new policy specifications
page, provided that the Monthly Deduction Amount for the first month after the
effective date of the increase is made. Each unscheduled increase in Face Amount
is subject to an increase fee of 1/12 of $1 per $1,000 of each increase per
month for the first twelve months from the effective date of each increase. This
amount will not be less than 1/12 of $500 but not greater than 1/12 of $3,000.
<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
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, Account Values and Cash Surrender 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%. The illustrations assume the
following: (a) a male, preferred non-nicotine, age 55, and a female, preferred
non-nicotine, age 55, with $1,000,000 of Face Amount, a Death Benefit Guarantee
Amount of $500,000, and a premium of $10,000.00 paid in all years; (b) a male,
preferred non-nicotine, age 55, and a female, preferred non-nicotine, age 55,
with $1,000,000 of Face Amount, a Death Benefit Guarantee Amount of $1,000,000,
and a premium of $20,000.00 paid in all years.
The Death Benefit, Account Value and Cash Surrender 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, Account
Values and Cash Surrender Values would change if current Cost of Insurance
charges change.
The amounts shown for the Death Benefits, Account Values and Cash Surrender
Values as of the end of each Policy Year take into account an average daily
charge equal to an annual charge of 1.09% 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 1.09% average daily charge) of
-1.09%, 4.91% and 10.91%, respectively.
In addition, the Death Benefits, Account Values and Cash Surrender Values as of
the end of each Policy Year take into account the front-end sales load, premium
tax charge (assumed to be 1.75% in these illustrations), Cost of Insurance
charge, monthly administrative fee, and mortality and expense risk charge.
The hypothetical returns shown in the tables 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 "Premium Paid Plus Interest" column of each table 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, 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>
STATEMENT OF ADDITIONAL INFORMATION 9
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$1,000,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$20,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (10.91% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -----------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------
1 21,000 16,546 2,424 1,000,000 16,106 1,984 1,000,000
2 43,050 34,747 20,625 1,000,000 33,712 19,590 1,000,000
3 66,203 54,775 40,652 1,000,000 52,949 38,827 1,000,000
4 90,513 76,806 64,701 1,000,000 73,956 61,851 1,000,000
5 116,038 101,037 90,950 1,000,000 96,886 86,798 1,000,000
6 142,840 127,946 119,876 1,000,000 122,153 114,083 1,000,000
7 170,982 157,534 151,482 1,000,000 149,702 143,650 1,000,000
8 200,531 190,063 186,028 1,000,000 179,713 175,679 1,000,000
9 231,558 225,822 223,804 1,000,000 212,381 210,363 1,000,000
10 264,136 265,123 265,123 1,000,000 247,918 247,918 1,000,000
11 298,343 313,105 313,105 1,000,000 290,787 290,787 1,000,000
12 334,260 366,026 366,026 1,000,000 337,580 337,580 1,000,000
13 371,973 424,398 424,398 1,000,000 388,708 388,708 1,000,000
14 411,571 488,781 488,781 1,000,000 444,654 444,654 1,000,000
15 453,150 559,804 559,804 1,000,000 505,974 505,974 1,000,000
16 496,807 638,165 638,165 1,000,000 573,314 573,314 1,000,000
17 542,648 724,637 724,637 1,000,000 647,451 647,451 1,000,000
18 590,780 820,095 820,095 1,000,000 729,341 729,341 1,000,000
19 641,319 925,517 925,517 1,008,814 820,212 820,212 1,000,000
20 694,385 1,041,928 1,041,928 1,114,863 921,678 921,678 1,000,000
25 1,002,269 1,836,935 1,836,935 1,928,782 1,510,604 1,510,604 1,691,134
30 1,395,216 3,146,183 3,146,183 3,303,492 2,695,080 2,695,080 2,829,834
----------------------------------------------------------------------------------------------------------------
</TABLE>
*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.
These values reflect Current Front-End Sales Loads of 4% and Guaranteed
Front-End Sales Loads of 6% in all years. The surrender charge effective in any
year can be determined by subtracting the cash surrender value from the account
value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
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>
10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$1,000,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$20,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (4.91% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ----------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
1 21,000 15,550 1,428 1,000,000 15,133 1,011 1,000,000
2 43,050 31,728 17,606 1,000,000 30,771 16,649 1,000,000
3 66,203 48,565 34,443 1,000,000 46,913 32,790 1,000,000
4 90,513 66,083 53,978 1,000,000 63,553 51,449 1,000,000
5 116,038 84,301 74,214 1,000,000 80,687 70,599 1,000,000
6 142,840 103,498 95,428 1,000,000 98,542 90,472 1,000,000
7 170,982 123,451 117,399 1,000,000 116,859 110,807 1,000,000
8 200,531 144,184 140,149 1,000,000 135,597 131,562 1,000,000
9 231,558 165,716 163,699 1,000,000 154,702 152,684 1,000,000
10 264,136 188,066 188,066 1,000,000 174,109 174,109 1,000,000
11 298,343 215,705 215,705 1,000,000 197,715 197,715 1,000,000
12 334,260 244,517 244,517 1,000,000 221,705 221,705 1,000,000
13 371,973 274,546 274,546 1,000,000 246,027 246,027 1,000,000
14 411,571 305,832 305,832 1,000,000 270,629 270,629 1,000,000
15 453,150 338,425 338,425 1,000,000 295,427 295,427 1,000,000
16 496,807 372,370 372,370 1,000,000 320,309 320,309 1,000,000
17 542,648 407,712 407,712 1,000,000 345,118 345,118 1,000,000
18 590,780 444,499 444,499 1,000,000 369,649 369,649 1,000,000
19 641,319 482,782 482,782 1,000,000 393,665 393,665 1,000,000
20 694,385 522,611 522,611 1,000,000 416,933 416,933 1,000,000
25 1,002,269 747,223 747,223 1,000,000 514,530 514,530 1,000,000
30 1,395,216 1,025,355 1,025,355 1,076,623 549,796 549,796 1,000,000
---------------------------------------------------------------------------------------------------------------
</TABLE>
*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.
These values reflect Current Front-End Sales Loads of 4% and Guaranteed
Front-End Sales Loads of 6% in all years. The surrender charge effective in any
year can be determined by subtracting the cash surrender value from the account
value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
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>
STATEMENT OF ADDITIONAL INFORMATION 11
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$1,000,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$20,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-1.09% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ---------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
1 21,000 14,556 433 1,000,000 14,163 41 1,000,000
2 43,050 28,832 14,710 1,000,000 27,950 13,828 1,000,000
3 66,203 42,839 28,717 1,000,000 41,347 27,225 1,000,000
4 90,513 56,575 44,470 1,000,000 54,336 42,231 1,000,000
5 116,038 70,038 59,951 1,000,000 66,894 56,806 1,000,000
6 142,840 83,473 75,403 1,000,000 79,229 71,159 1,000,000
7 170,982 96,627 90,575 1,000,000 91,059 85,007 1,000,000
8 200,531 109,494 105,459 1,000,000 102,328 98,293 1,000,000
9 231,558 122,068 120,050 1,000,000 112,966 110,948 1,000,000
10 264,136 134,335 134,335 1,000,000 122,890 122,890 1,000,000
11 298,343 150,469 150,469 1,000,000 135,769 135,769 1,000,000
12 334,260 166,303 166,303 1,000,000 147,725 147,725 1,000,000
13 371,973 181,831 181,831 1,000,000 158,668 158,668 1,000,000
14 411,571 197,041 197,041 1,000,000 168,499 168,499 1,000,000
15 453,150 211,925 211,925 1,000,000 177,079 177,079 1,000,000
16 496,807 226,469 226,469 1,000,000 184,217 184,217 1,000,000
17 542,648 240,650 240,650 1,000,000 189,657 189,657 1,000,000
18 590,780 254,444 254,444 1,000,000 193,053 193,053 1,000,000
19 641,319 267,819 267,819 1,000,000 193,990 193,990 1,000,000
20 694,385 280,733 280,733 1,000,000 192,002 192,002 1,000,000
25 1,002,269 335,917 335,917 1,000,000 117,777 117,777 1,000,000
30 1,395,216 359,397 359,397 1,000,000 0 0 0
--------------------------------------------------------------------------------------------------------------
</TABLE>
*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.
These values reflect Current Front-End Sales Loads of 4% and Guaranteed
Front-End Sales Loads of 6% in all years. The surrender charge effective in any
year can be determined by subtracting the cash surrender value from the account
value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
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>
12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$500,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$10,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (10.91% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ----------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
1 10,500 8,031 543 1,000,000 7,811 322 1,000,000
2 21,525 16,857 9,369 1,000,000 16,282 8,794 1,000,000
3 33,101 26,564 19,075 1,000,000 25,458 17,970 1,000,000
4 45,256 37,232 30,814 1,000,000 35,379 28,960 1,000,000
5 58,019 48,953 43,604 1,000,000 46,087 40,739 1,000,000
6 71,420 62,086 57,807 1,000,000 57,875 53,596 1,000,000
7 85,491 76,505 73,296 1,000,000 70,545 67,335 1,000,000
8 100,266 92,327 90,188 1,000,000 84,116 81,976 1,000,000
9 115,779 109,682 108,612 1,000,000 98,596 97,526 1,000,000
10 132,068 128,705 128,705 1,000,000 113,984 113,984 1,000,000
11 149,171 152,125 152,125 1,000,000 132,390 132,390 1,000,000
12 167,130 177,924 177,924 1,000,000 151,950 151,950 1,000,000
13 185,986 206,342 206,342 1,000,000 172,695 172,695 1,000,000
14 205,786 237,632 237,632 1,000,000 194,660 194,660 1,000,000
15 226,575 272,087 272,087 1,000,000 217,854 217,854 1,000,000
16 248,404 310,022 310,022 1,000,000 242,258 242,258 1,000,000
17 271,324 351,780 351,780 1,000,000 267,810 267,810 1,000,000
18 295,390 397,748 397,748 1,000,000 294,395 294,395 1,000,000
19 320,660 448,353 448,353 1,000,000 321,877 321,877 1,000,000
20 347,193 504,069 504,069 1,000,000 350,128 350,128 1,000,000
25 501,135 881,034 881,034 1,000,000 501,743 501,743 1,000,000
30 697,608 1,502,636 1,502,636 1,577,768 681,065 681,065 1,000,000
---------------------------------------------------------------------------------------------------------------
</TABLE>
*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.
These values reflect Current Front-End Sales Loads of 4% and Guaranteed
Front-End Sales Loads of 6% in all years. The surrender charge effective in any
year can be determined by subtracting the cash surrender value from the account
value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
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>
STATEMENT OF ADDITIONAL INFORMATION 13
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$500,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$10,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (4.91% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ---------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
1 10,500 7,540 52 1,000,000 7,332 0 1,000,000
2 21,525 15,377 7,889 1,000,000 14,843 7,355 1,000,000
3 33,101 23,528 16,040 1,000,000 22,518 15,030 1,000,000
4 45,256 32,000 25,581 1,000,000 30,334 23,915 1,000,000
5 58,019 40,797 35,448 1,000,000 38,264 32,915 1,000,000
6 71,420 50,181 45,902 1,000,000 46,516 42,237 1,000,000
7 85,491 59,914 56,705 1,000,000 54,803 51,593 1,000,000
8 100,266 69,998 67,858 1,000,000 63,053 60,914 1,000,000
9 115,779 80,433 79,363 1,000,000 71,176 70,107 1,000,000
10 132,068 91,215 91,215 1,000,000 79,063 79,063 1,000,000
11 149,171 104,745 104,745 1,000,000 88,586 88,586 1,000,000
12 167,130 118,819 118,819 1,000,000 97,727 97,727 1,000,000
13 185,986 133,449 133,449 1,000,000 106,349 106,349 1,000,000
14 205,786 148,640 148,640 1,000,000 114,299 114,299 1,000,000
15 226,575 164,404 164,404 1,000,000 121,370 121,370 1,000,000
16 248,404 180,745 180,745 1,000,000 127,287 127,287 1,000,000
17 271,324 197,657 197,657 1,000,000 131,684 131,684 1,000,000
18 295,390 215,135 215,135 1,000,000 134,077 134,077 1,000,000
19 320,660 233,164 233,164 1,000,000 133,875 133,875 1,000,000
20 347,193 251,719 251,719 1,000,000 130,391 130,391 1,000,000
25 501,135 350,519 350,519 1,000,000 31,119 31,119 1,000,000
30 697,608 445,523 445,523 1,000,000 0 0 0
--------------------------------------------------------------------------------------------------------------
</TABLE>
*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.
These values reflect Current Front-End Sales Loads of 4% and Guaranteed
Front-End Sales Loads of 6% in all years. The surrender charge effective in any
year can be determined by subtracting the cash surrender value from the account
value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
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>
14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$500,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$10,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-1.09% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ---------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
1 10,500 7,050 0 1,000,000 6,854 0 1,000,000
2 21,525 13,958 6,469 1,000,000 13,463 5,975 1,000,000
3 33,101 20,730 13,242 1,000,000 19,809 12,321 1,000,000
4 45,256 27,363 20,944 1,000,000 25,868 19,450 1,000,000
5 58,019 33,851 28,502 1,000,000 31,613 26,264 1,000,000
6 71,420 40,437 36,158 1,000,000 37,242 32,963 1,000,000
7 85,491 46,864 43,654 1,000,000 42,467 39,258 1,000,000
8 100,266 53,122 50,983 1,000,000 47,221 45,081 1,000,000
9 115,779 59,202 58,133 1,000,000 51,419 50,349 1,000,000
10 132,068 65,086 65,086 1,000,000 54,964 54,964 1,000,000
11 149,171 73,026 73,026 1,000,000 59,642 59,642 1,000,000
12 167,130 80,788 80,788 1,000,000 63,431 63,431 1,000,000
13 185,986 88,364 88,364 1,000,000 66,211 66,211 1,000,000
14 205,786 95,734 95,734 1,000,000 67,852 67,852 1,000,000
15 226,575 102,887 102,887 1,000,000 68,170 68,170 1,000,000
16 248,404 109,802 109,802 1,000,000 66,921 66,921 1,000,000
17 271,324 116,445 116,445 1,000,000 63,773 63,773 1,000,000
18 295,390 122,783 122,783 1,000,000 58,285 58,285 1,000,000
19 320,660 128,770 128,770 1,000,000 49,916 49,916 1,000,000
20 347,193 134,346 134,346 1,000,000 38,054 38,054 1,000,000
25 501,135 152,607 152,607 1,000,000 0 0 0
30 697,608 131,787 131,787 1,000,000 0 0 0
--------------------------------------------------------------------------------------------------------------
</TABLE>
*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.
These values reflect Current Front-End Sales Loads of 4% and Guaranteed
Front-End Sales Loads of 6% in all years. The surrender charge effective in any
year can be determined by subtracting the cash surrender value from the account
value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
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>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Financial Statements
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INDEX FOR HARTFORD AND FIDELITY
SUB-ACCOUNTS
Statements of Assets and
Liabilities For the Period Ended
September 30, 2000
(unaudited)..................... SA-2
Statements of Operations For the
Period Ended September 30, 2000
(unaudited)..................... SA-4
Statements of Changes in Net
Assets For the Period Ended
September 30, 2000
(unaudited)..................... SA-6
INDEX FOR PUTNAM SUB-ACCOUNTS
Statements of Assets and
Liabilities For the Period Ended
September 30, 2000
(unaudited)..................... SA-8
Statements of Operations For the
Period Ended September 30, 2000
(unaudited)..................... SA-12
Statements of Changes in Net
Assets For the Period Ended
September 30, 2000
(unaudited)..................... SA-15
</TABLE>
SA-1
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Assets and Liabilities (unaudited)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 Bond Stock Money Advisers Capital Mortgage Index
Fund Fund Market Fund Appreciation Securities Fund
Sub-Account Sub-Account Fund Sub-Account Fund Fund Sub-Account
Sub-Account Sub-Account Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
-------------------------------------------------------------------------------------------------------------------------
HARTFORD BOND HLS FUND, INC. --
CLASS IA
Shares 7,514,382
Cost $7,915,494
........................................................................................................................
Market Value $7,990,373 $ -- $ -- $ -- $ -- $ -- $ --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD STOCK HLS
FUND, INC. -- CLASS IA
Shares 5,294,047
Cost $34,679,305
........................................................................................................................
Market Value -- 32,906,774 -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS
FUND, INC. -- CLASS IA
Shares 31,594,607
Cost $31,594,607
........................................................................................................................
Market Value -- -- 31,594,607 -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD ADVISERS HLS
FUND, INC. -- CLASS IA
Shares 7,949,249
Cost $22,674,211
........................................................................................................................
Market Value -- -- -- 21,567,481 -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION HLS
FUND, INC. -- CLASS IA
Shares 3,745,296
Cost $21,015,095
........................................................................................................................
Market Value -- -- -- -- 23,650,071 -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD MORTGAGE SECURITIES HLS
FUND, INC. -- CLASS IA
Shares 1,003,299
Cost $1,081,666
........................................................................................................................
Market Value -- -- -- -- -- 1,101,616 --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INDEX HLS
FUND, INC. -- CLASS IA
Shares 9,625,511
Cost $35,192,153
........................................................................................................................
Market Value -- -- -- -- -- -- 39,243,361
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
OPPORTUNITIES HLS FUND, INC. --
CLASS IA
Shares 3,894,076
Cost $5,970,516
........................................................................................................................
Market Value -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life & Annuity
Insurance Company 20,520 76,469 206,964 76,630 222,713 3,040 630,903
........................................................................................................................
Receivable from fund shares sold -- -- -- -- -- -- --
........................................................................................................................
Total Assets 8,010,893 32,983,243 31,801,571 21,644,111 23,872,784 1,104,656 39,874,264
........................................................................................................................
LIABILITIES:
Due to Hartford Life & Annuity
Insurance Company -- -- -- -- -- -- --
........................................................................................................................
Payable for fund shares purchased 20,553 76,402 203,021 76,596 222,869 3,043 631,594
........................................................................................................................
TOTAL LIABILITIES 20,553 76,402 203,021 76,596 222,869 3043 631,594
-------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $7,990,340 $32,906,841 $31,598,550 $21,567,515 $23,649,915 $1,101,613 $39,242,670
-------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 5,107,956 8,994,897 22,110,371 8,000,325 5,821,905 708,325 11,141,646
........................................................................................................................
Unit Values $ 1.564293 $ 3.658390 $ 1.429128 $ 2.695830 $ 4.062230 $ 1.555236 $ 3.522161
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
September 30, 2000 International
Opportunities
Fund
Sub-Account
-----------------------------------------------------------
ASSETS
Investments:
----------------------------------------------------------------------
HARTFORD BOND HLS FUND, INC. --
CLASS IA
Shares 7,514,382
Cost $7,915,494
................................
Market Value $ --
---------------------------------------------------------------------------------
HARTFORD STOCK HLS
FUND, INC. -- CLASS IA
Shares 5,294,047
Cost $34,679,305
................................
Market Value --
--------------------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS
FUND, INC. -- CLASS IA
Shares 31,594,607
Cost $31,594,607
................................
Market Value --
-------------------------------------------------------------------------------------------------------
HARTFORD ADVISERS HLS
FUND, INC. -- CLASS IA
Shares 7,949,249
Cost $22,674,211
................................
Market Value --
------------------------------------------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION HLS
FUND, INC. -- CLASS IA
Shares 3,745,296
Cost $21,015,095
................................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD MORTGAGE SECURITIES HLS
FUND, INC. -- CLASS IA
Shares 1,003,299
Cost $1,081,666
................................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INDEX HLS
FUND, INC. -- CLASS IA
Shares 9,625,511
Cost $35,192,153
................................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
OPPORTUNITIES HLS FUND, INC. --
CLASS IA
Shares 3,894,076
Cost $5,970,516
................................
Market Value 5,674,413
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life & Annuity
Insurance Company 724,351
................................
Receivable from fund shares sold --
................................
Total Assets 6,398,764
................................
LIABILITIES:
Due to Hartford Life & Annuity
Insurance Company --
................................
Payable for fund shares purchased 724,458
................................
TOTAL LIABILITIES 724,458
-------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $5,674,306
-------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 2,717,349
................................
Unit Values $ 2.088177
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-2
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Assets and Liabilities (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 Dividend Growth International Small MidCap Fidelity VIP Fidelity
and Growth and Income Advisers Company Fund Equity-Income VIP
Fund Fund Fund Fund Sub-Account Portfolio Overseas
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Portfolio
Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
-------------------------------------------------------------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH
HLS FUND, INC. -- CLASS IA
Shares 5,186,170
Cost $10,813,960
........................................................................................................................
Market Value $10,649,318 $ -- $ -- $ -- $ -- $ -- $ --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD GROWTH AND INCOME
HLS FUND, INC. -- CLASS IA
Shares 2,961,844
Cost $4,038,772
........................................................................................................................
Market Value -- 4,261,042 -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
ADVISERS HLS FUND, INC. --
CLASS IA
Shares 386,985
Cost $487,391
........................................................................................................................
Market Value -- -- 475,840 -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD SMALL COMPANY HLS
FUND, INC. -- CLASS IA
Shares 1,808,038
Cost $3,552,000
........................................................................................................................
Market Value -- -- -- 3,447,890 -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD MIDCAP HLS
FUND, INC. -- CLASS IA
Shares 2,823,096
Cost $6,033,426
........................................................................................................................
Market Value -- -- -- -- 7,411,236 -- --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME
PORTFOLIO
Shares 244,344
Cost $5,878,670
........................................................................................................................
Market Value -- -- -- -- -- 5,996,190 --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS
PORTFOLIO
Shares 190,098
Cost $4,183,903
........................................................................................................................
Market Value -- -- -- -- -- -- 4,136,542
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP II ASSET MANAGER
PORTFOLIO
Shares 165,358
Cost $2,832,037
........................................................................................................................
Market Value -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life &
Annuity Insurance Company 4,242 43,308 2,372 93,067 252,603 -- 14
........................................................................................................................
Receivable from fund shares
sold -- -- -- -- -- 1,188 --
........................................................................................................................
Total Assets 10,653,560 4,304,350 478,212 3,540,957 7,663,839 5,997,378 4,136,556
........................................................................................................................
LIABILITIES:
Due to Hartford Life &
Annuity Insurance Company -- -- -- -- -- 1,326 --
........................................................................................................................
Payable for fund shares
purchased 4,263 43,328 2,375 93,078 252,610 -- --
........................................................................................................................
TOTAL LIABILITIES 4,263 43,328 2,375 93,078 252,610 1,326 --
-------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $10,649,297 $4,261,022 $ 475,837 $3,447,879 $7,411,229 $5,996,052 $4,136,556
-------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 4,132,024 2,994,553 402,202 1,967,006 3,321,369 2,760,780 2,153,983
........................................................................................................................
Unit Values $ 2.577259 $ 1.422924 $ 1.183079 $ 1.752856 $ 2.231378 $ 2.171869 $ 1.920422
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
September 30, 2000 Fidelity
VIP II
Asset
Manager
Portfolio
Sub-Account
-------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments:
-------------------------------------------------------------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH
HLS FUND, INC. -- CLASS IA
Shares 5,186,170
Cost $10,813,960
............................
Market Value $ --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD GROWTH AND INCOME
HLS FUND, INC. -- CLASS IA
Shares 2,961,844
Cost $4,038,772
............................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
ADVISERS HLS FUND, INC. --
CLASS IA
Shares 386,985
Cost $487,391
............................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD SMALL COMPANY HLS
FUND, INC. -- CLASS IA
Shares 1,808,038
Cost $3,552,000
............................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD MIDCAP HLS
FUND, INC. -- CLASS IA
Shares 2,823,096
Cost $6,033,426
............................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME
PORTFOLIO
Shares 244,344
Cost $5,878,670
............................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS
PORTFOLIO
Shares 190,098
Cost $4,183,903
............................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP II ASSET MANAGER
PORTFOLIO
Shares 165,358
Cost $2,832,037
............................
Market Value 2,751,550
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life &
Annuity Insurance Company --
............................
Receivable from fund shares
sold --
............................
Total Assets 2,751,550
............................
LIABILITIES:
Due to Hartford Life &
Annuity Insurance Company 3
............................
Payable for fund shares
purchased --
............................
TOTAL LIABILITIES 3
-------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $2,751,547
-------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 1,415,440
............................
Unit Values $ 1.943951
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-3
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Operations (unaudited)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Bond Stock Money Advisers Capital Mortgage Index
September 30, 2000 Fund Fund Market Fund Appreciation Securities Fund
Sub-Account Sub-Account Fund Sub-Account Fund Fund Sub-Account
Sub-Account Sub-Account Sub-Account
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 38,669 $ 7,409 $1,250,566 $ 40,704 $ 7,511 $ 6,896 $ 3,610
............................................................................................................................
Capital gains income -- 3,059,824 (739) 1,620,074 2,481,806 -- 338,727
............................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
............................................................................................................................
Net realized gain (loss) on
security transactions 26,463 (14,799) -- (29,127) (104,658) 178 (3,364)
............................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 484,317 (3,803,357) -- (1,562,856) 340,063 52,654 (841,310)
............................................................................................................................
Net gain (loss) on investments 510,780 (3,818,156) -- (1,591,983) 235,405 52,832 (844,674)
-----------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $549,449 $ (750,923) $1,249,827 $ 68,795 $2,724,722 $59,728 $(502,337)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended International
September 30, 2000 Opportunities
Fund
Sub-Account
--------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 29,701
................................
Capital gains income 475,725
................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
................................
Net realized gain (loss) on
security transactions 128,103
................................
Net unrealized appreciation
(depreciation) of investments
during the period (1,055,552)
................................
Net gain (loss) on investments (927,449)
---------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ (422,023)
----------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-4
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Operations (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Dividend Growth International Small MidCap Fidelity VIP Fidelity
September 30, 2000 and Growth and Income Advisers Company Fund Equity-Income VIP
Fund Fund Fund Fund Sub-Account Portfolio Overseas
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Portfolio
Sub-Account
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 7,056 $ 172 $ 4,149 $ -- $ -- $ 62,505 $ 37,000
...............................................................................................................................
Capital gains income 774,909 35,805 22,479 317,699 206,296 235,484 233,002
...............................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
...............................................................................................................................
Net realized (loss) gain on
security transactions (25,891) (1,883) 3,557 (60,034) 4,408 8,573 46,578
...............................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (260,045) 20,238 (47,020) (441,236) 996,812 11,852 (530,125)
...............................................................................................................................
Net gain (loss) on investments (285,936) 18,355 (43,463) (501,270) 1,001,220 20,425 (483,547)
--------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 496,029 $54,332 $(16,835) $(183,571) $1,207,516 $318,414 $(213,545)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended Fidelity
September 30, 2000 VIP II
Asset
Manager
Portfolio
Sub-Account
-----------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 59,726
................................
Capital gains income 140,711
................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
................................
Net realized (loss) gain on
security transactions (7,282)
................................
Net unrealized appreciation
(depreciation) of investments
during the period (180,578)
................................
Net gain (loss) on investments (187,860)
----------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 12,577
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-5
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Changes in Net Assets (unaudited)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Bond Stock Money Advisers Capital Mortgage Index
September 30, 2000 Fund Fund Market Fund Appreciation Securities Fund
Sub-Account Sub-Account Fund Sub-Account Fund Fund Sub-Account
Sub-Account Sub-Account Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 38,669 $ 7,409 $ 1,250,566 $ 40,704 $ 7,511 $ 6,896 $ 3,610
........................................................................................................................
Capital gains income -- 3,059,824 (739) 1,620,074 2,481,806 -- 338,727
........................................................................................................................
Net realized gain (loss) on
security transactions 26,463 (14,799) -- (29,127) (104,658) 178 (3,364)
........................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 484,317 (3,803,357) -- (1,562,856) 340,063 52,654 (841,310)
........................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 549,449 (750,923) 1,249,827 68,795 2,724,722 59,728 (502,337)
........................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,419,321 5,005,928 89,228,782 3,284,964 3,394,462 124,742 4,918,736
........................................................................................................................
Net transfers 389,234 11,310,878 (89,798,781) 5,805,901 8,055,227 329,715 9,526,065
........................................................................................................................
Surrenders for benefit payments
and fees (166,647) (724,352) (220,909) (594,986) (418,028) (6,205) (722,957)
........................................................................................................................
Net loan withdrawals (498) (48,818) (246,159) (12,269) (13,190) -- (11,162)
........................................................................................................................
Cost of insurance (308,805) (1,629,859) (3,778,178) (1,175,470) (1,018,489) (29,601) (1,315,478)
........................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 1,332,605 13,913,777 (4,815,245) 7,308,140 9,999,982 418,651 12,395,204
........................................................................................................................
Total increase (decrease) in net
assets 1,882,054 13,162,854 (3,565,418) 7,376,935 12,724,704 478,379 11,892,867
........................................................................................................................
NET ASSETS:
Beginning of period 6,108,286 19,743,987 35,163,968 14,190,580 10,925,211 623,234 27,349,803
-------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $7,990,340 $32,906,841 $31,598,550 $21,567,515 $23,649,915 $1,101,613 $39,242,670
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended International
September 30, 2000 Opportunities
Fund
Sub-Account
-------------------------------------------------------------
OPERATIONS:
Net investment income $ 29,701
................................
Capital gains income 475,725
................................
Net realized gain (loss) on
security transactions 128,103
................................
Net unrealized appreciation
(depreciation) of investments
during the period (1,055,552)
................................
Net increase (decrease) in net
assets resulting from
operations (422,023)
................................
UNIT TRANSACTIONS:
Purchases 701,331
................................
Net transfers 2,643,195
................................
Surrenders for benefit payments
and fees (93,986)
................................
Net loan withdrawals (18,397)
................................
Cost of insurance (187,945)
................................
Net increase (decrease) in net
assets resulting from unit
transactions 3,044,198
................................
Total increase (decrease) in net
assets 2,622,175
................................
NET ASSETS:
Beginning of period 3,052,131
-------------------------------------------------------------------------
END OF PERIOD $5,674,306
-------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-6
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Changes in Net Assets (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Dividend Growth International Small MidCap Fidelity VIP Fidelity
September 30, 2000 and Growth and Income Advisers Company Fund Equity-Income VIP
Fund Fund Fund Fund Sub-Account Portfolio Overseas
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Portfolio
Sub-Account
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 7,056 $ 172 $ 4,149 $ -- $ -- $ 62,505 $ 37,000
............................................................................................................................
Capital gains income 774,909 35,805 22,479 317,699 206,296 235,484 233,002
............................................................................................................................
Net realized (loss) gain on
security transactions (25,891) (1,883) 3,557 (60,034) 4,408 8,573 46,578
............................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (260,045) 20,238 (47,020) (441,236) 996,812 11,852 (530,125)
............................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 496,029 54,332 (16,835) (183,571) 1,207,516 318,414 (213,545)
............................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,683,743 443,409 72,525 521,781 632,345 1,147,605 350,805
............................................................................................................................
Net transfers 2,577,823 1,884,807 184,552 2,015,679 3,771,845 1,394,607 2,207,599
............................................................................................................................
Surrenders for benefit payments
and fees (191,278) (44,688) (9,615) (17,036) (73,941) (116,176) (60,874)
............................................................................................................................
Net loan withdrawals (9,476) (11,044) -- (8,799) (9,099) (22,320) (39)
............................................................................................................................
Cost of insurance (362,741) (211,119) (17,135) (173,961) (285,913) (268,584) (136,408)
............................................................................................................................
Net increase in net assets
resulting from unit
transactions 3,698,071 2,061,365 230,327 2,337,664 4,035,237 2,135,132 2,361,083
............................................................................................................................
Total increase in net assets 4,194,100 2,115,697 213,492 2,154,093 5,242,753 2,453,546 2,147,538
............................................................................................................................
NET ASSETS:
Beginning of period 6,455,197 2,145,325 262,345 1,293,786 2,168,476 3,542,506 1,989,018
-----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $10,649,297 $4,261,022 $475,837 $3,447,879 $7,411,229 $5,996,052 $4,136,556
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended Fidelity
September 30, 2000 VIP II
Asset
Manager
Portfolio
Sub-Account
-------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 59,726
................................
Capital gains income 140,711
................................
Net realized (loss) gain on
security transactions (7,282)
................................
Net unrealized appreciation
(depreciation) of investments
during the period (180,578)
................................
Net increase (decrease) in net
assets resulting from
operations 12,577
................................
UNIT TRANSACTIONS:
Purchases 257,110
................................
Net transfers 1,045,311
................................
Surrenders for benefit payments
and fees (292,178)
................................
Net loan withdrawals --
................................
Cost of insurance (82,276)
................................
Net increase in net assets
resulting from unit
transactions 927,967
................................
Total increase in net assets 940,544
................................
NET ASSETS:
Beginning of period 1,811,003
-------------------------------------------------------------------------------------------------------------
END OF PERIOD $2,751,547
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-7
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Assets & Liabilities (unaudited)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 Asia Diversified The George Global Global Growth Health
Pacific Income Putnam Asset Growth and Income Sciences
Growth Sub-Account Fund Allocation Sub-Account Sub-Account Sub-Account
Sub-Account of Boston Sub-Account
Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
-------------------------------------------------------------------------------------------------------------------------
PUTNAM VT ASIA PACIFIC GROWTH
FUND
Shares 53,737
Cost $676,738
........................................................................................................................
Market Value: $603,461 $ -- $ -- $ -- $ -- $ -- $ --
-------------------------------------------------------------------------------------------------------------------------
PUTNAM VT DIVERSIFIED INCOME FUND
Shares 72,469
Cost $724,439
........................................................................................................................
Market Value: -- 668,164 -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
PUTNAM VT THE GEORGE PUTNAM FUND
OF BOSTON
Shares 54,369
Cost $550,851
........................................................................................................................
Market Value: -- -- 567,073 -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL ASSET ALLOCATION
FUND
Shares 80,109
Cost $1,424,352
........................................................................................................................
Market Value: -- -- -- 1,377,082 -- -- --
-------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL GROWTH FUND
Shares 391,945
Cost $8,586,251
........................................................................................................................
Market Value: -- -- -- -- 8,548,311 -- --
-------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GROWTH AND INCOME FUND
Shares 672,947
Cost $17,627,510
........................................................................................................................
Market Value: -- -- -- -- -- 16,689,093 --
-------------------------------------------------------------------------------------------------------------------------
PUTNAM VT HEALTH SCIENCES FUND
Shares 170,361
Cost $2,079,288
........................................................................................................................
Market Value: -- -- -- -- -- -- 2,509,424
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company - 3,432 2 15 40,817 7,574 (1,065)
........................................................................................................................
Receivable from fund shares sold 132,954 -- -- -- -- -- --
........................................................................................................................
Total Assets 736,415 671,596 567,075 1,377,097 8,589,128 16,696,667 2,510,489
........................................................................................................................
LIABILITIES
Due to Hartford Life Insurance
Company 133,025 -- -- -- -- -- -
........................................................................................................................
Payable for fund shares purchased - 3,432 -- - 41,194 7,374 1,454
........................................................................................................................
TOTAL LIABILITIES 133,025 3,432 -- -- 41,194 7,374 1,454
-------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $603,390 $ 668,164 $567,075 $1,377,097 $8,547,934 $16,689,293 $2,509,035
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-8
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Assets & Liabilities (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 High Yield Income International International International Investors
Sub-Account Sub-Account Growth Growth and New Sub-Account
Sub-Account Income Opportunities
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT HIGH YIELD FUND
Shares 511,936
Cost $5,583,696
.......................................................................................................................
Market Value: $4,904,343 $ -- $ -- $ -- $ -- $ --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INCOME FUND
Shares 231,713
Cost $2,966,496
.......................................................................................................................
Market Value: -- 2,836,164 -- -- -- --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH
FUND
Shares 220,398
Cost $4,213,319
.......................................................................................................................
Market Value: -- -- 3,980,394 -- -- --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH
AND INCOME FUND
Shares 145,826
Cost $1,953,064
.......................................................................................................................
Market Value: -- -- -- 1,859,287 -- --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL NEW
OPPORTUNITIES FUND
Shares 194,967
Cost $3,628,350
.......................................................................................................................
Market Value: -- -- -- -- 3,285,202 --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INVESTORS FUND
Shares 301,733
Cost $4,198,515
.......................................................................................................................
Market Value: -- -- -- -- -- 4,384,188
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT MONEY MARKET FUND
Shares 1,865,766
Cost $1,865,766
.......................................................................................................................
Market Value: -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company 407 5 55,704 -- 1,535 1,279
.......................................................................................................................
Receivable from fund shares sold -- -- -- -- -- --
.......................................................................................................................
Total Assets 4,904,750 2,836,169 4,036,098 1,859,287 3,286,737 4,385,467
.......................................................................................................................
LIABILITIES
Due to Hartford Life Insurance
Company -- -- -- 11 -- --
.......................................................................................................................
Payable for fund shares purchased 387 -- 55,212 -- 1,625 1,255
.......................................................................................................................
TOTAL LIABILITIES 387 -- 55,212 11 1,625 1,255
------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $4,904,363 $2,836,169 $3,980,886 $1,859,276 $3,285,112 $4,384,212
------------------------------------------------------------------------------------------------------------------------
<S> <C>
September 30, 2000 Money
Market
Sub-Account
--------------------------------------------------------------
ASSETS
Investments:
----------------------------------------------------------------------------
PUTNAM VT HIGH YIELD FUND
Shares 511,936
Cost $5,583,696
................................
Market Value: $ --
------------------------------------------------------------------------------------------
PUTNAM VT INCOME FUND
Shares 231,713
Cost $2,966,496
................................
Market Value: --
--------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH
FUND
Shares 220,398
Cost $4,213,319
................................
Market Value: --
----------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH
AND INCOME FUND
Shares 145,826
Cost $1,953,064
................................
Market Value: --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL NEW
OPPORTUNITIES FUND
Shares 194,967
Cost $3,628,350
................................
Market Value: --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INVESTORS FUND
Shares 301,733
Cost $4,198,515
................................
Market Value: --
------------------------------------------------------------------------------------------------------------------------
PUTNAM VT MONEY MARKET FUND
Shares 1,865,766
Cost $1,865,766
................................
Market Value: 1,865,766
------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company --
................................
Receivable from fund shares sold 8,683
................................
Total Assets 1,874,449
................................
LIABILITIES
Due to Hartford Life Insurance
Company 8,401
................................
Payable for fund shares purchased --
................................
TOTAL LIABILITIES 8,401
------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $1,866,048
------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-9
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Assets & Liabilities (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 New New Value OTC & Utilities Vista Voyager
Opportunities Sub-Account Emerging Growth Sub-Account Sub-Account
Sub-Account Growth and Income
Sub-Account Sub-Account
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
---------------------------------------------------------------------------------------------------------------
PUTNAM VT NEW OPPORTUNITIES FUND
Shares 248,033
Cost $8,610,079
..............................................................................................................
Market Value: $10,409,949 $ -- $ -- $ -- $ -- $ --
---------------------------------------------------------------------------------------------------------------
PUTNAM VT NEW VALUE FUND
Shares 153,610
Cost $1,823,205
..............................................................................................................
Market Value: -- 1,894,009 -- -- -- --
---------------------------------------------------------------------------------------------------------------
PUTNAM VT OTC & EMERGING GROWTH
FUND
Shares 121,450
Cost $2,395,820
..............................................................................................................
Market Value: -- -- 2,252,891 -- -- --
---------------------------------------------------------------------------------------------------------------
PUTNAM VT UTILITIES GROWTH &
INCOME FUND
Shares 122,181
Cost $2,034,678
..............................................................................................................
Market Value: -- -- -- 2,161,388 -- --
---------------------------------------------------------------------------------------------------------------
PUTNAM VT VISTA FUND
Shares 139,778
Cost $3,056,914
..............................................................................................................
Market Value: -- -- -- -- 3,465,099 --
---------------------------------------------------------------------------------------------------------------
PUTNAM VT VOYAGER FUND
Shares 364,702
Cost $19,441,087
..............................................................................................................
Market Value: -- -- -- -- -- 20,864,578
---------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company -- 136 655 4,226 12,573 37,843
..............................................................................................................
Receivable from fund shares sold 191,561 -- -- -- -- --
..............................................................................................................
Total Assets 10,601,510 1,894,145 2,253,546 2,165,614 3,477,672 20,902,421
..............................................................................................................
LIABILITIES
Due to Hartford Life Insurance
Company 191,149 -- -- -- -- --
..............................................................................................................
Payable for fund shares purchased -- -- -- 4,290 12,177 34,539
..............................................................................................................
TOTAL LIABILITIES 191,149 -- -- 4,290 12,177 34,539
---------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $10,410,361 $1,894,145 $2,253,546 $2,161,324 $3,465,495 $20,867,882
---------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-10
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Assets & Liabilities (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 Units Unit Contract
Owned by Price Liability
Participants
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Variable life contracts:
Asia Pacific Growth Fund 40,400 $14.935338 $ 603,390
...................................................................................
Diversified Income Fund 50,953 13.113302 668,164
...................................................................................
George Putnam Fund of Boston 51,363 11.040569 567,075
...................................................................................
Global Asset Allocation Fund 60,359 22.815002 1,377,097
...................................................................................
Global Growth Fund 259,185 32.980056 8,547,934
...................................................................................
Growth and Income Fund 620,729 26.886600 16,689,293
...................................................................................
Health Sciences Fund 165,596 15.151502 2,509,035
...................................................................................
High Yield Fund 304,351 16.114172 4,904,363
...................................................................................
Income Fund 187,848 15.098227 2,836,169
...................................................................................
International Growth Fund 275,242 14.463235 3,980,886
...................................................................................
International Growth and Income Fund 156,999 11.842557 1,859,276
...................................................................................
International New Opportunities Fund 219,783 14.947040 3,285,112
...................................................................................
Investors Fund 314,281 13.949961 4,384,212
...................................................................................
Money Market Fund 1,315,863 1.418117 1,866,048
...................................................................................
New Opportunities Fund 260,454 39.970028 10,410,361
...................................................................................
New Value Fund 159,245 11.894540 1,894,145
...................................................................................
OTC & Emerging Growth Fund 112,430 20.043914 2,253,546
...................................................................................
Utilities Growth and Income Fund 87,628 24.664702 2,161,324
...................................................................................
Vista Fund 176,299 19.656868 3,465,495
...................................................................................
Voyager Fund 466,936 44.691134 20,867,882
...................................................................................
GRAND TOTAL: $95,130,807
------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-11
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Operations (unaudited)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Asia Diversified The George Global Global Growth Health
September 30, 2000 Pacific Income Putnam Asset Growth and Income Sciences
Growth Sub-Account Fund Allocation Sub-Account Sub-Account Sub-Account
Sub-Account of Boston Sub-Account
Sub-Account
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 27,228 $ 42,580 $ -- $ 12,034 $ 52,321 $ 219,766 $ --
......................................................................................................................
Capital gains income -- -- -- 62,848 1,303,909 1,034,713 --
......................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
......................................................................................................................
Net realized gain (loss) on
security transactions 994 1,202 (15) 54 (35,632) (26,064) (10,267)
......................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (299,791) (37,982) 23,766 (93,212) (2,738,089) (542,870) 401,443
......................................................................................................................
Net (loss) gain on investments (298,797) (36,780) 23,751 (93,158) (2,773,721) (568,934) 391,176
-----------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS: $(271,569) $ 5,800 $23,751 $(18,276) $(1,417,491) $ 685,545 $391,176
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-12
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Operations (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended High Yield Income International International International Investors
September 30, 2000 Sub-Account Sub-Account Growth Growth and New Sub-Account
Sub-Account Income Opportunities
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 466,428 $183,713 $ 40,512 $ 32,920 $ 471 $ --
.......................................................................................................................
Capital gains income -- -- 175,715 72,162 44,254 --
------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
.......................................................................................................................
Net realized (loss) gain on
security transactions (7,217) (11,048) 14,964 25,712 231,244 (9,911)
.......................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (571,009) (42,201) (503,625) (133,232) (534,588) (129,450)
.......................................................................................................................
Net (loss) gain on investments (578,226) (53,249) (488,661) (107,520) (303,344) (139,361)
------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS: $(111,798) $130,464 $(272,434) $ (2,438) $(258,619) $(139,361)
------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended Money
September 30, 2000 Market
Sub-Account
--------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 98,605
................................
Capital gains income --
----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
................................
Net realized (loss) gain on
security transactions --
................................
Net unrealized (depreciation)
appreciation of investments
during the period --
................................
Net (loss) gain on investments --
------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS: $ 98,605
--------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-13
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Operations (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended New New OTC & Utilities Vista Voyager
September 30, 2000 Opportunities Value Emerging Growth Sub-Account Sub-Account
Sub-Account Sub-Account Growth and
Sub-Account Income
Sub-Account
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ 13,729 $ -- $ 44,777 $ -- $ 4,464
............................................................................................................
Capital gains income 585,307 48,619 12,177 79,045 15,030 1,894,262
-------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
............................................................................................................
Net realized (loss) gain on
security transactions (101,488) (5,820) (15,039) (16,860) (20,259) 1,416
............................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (298,837) 87,169 (352,082) 119,606 265,990 (2,334,093)
............................................................................................................
Net (loss) gain on investments (400,325) 81,349 (367,121) 102,746 245,731 (2,332,677)
-------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS: $ 184,982 $143,697 $(354,944) $226,568 $260,761 $ (433,951)
-------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-14
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Changes in Net Assets (unaudited)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Asia Diversified The George Global Asset Global Growth Health
September 30, 2000 Pacific Income Putnam Fund Allocation Growth and Income Sciences
Growth Sub-Account of Boston Sub-Account Sub-Account Sub-Account Sub-Account
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 27,228 $ 42,580 $ -- $ 12,034 $ 52,321 $ 219,766 $ --
.............................................................................................................................
Capital gains income -- -- -- 62,848 1,303,909 1,034,713 --
.............................................................................................................................
Net realized gain (loss) on
security transactions 994 1,202 (15) 54 (35,632) (26,064) (10,267)
.............................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (299,791) (37,982) 23,766 (93,212) (2,738,089) (542,870) 401,443
.............................................................................................................................
Net (decrease) increase in net
assets resulting from
operations (271,569) 5,800 23,751 (18,276) (1,417,491) 685,545 391,176
.............................................................................................................................
UNIT TRANSACTIONS:
Purchases 82,533 51,287 89,619 181,242 1,867,759 2,689,788 263,170
.............................................................................................................................
Net transfers 63,445 153,866 235,062 647,733 1,028,982 4,697,316 1,409,194
.............................................................................................................................
Surrenders for benefit payments
and fees (9,343) (89,908) (10,095) (14,905) (457,308) (306,181) (64,926)
.............................................................................................................................
Net loan activity -- -- -- -- (18,965) (5,793) (18)
.............................................................................................................................
Cost of insurance (29,558) (31,555) (29,554) (45,757) (293,928) (745,281) (98,454)
.............................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 107,077 83,690 285,032 768,313 2,126,540 6,329,849 1,508,966
.............................................................................................................................
Total (decrease) increase in net
assets (164,492) 89,490 308,783 750,037 709,049 7,015,394 1,900,142
.............................................................................................................................
NET ASSETS:
Beginning of period 767,882 578,674 258,292 627,060 7,838,885 9,673,899 608,893
------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $603,390 $ 668,164 $567,075 $1,377,097 $8,547,934 $16,689,293 $2,509,035
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-15
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Changes in Net Assets (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended High Yield Income International International International Investors
September 30, 2000 Sub-Account Sub-Account Growth Growth and New Sub-Account
Sub-Account Income Opportunities
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 466,428 $ 183,713 $ 40,512 $ 32,920 $ 471 $ --
.......................................................................................................................
Capital gains income -- -- 175,715 72,162 44,254 --
.......................................................................................................................
Net realized (loss) gain on
security transactions (7,217) (11,048) 14,964 25,712 231,244 (9,911)
.......................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (571,009) (42,201) (503,625) (133,232) (534,588) (129,450)
.......................................................................................................................
Net (decrease) increase in net
assets resulting from
operations (111,798) 130,464 (272,434) (2,438) (258,619) (139,361)
.......................................................................................................................
UNIT TRANSACTIONS:
Purchases 660,989 424,515 543,168 162,724 160,642 747,207
.......................................................................................................................
Net transfers 904,849 116,012 2,974,374 1,347,458 2,943,281 2,137,151
.......................................................................................................................
Surrenders for benefit payments
and fees (103,086) (111,646) 2,433 (17,264) (20,699) (71,350)
.......................................................................................................................
Net loan activity (3,862) (8,019) (4,947) -- (36) --
.......................................................................................................................
Cost of insurance (172,670) (89,743) (236,632) (87,140) (105,607) (220,426)
.......................................................................................................................
Net increase in net assets
resulting from unit
transactions 1,286,220 331,119 3,278,396 1,405,778 2,977,581 2,592,582
.......................................................................................................................
Total increase in net assets 1,174,422 461,583 3,005,962 1,403,340 2,718,962 2,453,221
.......................................................................................................................
NET ASSETS:
Beginning of period 3,729,941 2,374,586 974,924 455,936 566,150 1,930,991
------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $4,904,363 $2,836,169 $3,980,886 $1,859,276 $3,285,112 $4,384,212
------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended Money
September 30, 2000 Market
Sub-Account
----------------------------------------------------------
OPERATIONS:
Net investment income $ 98,605
................................
Capital gains income --
................................
Net realized (loss) gain on
security transactions --
................................
Net unrealized (depreciation)
appreciation of investments
during the period --
................................
Net (decrease) increase in net
assets resulting from
operations 98,605
................................
UNIT TRANSACTIONS:
Purchases 117,227
................................
Net transfers 401,082
................................
Surrenders for benefit payments
and fees (42,984)
................................
Net loan activity --
................................
Cost of insurance (86,251)
................................
Net increase in net assets
resulting from unit
transactions 389,074
................................
Total increase in net assets 487,679
................................
NET ASSETS:
Beginning of period 1,378,369
----------------------------------------------------------------------
END OF PERIOD $1,866,048
----------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-16
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Statements of Changes in Net Assets (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended New New OTC & Utilities Vista Voyager
September 30, 2000 Opportunities Value Emerging Growth Sub-Account Sub-Account
Sub-Account Sub-Account Growth and Income
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ -- $ 13,729 $ -- $ 44,777 $ -- $ 4,464
.................................................................................................................
Capital gains income 585,307 48,619 12,177 79,045 15,030 1,894,262
.................................................................................................................
Net realized (loss) gain on
security transactions (101,488) (5,820) (15,039) (16,860) (20,259) 1,416
.................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (298,837) 87,169 (352,082) 119,606 265,990 (2,334,093)
.................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 184,982 143,697 (354,944) 226,568 260,761 (433,951)
.................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,355,586 250,944 264,746 508,388 173,596 2,783,437
.................................................................................................................
Net transfers 4,031,551 877,026 1,990,616 285,523 2,442,307 8,104,533
.................................................................................................................
Surrenders for benefit payments
and fees (399,833) (18,080) (80,381) (24,901) (83,445) (610,462)
.................................................................................................................
Net loan activity (35,150) (8) (6,794) (71) (8,887) (47,515)
.................................................................................................................
Cost of insurance (503,463) (84,963) (118,140) (70,565) (80,000) (886,786)
.................................................................................................................
Net increase in net assets
resulting from unit
transactions 4,448,691 1,024,919 2,050,047 698,374 2,443,571 9,343,207
.................................................................................................................
Total increase in net assets 4,633,673 1,168,616 1,695,103 924,942 2,704,332 8,909,256
.................................................................................................................
NET ASSETS:
Beginning of period 5,776,688 725,529 558,443 1,236,382 761,163 11,958,626
------------------------------------------------------------------------------------------------------------------
END OF PERIOD $10,410,361 $1,894,145 $2,253,546 $2,161,324 $3,465,495 $20,867,882
------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life and Annuity Insurance Company
Separate Account VL II 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 VL II (Bond Fund,
Stock Fund, Money Market Fund, Advisers Fund, Capital Appreciation Fund,
Mortgage Securities Fund, Index Fund, International Opportunities Fund, Dividend
and Growth Fund, Growth and Income Fund, International Advisers Fund, Small
Company Fund, MidCap Fund, Fidelity VIP Equity-Income Portfolio, Fidelity VIP
Overseas Portfolio and Fidelity VIP II Asset Manager Portfolio) (collectively,
the Account) as of December 31, 1999, and the related statements of operations
and the statements of changes in net assets for the periods presented. These
financial statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1999, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 17, 2000 ARTHUR ANDERSEN LLP
SA-1
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES
--------------------------------------------------------------------------------
<TABLE>
December 31, 1999 Bond Fund Stock Fund Money Advisers Capital Mortgage Index Fund
Sub-Account Sub-Account Market Fund Fund Appreciation Securities Sub-Account
Sub-Account Sub-Account Fund Fund
Sub-Account Sub-Account
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
---------------------------------------------------------------------------------------------------------------------------
HARTFORD BOND HLS FUND, INC. -
CLASS IA
Shares 6,146,042
Cost $6,517,756
..........................................................................................................................
Market Value $6,108,317 $ -- $ -- $ -- $ -- $ -- $ --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD STOCK HLS FUND, INC. -
CLASS IA
Shares 2,762,395
Cost $17,713,082
..........................................................................................................................
Market Value -- 19,743,908 -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS
FUND, INC. - CLASS IA
Shares 35,162,986
Cost $35,162,986
..........................................................................................................................
Market Value -- -- 35,162,986 -- -- -- --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD ADVISERS HLS FUND, INC.
-CLASS IA
Shares 4,786,407
Cost $13,734,488
..........................................................................................................................
Market Value -- -- -- 14,190,615 -- -- --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION HLS
FUND, INC. - CLASS IA
Shares 1,792,395
Cost $8,630,428
..........................................................................................................................
Market Value -- -- -- -- 10,925,342 -- --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD MORTGAGE SECURITIES HLS
FUND, INC. - CLASS IA
Shares 599,557
Cost $655,939
..........................................................................................................................
Market Value -- -- -- -- -- 623,234 --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD INDEX HLS FUND, INC. -
CLASS IA
Shares 6,529,463
Cost $22,457,967
..........................................................................................................................
Market Value -- -- -- -- -- -- 27,350,486
---------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
OPPORTUNITIES HLS FUND, INC. -
CLASS IA
Shares 1,627,053
Cost $2,292,796
..........................................................................................................................
Market Value -- -- -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life and
Annuity Insurance Company -- 54,616 463,281 2,393 28,816 -- 23,192
..........................................................................................................................
Receivable from fund shares sold 1,238 -- -- -- -- -- --
..........................................................................................................................
Total Assets 6,109,555 19,798,524 35,626,267 14,193,008 10,954,158 623,234 27,373,678
..........................................................................................................................
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company 1,269 -- -- -- -- -- --
..........................................................................................................................
Payable for fund shares purchased -- 54,537 462,299 2,428 28,947 -- 23,875
..........................................................................................................................
Total Liabilities 1,269 54,537 462,299 2,428 28,947 -- 23,875
---------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $6,108,286 $19,743,987 $35,163,968 $14,190,580 $10,925,211 $ 623,234 $27,349,803
---------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 4,197,044 5,253,119 25,709,955 5,287,048 3,222,333 426,305 7,630,809
Unit Values $ 1.455378 $ 3.758526 $ 1.367718 $ 2.684027 $ 3.390466 $ 1.461942 $ 3.584129
---------------------------------------------------------------------------------------------------------------------------
<S> <C>
December 31, 1999 International
Opportunities
Fund
Sub-Account
------------------------------------------------------------
ASSETS:
Investments:
------------------------------------------------------------------------
HARTFORD BOND HLS FUND, INC. -
CLASS IA
Shares 6,146,042
Cost $6,517,756
................................
Market Value $ --
------------------------------------------------------------------------------------
HARTFORD STOCK HLS FUND, INC. -
CLASS IA
Shares 2,762,395
Cost $17,713,082
................................
Market Value --
------------------------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS
FUND, INC. - CLASS IA
Shares 35,162,986
Cost $35,162,986
................................
Market Value --
------------------------------------------------------------------------------------------------------------
HARTFORD ADVISERS HLS FUND, INC.
-CLASS IA
Shares 4,786,407
Cost $13,734,488
................................
Market Value --
------------------------------------------------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION HLS
FUND, INC. - CLASS IA
Shares 1,792,395
Cost $8,630,428
................................
Market Value --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD MORTGAGE SECURITIES HLS
FUND, INC. - CLASS IA
Shares 599,557
Cost $655,939
................................
Market Value --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD INDEX HLS FUND, INC. -
CLASS IA
Shares 6,529,463
Cost $22,457,967
................................
Market Value --
---------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
OPPORTUNITIES HLS FUND, INC. -
CLASS IA
Shares 1,627,053
Cost $2,292,796
................................
Market Value 3,052,245
---------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life and
Annuity Insurance Company --
................................
Receivable from fund shares sold --
................................
Total Assets 3,052,245
................................
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company 114
................................
Payable for fund shares purchased --
................................
Total Liabilities 114
---------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $3,052,131
---------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 1,284,374
Unit Values $ 2.376357
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-2
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
December 31, 1999 Dividend Growth and International Small MidCap Fund Fidelity Fidelity
and Growth Income Fund Advisers Company Sub-Account VIP VIP
Fund Sub-Account Fund Fund Equity- Overseas
Sub-Account Sub-Account Sub-Account Income Portfolio
Portfolio Sub-Account
Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
-------------------------------------------------------------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH HLS
FUND, INC. - CLASS IA
Shares 3,004,060
Cost $6,359,805
........................................................................................................................
Market Value $6,455,208 $ -- $ -- $ -- $ -- $ -- $ --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD GROWTH AND INCOME HLS
FUND, INC. - CLASS IA
Shares 1,498,531
Cost $1,943,326
........................................................................................................................
Market Value -- 2,145,358 -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL ADVISERS
HLS FUND, INC. - CLASS IA
Shares 187,834
Cost $226,878
........................................................................................................................
Market Value -- -- 262,345 -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD SMALL COMPANY HLS
FUND, INC. - CLASS IA
Shares 591,371
Cost $956,662
........................................................................................................................
Market Value -- -- -- 1,293,787 -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD MIDCAP HLS FUND, INC. -
CLASS IA
Shares 1,055,994
Cost $1,787,486
........................................................................................................................
Market Value -- -- -- -- 2,168,483 -- --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME
PORTFOLIO
Shares 137,789
Cost $3,436,883
........................................................................................................................
Market Value -- -- -- -- -- 3,542,551 --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO
Shares 72,487
Cost $1,506,287
........................................................................................................................
Market Value -- -- -- -- -- -- 1,989,051
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP II ASSET MANAGER
PORTFOLIO
Shares 97,000
Cost $1,710,904
........................................................................................................................
Market Value -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life and
Annuity Insurance Company 577 2,326 -- 6,539 7,866 5,465 8,224
........................................................................................................................
Receivable from fund shares sold -- -- -- -- -- -- --
........................................................................................................................
Total Assets 6,455,785 2,147,684 262,345 1,300,326 2,176,349 3,548,016 1,997,275
........................................................................................................................
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company -- -- -- -- -- -- --
........................................................................................................................
Payable for fund shares purchased 588 2,359 -- 6,540 7,873 5,510 8,257
........................................................................................................................
TOTAL LIABILITIES 588 2,359 -- 6,540 7,873 5,510 8,257
........................................................................................................................
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $6,455,197 $2,145,325 $ 262,345 $1,293,786 $2,168,476 $3,542,506 $1,989,018
-------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 2,634,320 1,529,997 211,426 724,835 1,294,214 1,700,502 911,992
Unit Values $ 2.450422 $ 1.402176 $1.240838 $1.784939 $ 1.675516 $ 2.083213 $ 2.180961
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
December 31, 1999 Fidelity
VIP II
Asset
Manager
Portfolio
Sub-Account
----------------------------------------------------------
ASSETS:
Investments:
----------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH HLS
FUND, INC. - CLASS IA
Shares 3,004,060
Cost $6,359,805
................................
Market Value $ --
----------------------------------------------------------------------------------
HARTFORD GROWTH AND INCOME HLS
FUND, INC. - CLASS IA
Shares 1,498,531
Cost $1,943,326
................................
Market Value --
----------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL ADVISERS
HLS FUND, INC. - CLASS IA
Shares 187,834
Cost $226,878
................................
Market Value --
----------------------------------------------------------------------------------------------------------
HARTFORD SMALL COMPANY HLS
FUND, INC. - CLASS IA
Shares 591,371
Cost $956,662
................................
Market Value --
----------------------------------------------------------------------------------------------------------------------
HARTFORD MIDCAP HLS FUND, INC. -
CLASS IA
Shares 1,055,994
Cost $1,787,486
................................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME
PORTFOLIO
Shares 137,789
Cost $3,436,883
................................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO
Shares 72,487
Cost $1,506,287
................................
Market Value --
-------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP II ASSET MANAGER
PORTFOLIO
Shares 97,000
Cost $1,710,904
................................
Market Value 1,810,995
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life and
Annuity Insurance Company 303
................................
Receivable from fund shares sold --
................................
Total Assets 1,811,298
................................
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company --
................................
Payable for fund shares purchased 295
................................
TOTAL LIABILITIES 295
................................
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $1,811,003
-------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 930,804
Unit Values $ 1.945633
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-3
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Bond Fund Stock Fund Money Advisers Capital Mortgage Index Fund
December 31, 1999 Sub-Account Sub-Account Market Fund Appreciation Securities Sub-Account
Fund Sub-Account Fund Fund
Sub-Account Sub-Account Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 333,423 $ 131,640 $800,903 $ 289,143 $ 32,940 $ 34,905 $ 240,349
........................................................................................................................
Capital gains income 13,422 523,019 257 362,974 255,982 -- 235,278
........................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
........................................................................................................................
Net realized (loss) gain on
security transactions (10,936) (1,322) -- 201 (11,561) (16) (2,132)
........................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (395,236) 1,470,668 -- 228,460 1,988,151 (31,744) 3,270,915
........................................................................................................................
Net (loss) gain on investments (406,172) 1,469,346 -- 228,661 1,976,590 (31,760) 3,268,783
-------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $ (59,327) $2,124,005 $801,160 $ 880,778 $2,265,512 $ 3,145 $3,744,410
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended International
December 31, 1999 Opportunities
Fund
Sub-Account
------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 33,938
................................
Capital gains income --
................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
................................
Net realized (loss) gain on
security transactions 110,868
................................
Net unrealized (depreciation)
appreciation of investments
during the period 695,310
................................
Net (loss) gain on investments 806,178
------------------------------------------------------------------------
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $ 840,116
------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-4
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Bond Fund Stock Fund Money Market Advisers Capital Mortgage Index Fund
December 31, 1999 Sub-Account Sub-Account Fund Fund Appreciation Securities Sub-Account
Sub-Account Sub-Account Fund Fund
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 333,423 $ 131,640 $ 800,903 $ 289,143 $ 32,940 $ 34,905 $ 240,349
.............................................................................................................................
Capital gains income 13,422 523,019 257 362,974 255,982 -- 235,278
.............................................................................................................................
Net realized (loss) gain on
security transactions (10,936) (1,322) -- 201 (11,561) (16) (2,132)
.............................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (395,236) 1,470,668 -- 228,460 1,988,151 (31,744) 3,270,915
.............................................................................................................................
Net (decrease) increase in net
assets resulting from
operations (59,327) 2,124,005 801,160 880,778 2,265,512 3,145 3,744,410
.............................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,116,710 3,539,905 97,498,245 2,459,695 2,036,106 39,491 3,166,528
.............................................................................................................................
Net transfers 2,969,489 9,958,243 (72,516,882) 8,314,204 3,727,669 557,329 11,023,584
.............................................................................................................................
Surrenders for benefit payments
and fees (65,653) (426,813) (587,181) (205,445) (262,338) (9,550) (339,245)
.............................................................................................................................
Net loan activity 14,226 (14,597) (595,739) (32,863) (3) -- (48,709)
.............................................................................................................................
Cost of insurance (171,351) (629,327) (2,417,385) (483,197) (313,821) (10,668) (624,639)
.............................................................................................................................
Net increase in net assets
resulting from unit
transactions 3,863,421 12,427,411 21,381,058 10,052,394 5,187,613 576,602 13,177,519
.............................................................................................................................
Net increase in net assets 3,804,094 14,551,416 22,182,218 10,933,172 7,453,125 579,747 16,921,929
.............................................................................................................................
NET ASSETS:
Beginning of period 2,304,192 5,192,571 12,981,750 3,257,408 3,472,086 43,487 10,427,874
------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $6,108,286 $19,743,987 $ 35,163,968 $14,190,580 $10,925,211 $ 623,234 $27,349,803
------------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended International
December 31, 1999 Opportunities
Fund
Sub-Account
------------------------------------------------------------
OPERATIONS:
Net investment income $ 33,938
................................
Capital gains income --
................................
Net realized (loss) gain on
security transactions 110,868
................................
Net unrealized (depreciation)
appreciation of investments
during the period 695,310
................................
Net (decrease) increase in net
assets resulting from
operations 840,116
................................
UNIT TRANSACTIONS:
Purchases 585,350
................................
Net transfers 324,908
................................
Surrenders for benefit payments
and fees (65,954)
................................
Net loan activity 5,695
................................
Cost of insurance (108,222)
................................
Net increase in net assets
resulting from unit
transactions 741,777
................................
Net increase in net assets 1,581,893
................................
NET ASSETS:
Beginning of period 1,470,238
------------------------------------------------------------------------
END OF PERIOD $3,052,131
------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-6
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Dividend Growth and International Small MidCap Fidelity Fidelity
December 31, 1999 and Growth Income Fund Advisers Company Fund Fund VIP Equity- VIP
Fund Sub-Account Fund Sub-Account Sub-Account Income Overseas
Sub-Account Sub-Account Portfolio Portfolio
Sub-Account Sub-Account
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 100,615 $ 5,788 $ 4,605 $ -- $ -- $ 23,696 $ 16,232
...........................................................................................................................
Capital gains income 118,987 13,333 -- 1,692 82,187 52,380 26,180
...........................................................................................................................
Net realized (loss) gain on
security transactions (461) (274) 1 2,003 (2,189) (4,629) 112,350
...........................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (25,993) 197,340 31,108 324,664 372,819 31,327 438,753
...........................................................................................................................
Net increase in net assets
resulting from operations 193,148 216,187 35,714 328,359 452,817 102,774 593,515
...........................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,379,402 378,405 10,899 67,151 231,734 626,931 332,337
...........................................................................................................................
Net transfers 2,970,543 1,558,447 144,272 848,771 1,448,161 1,672,590 248,522
...........................................................................................................................
Surrenders for benefit payments
and fees (155,404) (16,145) (4,694) (13,485) (16,009) (105,540) (67,389)
...........................................................................................................................
Net loan activity (5,150) -- -- (4) (4) -- --
...........................................................................................................................
Cost of insurance (207,847) (34,387) (4,204) (21,813) (37,372) (126,745) (73,427)
...........................................................................................................................
Net increase in net assets
resulting from unit
transactions 3,981,544 1,886,320 146,273 880,620 1,626,510 2,067,236 440,043
...........................................................................................................................
Net increase in net assets 4,174,692 2,102,507 181,987 1,208,979 2,079,327 2,170,010 1,033,558
...........................................................................................................................
NET ASSETS:
Beginning of period 2,280,505 42,818 80,358 84,807 89,149 1,372,496 955,460
----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $6,455,197 $2,145,325 $262,345 $1,293,786 $2,168,476 $3,542,506 $1,989,018
----------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended Fidelity
December 31, 1999 VIP II
Asset
Manager
Portfolio
Sub-Account
------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 13,958
................................
Capital gains income 17,680
................................
Net realized (loss) gain on
security transactions 548
................................
Net unrealized (depreciation)
appreciation of investments
during the period 82,405
................................
Net increase in net assets
resulting from operations 114,591
................................
UNIT TRANSACTIONS:
Purchases 305,467
................................
Net transfers 1,086,533
................................
Surrenders for benefit payments
and fees (46,507)
................................
Net loan activity --
................................
Cost of insurance (37,787)
................................
Net increase in net assets
resulting from unit
transactions 1,307,706
................................
Net increase in net assets 1,422,297
................................
NET ASSETS:
Beginning of period 388,706
------------------------------------------------------------------------------------------------------------
END OF PERIOD $1,811,003
------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-7
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Bond Fund Stock Fund Money Market Advisers Capital Mortgage Index Fund
December 31, 1998 Sub-Account Sub-Account Fund Fund Appreciation Securities Sub-Account
Sub-Account Sub-Account Fund Fund
Sub-Account Sub-Account
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 106,052 $ 38,074 $ 178,529 $ 63,199 $ 17,887 $ 2,575 $ 79,420
............................................................................................................................
Capital gains income -- 18,418 -- 11,531 30,576 -- 12,992
............................................................................................................................
Net realized gain (loss) on
security transactions 746 (2,645) -- 1,768 (3,241) (114) 14,698
............................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (16,930) 557,352 -- 224,740 308,545 147 1,617,496
............................................................................................................................
Net increase in net assets
resulting from operations 89,868 611,199 178,529 301,238 353,767 2,608 1,724,606
............................................................................................................................
UNIT TRANSACTIONS:
Purchases 219,212 486,207 44,552,053 332,157 483,397 7,687 443,474
............................................................................................................................
Net transfers 1,873,633 4,031,316 (32,394,672) 2,418,661 2,506,371 (37,994) 8,055,206
............................................................................................................................
Surrenders for benefit payments
and fees (22,489) (93,425) (423,409) (40,763) (79,406) (1,565) (110,057)
............................................................................................................................
Net loan activity (63,707) (57) (6,910) (23,103) -- -- --
............................................................................................................................
Cost of insurance (39,274) (74,817) (362,173) (28,973) (51,821) (4,367) (60,585)
............................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 1,967,375 4,349,224 11,364,889 2,657,979 2,858,541 (36,239) 8,328,038
............................................................................................................................
Net increase (decrease) in net
assets 2,057,243 4,960,423 11,543,418 2,959,217 3,212,308 (33,631) 10,052,644
............................................................................................................................
NET ASSETS:
Beginning of period 246,949 232,148 1,438,332 298,191 259,778 77,118 375,230
-----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $2,304,192 $5,192,571 $ 12,981,750 $3,257,408 $3,472,086 $ 43,487 $10,427,874
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended International
December 31, 1998 Opportunities
Fund
Sub-Account
------------------------------------------------------------
OPERATIONS:
Net investment income $ 18,410
................................
Capital gains income 17,744
................................
Net realized gain (loss) on
security transactions 77
................................
Net unrealized (depreciation)
appreciation of investments
during the period 73,152
................................
Net increase in net assets
resulting from operations 109,383
................................
UNIT TRANSACTIONS:
Purchases 286,640
................................
Net transfers 1,011,184
................................
Surrenders for benefit payments
and fees (27,008)
................................
Net loan activity (17,916)
................................
Cost of insurance (39,292)
................................
Net increase (decrease) in net
assets resulting from unit
transactions 1,213,608
................................
Net increase (decrease) in net
assets 1,322,991
................................
NET ASSETS:
Beginning of period 147,247
------------------------------------------------------------------------
END OF PERIOD $1,470,238
------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-8
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Dividend Growth and International Small MidCap Fidelity Fidelity
December 31, 1998 and Growth Income Fund Advisers Company Fund Fund VIP Equity- VIP
Fund Sub-Account* Fund Sub-Account* Sub-Account* Income Overseas
Sub-Account Sub-Account* Portfolio Portfolio
Sub-Account Sub-Account
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 33,160 $ 138 $ -- $ -- $ -- $ 1,864 $ 540
...........................................................................................................................
Capital gains income 8,141 -- -- -- -- 6,635 1,592
...........................................................................................................................
Net realized gain (loss) on
security transactions 63 21 308 (148) 19 (1,856) 89
...........................................................................................................................
Net unrealized appreciation of
investments during the period 117,405 4,692 4,361 12,462 8,178 70,207 44,647
...........................................................................................................................
Net increase in net assets
resulting from operations. 158,769 4,851 4,669 12,314 8,197 76,850 46,868
...........................................................................................................................
UNIT TRANSACTIONS:
Purchases 250,584 1,000 1,000 10,618 1,000 213,483 152,670
...........................................................................................................................
Net transfers 1,838,934 37,221 75,134 62,509 80,559 1,066,683 770,437
...........................................................................................................................
Surrenders for benefit payments
and fees (49,049) (181) (356) (439) (361) (28,144) (16,660)
...........................................................................................................................
Net loan activity -- -- -- -- -- -- --
...........................................................................................................................
Cost of insurance (41,259) (73) (89) (195) (246) (15,372) (19,327)
...........................................................................................................................
Net increase in net assets
resulting from unit
transactions 1,999,210 37,967 75,689 72,493 80,952 1,236,650 887,120
...........................................................................................................................
Net increase in net assets 2,157,979 42,818 80,358 84,807 89,149 1,313,500 933,988
...........................................................................................................................
NET ASSETS:
Beginning of period 122,526 -- -- -- -- 58,996 21,472
----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $2,280,505 $ 42,818 $80,358 $ 84,807 $ 89,149 $1,372,496 $955,460
----------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended Fidelity
December 31, 1998 VIP II
Asset
Manager
Portfolio
Sub-Account
------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 5,839
................................
Capital gains income 17,517
................................
Net realized gain (loss) on
security transactions (16)
................................
Net unrealized appreciation of
investments during the period 15,814
................................
Net increase in net assets
resulting from operations. 39,154
................................
UNIT TRANSACTIONS:
Purchases 54,314
................................
Net transfers 134,602
................................
Surrenders for benefit payments
and fees (10,808)
................................
Net loan activity --
................................
Cost of insurance (5,833)
................................
Net increase in net assets
resulting from unit
transactions 172,275
................................
Net increase in net assets 211,429
................................
NET ASSETS:
Beginning of period 177,277
------------------------------------------------------------------------------------------------------------
END OF PERIOD $388,706
------------------------------------------------------------------------------------------------------------------------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-9
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Notes to Financial Statements
December 31, 1999
1. ORGANIZATION:
Separate Account VL II (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). Realized gains and losses on
the sales of securities are computed on the basis of identified cost of the fund
shares sold. Dividend and capital gains income is accrued as of the ex-dividend
date. Capital gains income represents 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, 1999.
C) UNIT TRANSACTIONS -- Unit transactions are executed based on the unit values
calculated at the close of the business day.
D) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no federal
income taxes are payable with respect to the operations of the Account.
E) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
A) 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 which the terms of the
contracts, are deducted through termination of units of interest from the
applicable contractholders' accounts.
SA-10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life and Annuity Insurance Company Separate Account VL II 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 VL II (Asia Pacific
Growth, Diversified Income, The George Putnam Fund of Boston, Global Asset
Allocation, Global Growth, Growth and Income, Health Sciences, High Yield,
Income, International Growth, International Growth and Income, International New
Opportunities, Investors, Money Market, New Opportunities, New Value, OTC &
Emerging Growth, Utilities Growth and Income, Vista, and Voyager sub-accounts),
(collectively, the Account) as of December 31, 1999, and the related statements
of operations and the statements of changes in net assets for the periods
presented. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1999, and the results of its operations and the changes in its net assets for
the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 11, 2000 ARTHUR ANDERSEN LLP
SA-11
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1999 Asia Pacific Diversified The George Global Asset Global Growth Health
Growth Income Putnam Fund Allocation Growth and Income Sciences
Sub-Account Sub-Account of Boston Sub-Account Sub-Account Sub-Account Sub-Account
Sub-Account
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments:
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT ASIA PACIFIC GROWTH
FUND
Shares 44,412
Cost $541,366
................................................................................................................................
Market Value: $767,881 $ -- $ -- $ -- $ -- $ -- $ --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT DIVERSIFIED INCOME
FUND
Shares 58,275
Cost $596,967
................................................................................................................................
Market Value: -- 578,674 -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT THE GEORGE PUTNAM
FUND OF BOSTON
Shares 25,881
Cost $265,835
................................................................................................................................
Market Value: -- -- 258,291 -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL ASSET
ALLOCATION FUND
Shares 31,976
Cost $581,099
................................................................................................................................
Market Value: -- -- -- 627,040 -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL GROWTH FUND
Shares 257,107
Cost $5,139,043
................................................................................................................................
Market Value: -- -- -- -- 7,839,192 -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GROWTH AND INCOME
FUND
Shares 360,961
Cost $10,069,295
................................................................................................................................
Market Value: -- -- -- -- -- 9,673,749 --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT HEALTH SCIENCES FUND
Shares 57,991
Cost $580,209
................................................................................................................................
Market Value: -- -- -- -- -- -- 608,902
---------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life
Insurance Company 30,001 -- 1 20 9,719 18,900 --
................................................................................................................................
Receivable from fund shares
sold -- -- -- -- -- -- --
................................................................................................................................
TOTAL ASSETS 797,882 578,674 258,292 627,060 7,848,911 9,692,649 608,902
................................................................................................................................
LIABILITIES
Due to Hartford Life Insurance
Company -- -- -- -- -- -- 9
................................................................................................................................
Payable for fund shares
purchased 30,000 -- -- -- 10,026 18,750 --
................................................................................................................................
TOTAL LIABILITIES 30,000 -- -- -- 10,026 18,750 9
---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $767,882 $578,674 $258,292 $627,060 $7,838,885 $9,673,899 $608,893
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-12
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1999 High Yield Income International International International Investors Money
Sub-Account Sub-Account Growth Growth and New Sub-Account Market
Sub- Income Opportunities Sub-Account
Account Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments:
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT HIGH YIELD FUND
Shares 336,333
Cost $3,838,275
................................................................................................................................
Market Value: $3,729,931 $ -- $ -- $ -- $ -- $ -- $ --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INCOME FUND
Shares 189,663
Cost $2,462,713
................................................................................................................................
Market Value: -- 2,374,582 -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL
GROWTH FUND
Shares 45,031
Cost $704,229
................................................................................................................................
Market Value: -- -- 974,929 -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL
GROWTH AND INCOME FUND
Shares 29,898
Cost $416,492
................................................................................................................................
Market Value: -- -- -- 455,947 -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL
NEW OPPORTUNITIES FUND
Shares 24,288
Cost $374,709
................................................................................................................................
Market Value: -- -- -- -- 566,149 -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INVESTORS FUND
Shares 127,372
Cost $1,615,839
................................................................................................................................
Market Value: -- -- -- -- -- 1,930,961 --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT MONEY MARKET
FUND
Shares 1,378,310
Cost $1,378,310
................................................................................................................................
Market Value: -- -- -- -- -- -- 1,378,310
---------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life
Insurance Company -- 4 5,393 -- 1 3,638 --
................................................................................................................................
Receivable from fund
shares sold 20 -- -- -- -- -- 280
................................................................................................................................
TOTAL ASSETS 3,729,951 2,374,586 980,322 455,947 566,150 1,934,599 1,378,590
................................................................................................................................
LIABILITIES
Due to Hartford Life
Insurance Company 10 -- -- 11 -- -- 221
................................................................................................................................
Payable for fund shares
purchased -- -- 5,398 -- -- 3,608 --
................................................................................................................................
TOTAL LIABILITIES 10 -- 5,398 11 -- 3,608 221
---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $3,729,941 $2,374,586 $974,924 $455,936 $566,150 $1,930,991 $1,378,369
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-13
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1999 New New OTC & Utilities Vista Voyager
Opportunities Value Emerging Growth Sub-Account Sub-Account
Sub-Account Sub-Account Growth and Income
Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments:
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT NEW OPPORTUNITIES FUND
Shares 132,675
Cost $3,677,974
................................................................................................................................
Market Value: $5,776,681 $ -- $ -- $ -- $ -- $ --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT NEW VALUE FUND
Shares 61,174
Cost $741,893
................................................................................................................................
Market Value: -- 725,528 -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT OTC & EMERGING GROWTH FUND
Shares 24,505
Cost $349,307
................................................................................................................................
Market Value: -- -- 558,460 -- -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT UTILITIES GROWTH & INCOME FUND
Shares 72,857
Cost $1,229,280
................................................................................................................................
Market Value: -- -- -- 1,236,384 -- --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT VISTA FUND
Shares 36,807
Cost $618,966
................................................................................................................................
Market Value: -- -- -- -- 761,162 --
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT VOYAGER FUND
Shares 180,504
Cost $8,200,788
................................................................................................................................
Market Value: -- -- -- -- -- 11,958,371
---------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance Company 8,780 1 9,793 -- 2,686 17,930
................................................................................................................................
Receivable from fund shares sold -- -- -- 1,253 -- --
................................................................................................................................
TOTAL ASSETS 5,785,461 725,529 568,253 1,237,637 763,848 11,976,301
................................................................................................................................
LIABILITIES
Due to Hartford Life Insurance Company -- -- -- 1,255 -- --
................................................................................................................................
Payable for fund shares purchased 8,773 -- 9,810 -- 2,685 17,675
................................................................................................................................
TOTAL LIABILITIES 8,773 -- 9,810 1,255 2,685 17,675
---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE CONTRACT
LIABILITIES) $5,776,688 $725,529 $558,443 $1,236,382 $761,163 $11,958,626
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-14
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1999 Units Unit Contract
Owned by Price Liability
Participants
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------
Variable life contracts:
Asia Pacific Growth Fund 34,596 $22.195777 $ 767,882
....................................................................................................
Diversified Income Fund 44,505 13.002362 578,674
....................................................................................................
George Putnam Fund of Boston 24,450 10.564227 258,292
....................................................................................................
Global Asset Allocation Fund 26,963 23.255993 627,060
....................................................................................................
Global Growth Fund 201,512 38.900326 7,838,885
....................................................................................................
Growth and Income Fund 373,182 25.922728 9,673,899
....................................................................................................
Health Sciences Fund 56,377 10.800460 608,893
....................................................................................................
High Yield Fund 226,074 16.498765 3,729,941
....................................................................................................
Income Fund 164,884 14.401541 2,374,586
....................................................................................................
International Growth Fund 62,217 15.669625 974,924
....................................................................................................
International Growth and Income Fund 37,465 12.169641 455,936
....................................................................................................
International New Opportunities Fund 28,600 19.795791 566,150
....................................................................................................
Investors Fund 132,670 14.554810 1,930,991
....................................................................................................
Money Market Fund 1,014,621 1.358506 1,378,369
....................................................................................................
New Opportunities Fund 149,987 38.514515 5,776,688
....................................................................................................
New Value Fund 68,192 10.639520 725,529
....................................................................................................
OTC & Emerging Growth Fund 22,885 24.402281 558,443
....................................................................................................
Utilities Growth and Income Fund 57,523 21.493623 1,236,382
....................................................................................................
Vista Fund 46,906 16.227448 761,163
....................................................................................................
Voyager Fund 262,107 45.624980 11,958,626
....................................................................................................
GRAND TOTAL: $52,781,313
-----------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-15
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended Asia Pacific Diversified The George Global Asset Global Growth Health
December 31, 1999 Growth Income Putnam Allocation Growth and Income Sciences
Sub-Account Sub-Account Fund Sub-Account Sub-Account Sub-Account Sub-Account
of Boston
Sub-Account
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ -- $ 23,061 $ 5,950 $ 6,496 $ 10,324 $ 82,679 $ 519
................................................................................................................................
Capital gains income -- -- 319 18,235 214,984 412,587
................................................................................................................................
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
................................................................................................................................
Net realized gain (loss) on
security transactions 677 (296) 27 273 (8,555) (19,393) 849
................................................................................................................................
Net unrealized appreciation
(depreciation) of
investments during the
period 226,183 (11,756) (9,563) 29,249 2,479,211 (561,127) 23,736
................................................................................................................................
Net gain (loss) on
investments 226,860 (12,052) (9,536) 29,522 2,470,656 (580,520) 24,585
---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $226,860 $ 11,009 $(3,267) $54,253 $2,695,964 $ (85,254) $25,104
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-16
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended High Yield Income International International International Investors Money Market
December 31, 1999 Sub-Account Sub-Account* Growth Growth and New Sub-Account Sub-Account
Sub-Account Income Opportunities
Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 188,019 $ 57,563 $ -- $ -- $ 13 $ -- $ 36,485
................................................................................................................................
Capital gains income -- 17,173 -- -- -- -- --
................................................................................................................................
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
................................................................................................................................
Net realized (loss) gain on
security transactions (4,621) (1,612) 55,875 14,000 167,282 285 --
................................................................................................................................
Net unrealized
(depreciation)
appreciation of
investments during the
period (56,566) (103,792) 268,792 38,658 191,201 305,881 --
................................................................................................................................
Net (loss) gain on
investments (61,187) (105,404) 324,667 52,658 358,483 306,166 --
---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS $ 126,832 $ (30,668) $ 324,667 $ 52,658 $ 358,496 $ 306,166 $ 36,485
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Formerly Putnam U.S. Government and High Quality Bond Sub-Account, change
effective on April 9, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-17
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended New New OTC & Utilities Growth Vista Voyager
December 31, 1999 Opportunities Value Emerging and Income Sub-Account Sub-Account
Sub-Account Sub-Account Growth Sub-Account
Sub-Account
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ -- $ 2 $ -- $ 17,021 $ -- $ 3,744
.............................................................................................................................
Capital gains income 21,300 410 1,285 17,875 53,041 300,222
.............................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
.............................................................................................................................
Net realized (loss) gain on
security transactions (74,118) (42) 194 (5,144) 340 3,384
.............................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 1,903,919 (17,299) 201,676 (28,195) 141,175 3,398,379
.............................................................................................................................
Net gain (loss) on investments 1,829,801 (17,341) 201,870 (33,339) 141,515 3,401,763
------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $1,851,101 $(16,929) $203,155 $ 1,557 $194,556 $3,705,729
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-18
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended Asia Pacific Diversified The George Global Asset Global Growth and Health
December 31, 1999 Growth Income Putnam Fund Allocation Growth Income Sub- Sciences
Sub-Account Sub-Account of Boston Sub-Account Sub-Account Account Sub-Account
Sub-Account
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ -- $ 23,061 $ 5,950 $ 6,496 $ 10,324 $ 82,679 $ 519
...............................................................................................................................
Capital gains income -- -- 319 18,235 214,984 412,587 --
...............................................................................................................................
Net realized gain (loss)
on security
transactions 677 (296) 27 273 (8,555) (19,393) 849
...............................................................................................................................
Net unrealized
appreciation
(depreciation) of
investments during the
period 226,183 (11,756) (9,563) 29,249 2,479,211 (561,127) 23,736
...............................................................................................................................
Net increase (decrease)
in net assets resulting
from operations 226,860 11,009 (3,267) 54,253 2,695,964 (85,254) 25,104
...............................................................................................................................
UNIT TRANSACTIONS:
Purchases 11,544 51,671 61,898 127,321 927,414 1,931,571 45,376
...............................................................................................................................
Net transfers 534,285 325,503 121,681 154,876 2,582,332 5,598,828 530,101
...............................................................................................................................
Surrenders for benefit
payments and fees (8,845) (13,076) (7,613) (20,284) (113,107) (186,185) (16,861)
...............................................................................................................................
Net loan activity -- -- -- -- (42,601) 4,745 (3)
...............................................................................................................................
Cost of insurance (4,531) (20,872) (13,604) (21,379) (139,949) (391,660) (19,700)
...............................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 532,453 343,226 162,362 240,534 3,214,089 6,957,299 538,913
...............................................................................................................................
Total increase (decrease)
in net assets 759,313 354,235 159,095 294,787 5,910,053 6,872,045 564,017
...............................................................................................................................
NET ASSETS:
Beginning of period 8,569 224,439 99,197 332,273 1,928,832 2,801,854 44,876
--------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $767,882 $578,674 $258,292 $627,060 $7,838,885 $9,673,899 $608,893
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-19
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended High Yield Income International International International Investors Money
December 31, 1999 Sub-Account Sub- Growth Growth and New Sub-Account Market
Account* Sub-Account Income Opportunities Sub-Account
Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 188,019 $ 57,563 $ -- $ -- $ 13 $ -- $ 36,485
..............................................................................................................................
Capital gains income -- 17,173 -- -- -- -- --
..............................................................................................................................
Net realized gain (loss) on
security transactions (4,621) (1,612) 55,875 14,000 167,282 285 --
..............................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (56,566) (103,792) 268,792 38,658 191,201 305,881 --
..............................................................................................................................
Net increase (decrease) in
net assets resulting from
operations 126,832 (30,668) 324,667 52,658 358,496 306,166 36,485
..............................................................................................................................
UNIT TRANSACTIONS:
Purchases 757,124 368,161 97,192 52,504 14,025 172,801 185,196
..............................................................................................................................
Net transfers 2,282,146 1,315,129 588,502 357,272 209,334 1,432,571 1,058,352
..............................................................................................................................
Surrenders for benefit
payments and fees (63,031) (40,709) (13,235) (12,129) (7,540) (30,687) (18,664)
..............................................................................................................................
Net loan activity (31,040) -- (4) -- -- --
..............................................................................................................................
Cost of insurance (93,855) (50,346) (42,836) (16,228) (11,827) (44,912) (24,680)
..............................................................................................................................
Net increase (decrease) in
net assets resulting from
unit transactions 2,851,344 1,592,235 629,619 381,419 203,992 1,529,773 1,200,204
..............................................................................................................................
Total increase (decrease) in
net assets 2,978,176 1,561,567 954,286 434,077 562,488 1,835,939 1,236,689
..............................................................................................................................
NET ASSETS:
Beginning of period 751,765 813,019 20,638 21,859 3,662 95,052 141,680
-------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $3,729,941 $2,374,586 $ 974,924 $ 455,936 $ 566,150 $1,930,991 $1,378,369
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Formerly Putnam U.S. Government and High Quality Bond Sub-Account, change
effective on April 9, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-20
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended New New OTC & Utilities Vista Voyager
December 31, 1999 Opportunities Value Emerging Growth Sub-Account Sub-Account
Sub-Account Sub-Account Growth and Income
Sub-Account Sub-Account
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ -- $ 2 $ -- $ 17,021 $ -- $ 3,744
......................................................................................................................
Capital gains income 21,300 410 1,285 17,875 53,041 300,222
......................................................................................................................
Net realized gain (loss) on
security transactions (74,118) (42) 194 (5,144) 340 3,384
......................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 1,903,919 (17,299) 201,676 (28,195) 141,175 3,398,379
......................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 1,851,101 (16,929) 203,155 1,557 194,556 3,705,729
......................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,084,027 55,882 35,239 211,762 45,420 1,775,053
......................................................................................................................
Net transfers 1,897,800 705,264 314,874 658,887 532,694 4,254,791
......................................................................................................................
Surrenders for benefit payments
and fees (129,321) (10,254) (8,673) (34,570) (11,139) (237,711)
......................................................................................................................
Net loan activity (5,580) (3) (9) -- (4) (8,610)
......................................................................................................................
Cost of insurance (145,610) (17,973) (13,596) (43,706) (7,815) (244,692)
......................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 2,701,316 732,916 327,835 792,373 559,156 5,538,831
......................................................................................................................
Total increase (decrease) in net
assets 4,552,417 715,987 530,990 793,930 753,712 9,244,560
......................................................................................................................
NET ASSETS
Beginning of period 1,224,271 9,542 27,453 442,452 7,451 2,714,066
-----------------------------------------------------------------------------------------------------------------------
END OF PERIOD $5,776,688 $725,529 $558,443 $1,236,382 $761,163 $11,958,626
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-21
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended Asia Pacific Diversified The George Global Asset Global Growth Health
December 31, 1998 Growth Income Putnam Fund Allocation Growth and Income Sciences
Sub-Account* Sub-Account of Boston Sub-Account Sub-Account Sub-Account Sub-Account*
Sub-Account*
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ -- $ 3,629 $ 778 $ 2,857 $ 10,284 $ 6,912 $ 38
...............................................................................................................................
Capital gains income -- 1,541 -- 12,271 51,418 45,119 --
...............................................................................................................................
Net realized gain (loss)
on security
transactions 1 21 2 16 2,284 (64) (1)
...............................................................................................................................
Net unrealized
appreciation
(depreciation) of
investments during the
period 331 (6,773) 2,018 15,297 222,508 157,616 4,957
...............................................................................................................................
Net increase (decrease)
in net assets resulting
from operations 332 (1,582) 2,798 30,441 286,494 209,583 4,994
...............................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,000 18,359 1,018 15,068 322,831 341,341 1,000
...............................................................................................................................
Net transfers 7,366 130,020 95,712 264,595 1,095,109 2,215,815 39,704
...............................................................................................................................
Surrenders for benefit
payments and fees (106) (3,807) 42 (10,473) (47,555) (85,000) (308)
...............................................................................................................................
Cost of insurance (23) (3,546) (373) (6,166) (30,391) (35,272) (514)
...............................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 8,237 141,026 96,399 263,024 1,339,994 2,436,884 39,882
...............................................................................................................................
Total increase (decrease)
in net assets 8,569 139,444 99,197 293,465 1,626,488 2,646,467 44,876
...............................................................................................................................
NET ASSETS
Beginning of period -- 84,995 -- 38,808 302,344 155,387 --
--------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $8,569 $224,439 $99,197 $332,273 $1,928,832 $2,801,854 $44,876
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*From inception, August 3, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-22
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended High Yield Income International International International Investors Money
December 31, 1998 Sub-Account Sub-Account** Growth Growth and New Sub-Account* Market
Sub-Account* Income Opportunities Sub-Account
Sub-Account* Sub-Account*
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 10,447 $ 10,911 $ 66 $ 206 $ -- $ 112 $ 1,123
...............................................................................................................................
Capital gains income 1,639 284 -- 496 -- -- --
...............................................................................................................................
Net realized gain (loss)
on security
transactions 5,348 (1,150) 11 8 5 14 --
...............................................................................................................................
Net unrealized
appreciation
(depreciation) of
investments during the
period (52,560) 12,055 1,909 796 239 9,241 --
...............................................................................................................................
Net increase (decrease)
in net assets resulting
from operations (35,126) 22,100 1,986 1,506 244 9,367 1,123
...............................................................................................................................
UNIT TRANSACTIONS:
Purchases 295,001 11,794 1,018 5,809 1,000 7,115 49,306
...............................................................................................................................
Net transfers 484,563 574,461 18,763 14,788 2,548 79,363 88,070
...............................................................................................................................
Surrenders for benefit
payments and fees (33,428) (10,223) (618) (143) (104) (437) (3,369)
...............................................................................................................................
Cost of insurance (6,247) (8,204) (511) (101) (26) (356) (1,780)
...............................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 739,889 567,828 18,652 20,353 3,418 85,685 132,227
...............................................................................................................................
Total increase (decrease)
in net assets 704,763 589,928 20,638 21,859 3,662 95,052 133,350
...............................................................................................................................
NET ASSETS
Beginning of period 47,002 223,091 -- -- -- -- 8,330
--------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $ 751,765 $ 813,019 $ 20,638 $ 21,859 $ 3,662 $ 95,052 $ 141,680
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*From inception, August 3, 1998, to December 31, 1998.
**Formerly Putnam U.S. Government and High Quality Bond Sub-Account, change
effective on April 9, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-23
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended New New OTC & Utilities Vista Voyager
December 31, 1998 Opportunities Value Emerging Growth Sub- Sub-Account
Sub-Account Sub-Account* Growth and Income Account*
Sub- Sub-Account
Account*
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ -- $ 98 $ 10 $ 1,849 $ -- $ 896
.......................................................................................................................
Capital gains income 4,296 19 -- 3,187 -- 21,866
.......................................................................................................................
Net realized gain (loss) on
security transactions (21,117) 15 21 58 11 (5,975)
.......................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 190,762 934 7,477 31,421 1,020 350,909
.......................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 173,941 1,066 7,508 36,515 1,031 367,696
.......................................................................................................................
UNIT TRANSACTIONS:
Purchases 258,118 1,525 3,676 12,990 1,000 364,335
.......................................................................................................................
Net transfers 690,830 7,543 17,238 379,093 5,651 1,952,698
.......................................................................................................................
Surrenders for benefit payments
and fees (36,267) (191) (314) (5,423) (223) (51,533)
.......................................................................................................................
Cost of insurance (34,620) (401) (655) (6,554) (8) (28,004)
.......................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 878,061 8,476 19,945 380,106 6,420 2,237,496
.......................................................................................................................
Total increase (decrease) in net
assets 1,052,002 9,542 27,453 416,621 7,451 2,605,192
.......................................................................................................................
NET ASSETS:
Beginning of period 172,269 -- -- 25,831 -- 108,874
------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $1,224,271 $9,542 $27,453 $442,452 $7,451 $2,714,066
------------------------------------------------------------------------------------------------------------------------
</TABLE>
*From inception, August 3, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-24
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1. ORGANIZATION:
Separate Account VL II (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
policyowners of the Company in the various mutual funds (the Funds) as directed
by the policyowners.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the Account,
which are in accordance with generally accepted accounting principles in the
investment company industry:
A) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade date
(date the order to buy or sell is executed). Realized gains and losses on the
sales of securities are computed on the basis of identified cost of the fund
shares sold. Dividend and capital gains income is accrued as of the ex-dividend
date. Capital gains income represents dividends from the Funds which are
characterized as capital gains under tax regulations.
B) SECURITY VALUATION -- The investments in shares of the Funds are valued at
the closing net asset value per share as determined by the appropriate Fund as
of December 31, 1999.
C) UNIT TRANSACTIONS -- Unit transactions are executed based on the unit values
calculated at the close of the business day. All unit transactions are executed
at fair value.
D) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and are
taxed with, the total operations of the Company, which is taxed as an insurance
company under the Internal Revenue Code. Under current law, no federal income
taxes are payable with respect to the operations of the Account.
E) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
A) COST OF INSURANCE -- In accordance with terms of the policies, the Company
assesses deductions for costs of insurance charges 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 life
policies, provides the mortality and expense undertakings and, with respect to
the Account, receives a maximum annual fee of 0.80% of the Account's average
daily net assets. These charges are reflected in surrenders for benefit payments
and fees on the accompanying statements of changes in net assets.
C) ADMINISTRATIVE 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 services and
varies based on the face amount of the underlying policy, among other factors.
These charges are reflected in surrenders for benefit payments and fees 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 policyowners' accounts,
in accordance with the terms of the policies. These charges are reflected in
surrenders for benefit payments and fees on the accompanying statements of
changes in net assets.
SA-25
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
BALANCE SHEETS
(STATUTORY BASIS)
(IN THOUSANDS)
(UNAUDITED)
--------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
<S> <C> <C>
-----------------------------------------------------------------------------------
<CAPTION>
2000 1999
-----------------------------------------------------------------------------------
<S> <C> <C>
<CAPTION>
(UNAUDITED)
ASSETS
<S> <C> <C>
Bonds $ 1,226,915 $ 1,465,815
Common stocks 38,701 42,430
Mortgage loans 34,380 63,784
Policy loans 75,857 59,429
Cash and short-term investments 213,302 267,579
-----------------------------------------------------------------------------------
Other invested assets 18,836 2,892
-----------------------------------------------------------------------------------
Total cash and invested assets 1,607,991 1,901,929
Investment income due and accrued 20,344 21,069
Other assets 41,486 39,576
Separate account assets 47,812,204 44,865,042
-----------------------------------------------------------------------------------
TOTAL ASSETS $49,482,025 $46,827,616
-----------------------------------------------------------------------------------
LIABILITIES
Aggregate reserves for future benefits $ 615,263 $ 591,621
Policy and contract claim liabilities 11,835 7,677
Liability for premium and other deposit funds 1,583,921 1,969,262
Asset valuation reserve 3,647 4,935
Payable to affiliates 22,829 14,084
Accrued expense allowances and other amounts due
from separate account (1,392,483) (1,377,927)
Remittances and items not allocated 135,641 111,582
Other liabilities 152,799 118,464
Separate account liabilities 47,812,204 44,865,042
-----------------------------------------------------------------------------------
TOTAL LIABILITIES 48,945,656 46,304,740
-----------------------------------------------------------------------------------
CAPITAL AND SURPLUS
Common stock 2,500 2,500
Gross paid-in and contributed surplus 226,043 226,043
Unassigned funds 307,826 294,333
-----------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS 536,369 522,876
-----------------------------------------------------------------------------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $49,482,025 $46,827,616
-----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-1
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(STATUTORY BASIS)
(IN THOUSANDS)
(UNAUDITED)
--------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
<S> <C> <C>
----------------------------------------------------------------------------
<CAPTION>
2000 1999
----------------------------------------------------------------------------
<S> <C> <C>
REVENUES
Premiums and annuity considerations $ 564,487 $ 407,330
Annuity and other fund deposits 3,213,811 2,745,707
Net investment income 82,766 92,321
Commissions and expense allowances on
reinsurance ceded 96,524 243,448
Reserve adjustment on reinsurance ceded 1,022,716 702,323
Fee income 618,388 455,917
Other revenues 3,847 7,887
----------------------------------------------------------------------------
TOTAL REVENUES 5,602,539 4,654,933
----------------------------------------------------------------------------
BENEFITS AND EXPENSES
Death and annuity benefits 42,004 34,403
Disability and other benefits 4,228 4,583
Surrenders and other fund withdrawals 2,654,640 858,280
Commissions 363,369 353,077
Increase (Decrease) in aggregate reserves for
future benefits 23,431 (650)
(Decrease) Increase in liability for premium and
other deposit funds (384,393) 2,232
General insurance expenses 182,679 115,771
Net transfers to separate accounts 2,597,386 3,231,911
Other expenses 22,881 16,734
----------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 5,506,225 4,616,341
----------------------------------------------------------------------------
NET GAIN FROM OPERATIONS
Before federal income tax expense 96,314 38,592
Federal income tax expense 71,591 13,144
----------------------------------------------------------------------------
NET GAIN FROM OPERATIONS 24,723 25,448
Net realized capital losses, after tax (514) (36,258)
----------------------------------------------------------------------------
NET INCOME (LOSS) $ 24,209 $ (10,810)
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-2
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
(STATUTORY BASIS)
(IN THOUSANDS)
(UNAUDITED)
--------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
<S> <C> <C>
----------------------------------------------------------------------------
<CAPTION>
2000 1999
----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK
Beginning and end of year $ 2,500 $ 2,500
----------------------------------------------------------------------------
GROSS PAID-IN AND CONTRIBUTED SURPLUS
Beginning and end of year $226,043 $226,043
----------------------------------------------------------------------------
UNASSIGNED FUNDS
Balance, beginning of year $294,333 $247,969
Net income (loss) 24,209 (10,810)
Change in net unrealized capital gains (losses)
on common stocks and other invested assets (3,702) 1,489
Change in asset valuation reserve 1,288 18,079
Change in non-admitted assets (3,126) 2,773
Credit on reinsurance ceded (5,176) (2,716)
----------------------------------------------------------------------------
Balance, end of year $307,826 $256,784
----------------------------------------------------------------------------
CAPITAL AND SURPLUS
End of year $536,369 $485,327
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-3
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(STATUTORY BASIS)
(IN THOUSANDS)
(UNAUDITED)
--------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
<S> <C> <C>
----------------------------------------------------------------------------
<CAPTION>
2000 1999
----------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Premiums and annuity considerations $3,776,739 $3,152,996
Investment income 83,130 93,174
Fee income 618,388 455,917
Other income 1,114,139 949,553
----------------------------------------------------------------------------
Total income 5,592,396 4,651,640
----------------------------------------------------------------------------
Benefits paid 2,697,533 896,755
Federal income taxes (recoveries) payments (3,299) 24,000
Net transfers to separate accounts 2,597,386 3,231,911
Other expenses 585,737 552,191
----------------------------------------------------------------------------
Total benefits and expenses 5,877,357 4,704,857
----------------------------------------------------------------------------
NET CASH USED BY OPERATING ACTIVITIES (284,961) (53,217)
----------------------------------------------------------------------------
INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD
Bonds 508,750 634,564
Common stocks 614 754
Mortgage loans 33,312 30,292
Other -- 1,351
----------------------------------------------------------------------------
NET INVESTMENT PROCEEDS 542,676 666,961
----------------------------------------------------------------------------
COST OF INVESTMENTS ACQUIRED
Bonds 274,569 727,958
Common stocks 468 166
Mortgage loans 3,681 56,013
Other 32,356 39,099
----------------------------------------------------------------------------
TOTAL INVESTMENTS ACQUIRED 311,074 823,236
----------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) INVESTING
ACTIVITIES 231,602 (156,275)
----------------------------------------------------------------------------
FINANCING AND MISCELLANEOUS ACTIVITIES
Net other cash used (918) (24,952)
----------------------------------------------------------------------------
NET CASH USED FOR FINANCING AND MISCELLANEOUS
ACTIVITIES (918) (24,952)
----------------------------------------------------------------------------
Net change in cash and short-term investments (54,277) (234,444)
Cash and short-term investments, beginning of
period 267,579 469,955
----------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 213,302 $ 235,511
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(STATUTORY BASIS)
(DOLLAR AMOUNTS IN MILLIONS UNLESS OTHERWISE STATED)
(Unaudited)
--------------------------------------------------------------------------------
1. BASIS OF PRESENTATION:
The accompanying unaudited financial statements of Hartford Life and Annuity
Insurance Company (the Company) have been prepared in conformity with statutory
accounting practices prescribed by the National Association of Insurance
Commissioners and the Connecticut Department of Insurance. Certain information
and note disclosures which are normally included in financial statements
prepared in accordance with statutory accounting practices have been condensed
or omitted, although the Company believes that the disclosures made are adequate
to make the information presented not misleading. In the opinion of management,
these statements include all adjustments which were normal recurring adjustments
necessary to present fairly the financial position, results of operations and
cash flows for the periods presented in accordance with statutory accounting
practices. For a description of significant accounting policies, see Note 1 of
Notes to Financial Statements in Hartford Life and Annuity Insurance Company's
1999 statutory basis financial statements.
Certain reclassifications have been made to prior year financial information to
conform to the current year classification of transactions and accounts.
2. INVESTMENTS:
In October 1998, the Company became aware of allegations of improper activities
at Commercial Financial Services Inc. (CFS), a securitizer and servicer of asset
backed securities. On December 11, 1998, CFS filed for protection under Chapter
11 of the Bankruptcy Code and, in June 1999, CFS ceased operations. In August
1999, the Company sold all of its CFS holdings recognizing a $36, after tax,
realized capital loss.
F-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------------------
To the Board of Directors of
Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory balance sheets of Hartford Life and
Annuity Insurance Company (a Connecticut Corporation and wholly owned subsidiary
of Hartford Life Insurance Company) (the Company) as of December 31, 1999 and
1998, and the related statutory statements of operations, changes in capital and
surplus, and cash flows for each of the three years in the period ended December
31, 1999. These statutory financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statutory financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 2 of notes to statutory financial
statements. When financial statements are presented for purposes other than for
filing with a regulatory agency, auditing standards generally accepted in the
United States require that an auditors' report on them state whether they are
presented in conformity with accounting principles generally accepted in the
United States. The accounting practices used by the Company vary from accounting
principles generally accepted in the United States as explained and quantified
in Note 2.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the statutory financial statements referred to above do not present
fairly, in conformity with accounting principles generally accepted in the
United States, the financial position of the Company as of December 31, 1999 and
1998, or the results of its operations or its cash flows for each of the three
years in the period ended December 31, 1999.
In our opinion, the statutory financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with statutory accounting practices as described in Note 2.
Hartford, Connecticut
January 31, 2000 ARTHUR ANDERSEN LLP
F-1
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
BALANCE SHEETS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
<S> <C> <C>
------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998
------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Bonds $ 1,465,815 $ 1,453,792
Common stocks 42,430 40,650
Mortgage loans 63,784 59,548
Policy loans 59,429 47,212
Cash and short-term investments 267,579 469,955
------------------------------------------------------------------------------------------------
Other invested assets 2,892 2,188
------------------------------------------------------------------------------------------------
Total cash and invested assets 1,901,929 2,073,345
Investment income due and accrued 21,069 20,126
Other assets 39,576 45,691
Separate account assets 44,865,042 32,876,278
------------------------------------------------------------------------------------------------
TOTAL ASSETS $46,827,616 $35,015,440
------------------------------------------------------------------------------------------------
LIABILITIES
Aggregate reserves for future benefits $ 591,621 $ 579,140
Policy and contract claim liabilities 7,677 5,667
Liability for premium and other deposit funds 1,969,262 2,011,672
Asset valuation reserve 4,935 21,782
Payable to affiliates 14,084 19,271
Accrued expense allowances and other amounts due from
separate accounts (1,377,927) (1,173,513)
Remittances and items not allocated 111,582 87,449
Other liabilities 118,464 111,182
Separate account liabilities 44,865,042 32,876,278
------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 46,304,740 34,538,928
------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS
Common stock 2,500 2,500
Gross paid-in and contributed surplus 226,043 226,043
Unassigned funds 294,333 247,969
------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS 522,876 476,512
------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $46,827,616 $35,015,440
------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-2
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums and annuity considerations $ 621,789 $ 469,343 $ 296,645
Annuity and other fund deposits 2,991,363 2,051,251 1,981,246
Net investment income 122,322 129,982 102,285
Commissions and expense allowances on reinsurance ceded 379,905 444,241 396,921
Reserve adjustment on reinsurance ceded 1,411,342 3,185,590 3,672,076
Fee income 647,565 448,260 290,675
Other revenues 842 9,930 (2,043)
-------------------------------------------------------------------------------------------------------
TOTAL REVENUES 6,175,128 6,738,597 6,737,805
-------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Death and annuity benefits 47,372 43,152 65,961
Disability and other benefits 6,270 6,352 7,532
Surrenders and other fund withdrawals 1,250,813 739,663 454,417
Commissions 467,338 435,994 470,334
Increase (Decrease) in aggregate reserves for future
benefits 12,481 (10,711) 33,213
(Decrease) Increase in liability for premium and other
deposit funds (47,852) 218,642 640,840
General insurance expenses 192,196 190,979 77,237
Net transfers to separate accounts 4,160,501 4,956,007 4,914,980
Other expenses 35,385 22,091 15,671
-------------------------------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 6,124,504 6,602,169 6,680,185
-------------------------------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS
Before federal income tax (benefit) expense 50,624 136,428 57,620
Federal income tax (benefit) expense (10,231) 35,887 (14,878)
-------------------------------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS 60,855 100,541 72,498
Net realized capital (losses) gains, after tax (36,428) 2,085 1,544
-------------------------------------------------------------------------------------------------------
NET INCOME $ 24,427 $ 102,626 $ 74,042
-------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-3
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Beginning and end of year $ 2,500 $ 2,500 $ 2,500
-------------------------------------------------------------------------------------------------
GROSS PAID-IN AND CONTRIBUTED SURPLUS
Beginning and end of year 226,043 226,043 226,043
-------------------------------------------------------------------------------------------------
UNASSIGNED FUNDS
Balance, beginning of year 247,969 143,257 74,570
Net income 24,427 102,626 74,042
Change in net unrealized capital gains on common stocks
and other invested assets 2,258 1,688 2,186
Change in asset valuation reserve 16,847 (8,112) (6,228)
Change in non-admitted assets 6,557 (1,277) (1,313)
Credit on reinsurance ceded (3,725) 9,787 --
-------------------------------------------------------------------------------------------------
Balance, end of year 294,333 247,969 143,257
-------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS,
End of year $522,876 $476,512 $371,800
-------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-4
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums and annuity considerations $3,613,217 $2,520,655 $2,277,874
Net investment income 122,998 127,425 101,991
Fee income 647,565 448,260 290,675
Other income 1,799,323 3,644,704 4,091,043
-------------------------------------------------------------------------------------------------------
Total income 6,183,103 6,741,044 6,761,583
-------------------------------------------------------------------------------------------------------
Benefits paid 1,303,801 790,051 529,733
Federal income tax (recoveries) payments (8,815) 25,780 (14,499)
Net transfers to separate accounts 4,364,914 5,222,144 5,199,354
Other expenses 669,525 626,240 547,692
-------------------------------------------------------------------------------------------------------
Total benefits and expenses 6,329,425 6,664,215 6,262,280
-------------------------------------------------------------------------------------------------------
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES (146,322) 76,829 499,303
-------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD
Bonds 753,358 633,926 614,413
Common stocks 939 34,010 11,481
Mortgage loans 53,704 85,275 --
Other 1,490 19,990 152
-------------------------------------------------------------------------------------------------------
NET INVESTMENT PROCEEDS 809,491 773,201 626,046
-------------------------------------------------------------------------------------------------------
COST OF INVESTMENTS ACQUIRED
Bonds 804,947 586,913 848,267
Common stocks 464 7,012 28,302
Mortgage loans 57,665 59,702 85,103
Other 14,211 11,847 26,227
-------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS ACQUIRED 877,287 665,474 987,899
-------------------------------------------------------------------------------------------------------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES $ (67,796) $ 107,727 $ (361,853)
-------------------------------------------------------------------------------------------------------
FINANCING AND MISCELLANEOUS ACTIVITIES
Net other cash provided (used) 11,742 (24,033) (4,848)
-------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) FINANCING
AND MISCELLANEOUS ACTIVITIES 11,742 (24,033) (4,848)
-------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and short-term investments (202,376) 160,523 132,602
Cash and short-term investments, beginning of year 469,955 309,432 176,830
-------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF YEAR $ 267,579 $ 469,955 $ 309,432
-------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(STATUTORY BASIS)
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
--------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS:
Hartford Life and Annuity Insurance Company (the "Company") is a wholly owned
subsidiary of Hartford Life Insurance Company ("HLIC"), which is an indirect
subsidiary of Hartford Life, Inc. ("HLI"). HLI is indirectly majority owned by
The Hartford Financial Services Group, Inc. ("The Hartford"). On February 10,
1997, HLI filed a registration statement, as amended, with the Securities and
Exchange Commission relating to the initial public offering of HLI Class A
Common Stock (the "Offering"). Pursuant to the Offering on May 22, 1997, HLI
sold to the public 26 million shares, representing approximately 18.6% of the
equity ownership of HLI.
In 1998, the Company changed its name to Hartford Life and Annuity Insurance
Company from ITT Hartford Life and Annuity Insurance Company.
The Company offers a complete line of fixed and variable annuities, as well as
variable, universal and traditional individual life insurance.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying statutory basis financial statements of the Company were
prepared in conformity with statutory accounting practices prescribed or
permitted by the National Association of Insurance Commissioners ("NAIC") and
the State of Connecticut Department of Insurance. Certain reclassifications have
been made to prior year financial information to conform to the current year
presentation.
Current prescribed statutory accounting practices include accounting
publications of the NAIC, as well as state laws, regulations and general
administrative rules. Permitted statutory accounting practices encompass
accounting practices approved by state insurance departments. The Company does
not follow any permitted statutory accounting practices that have a material
effect on statutory surplus, statutory net income or risk-based capital.
The preparation of financial statements in conformity with statutory accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reported periods. Actual results could
differ from those estimates. The most significant estimates include those used
in determining the liability for aggregate reserves for future benefits and the
liability for premium and other deposit funds. Although some variability is
inherent in these estimates, management believes the amounts provided are
adequate.
STATUTORY ACCOUNTING PRACTICES VERSUS GAAP
Statutory accounting practices and generally accepted accounting principles
("GAAP") differ in certain significant respects. These differences principally
involve:
(1) treatment of policy acquisition costs (commissions, underwriting and selling
expenses, etc.) which are charged to expense when incurred for statutory
purposes rather than on a pro-rata basis over the expected life and gross
profit stream of the policy for GAAP purposes;
(2) recognition of premium revenues, which for statutory purposes are generally
recorded as collected or when due during the premium paying period of the
contract and which for GAAP purposes, for universal life policies and
investment products, generally only consist of charges assessed to policy
account balances for cost of insurance, policy administration and
surrenders. When policy charges received relate to coverage or services to
be provided in the future, the charges are recognized as revenue on a
pro-rata basis over the expected life and gross profit stream of the policy.
Also, for GAAP purposes, premiums for traditional life insurance policies
are recognized as revenues when they are due from policyholders;
(3) development of liabilities for future policy benefits, which for statutory
purposes predominantly use interest rate and mortality assumptions
prescribed by the NAIC which may vary considerably from interest and
mortality assumptions used under GAAP;
(4) providing for income taxes based on current taxable income only for
statutory purposes, rather than establishing additional assets or
liabilities for deferred Federal income taxes to recognize the tax effect
related to reporting revenues and expenses in different periods for
financial reporting and tax return purposes or required under GAAP;
(5) excluding certain assets designated as non-admitted assets (e.g., negative
Interest Maintenance Reserve, and past due agents' balances) from the
balance sheet for statutory purposes by directly charging surplus;
(6) the calculation of post retirement benefits obligation which, for statutory
accounting, excludes non-vested employees whereas GAAP liabilities include a
provision for such employees; statutory and GAAP accounting permit either
immediate recognition of the liability or straight-line amortization of the
liability over a period not to exceed 20 years. For GAAP, The Hartford's
obligation was immediately recognized, whereas for statutory accounting, the
obligation is being recognized ratably over a 20 year period;
F-6
<PAGE>
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve) for statutory purposes; as well as the deferral and
amortization of realized gains and losses, caused by changes in interest
rates during the period the asset is held, into income over the remaining
life to maturity of the asset sold (Interest Maintenance Reserve) for
statutory purposes; whereas on a GAAP basis, no such formula reserve is
required and realized gains and losses are recognized in the period the
asset is sold;
(8) the reporting of reserves and benefits net of reinsurance ceded for
statutory purposes; whereas on a GAAP basis, reserves are reported gross of
reinsurance with reserve credits presented as recoverable assets;
(9) the reporting of fixed maturities at amortized cost for statutory purposes,
whereas GAAP requires that fixed maturities be classified as
"held-to-maturity," "available-for-sale" or "trading," based on the
Company's intentions with respect to the ultimate disposition of the
security and its ability to affect those intentions. The Company's bonds
were classified on a GAAP basis as available-for-sale and accordingly, those
investments and common stocks were reflected at fair value with the
corresponding impact included as a separate component of Stockholder's
Equity; as well as the change in the basis of the Company's other invested
assets, which consist primarily of limited partnership investments, which is
recognized as income under GAAP and as a change in surplus under statutory
accounting; and
(10) statutory accounting calculates separate account liabilities using
prescribed actuarial methodologies, which approximate the market value of
separate account assets less applicable surrender charges. The separate
account surplus generated by these reserving methods is recorded as an
amount due to or from the separate account on the statutory basis balance
sheet, with changes reflected in the statutory basis results of operations.
On a GAAP basis, separate account assets and liabilities are held at fair
value.
As of and for the years ended December 31, the significant differences between
Statutory and GAAP basis net income and capital and surplus for the Company are
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
----------------------------------------
GAAP Net Income $ 75,654 $ 74,525 $ 58,050
Deferral and amortization of policy
acquisition costs, net (272,171) (331,882) (345,657)
Change in unearned revenue reserve (64,915) 23,118 4,058
Deferred taxes 57,833 2,476 47,092
Separate account expense allowance 214,388 259,287 282,818
Asset impairments and write-downs (17,250) 17,250 --
Benefit reserve adjustment 11,491 5,360 24,666
Gain on commutation of reinsurance
(Note 4) -- 52,026 --
Prepaid reinsurance premium (3,524) -- --
Statutory voluntary reserve (6,286) -- --
Other, net 29,207 466 3,015
----------------------------------------
STATUTORY NET INCOME $ 24,427 $ 102,626 $ 74,042
----------------------------------------
GAAP Stockholder's Equity $ 676,428 $ 648,097 $ 570,469
Deferred policy acquisition costs (1,887,824) (1,615,653) (1,283,771)
Unearned revenue reserve 95,965 160,951 134,789
Deferred taxes 122,105 68,936 64,522
Separate account expense allowance 1,398,030 1,183,642 924,355
Asset impairments and write-downs -- 17,250 --
Unrealized losses (gains) on
investments 26,292 (24,955) (21,451)
Benefit reserve adjustment 81,111 69,233 16,378
Asset valuation reserve (4,935) (21,782) (13,670)
Adjustment relating to Lyndon
contribution (Note 4) -- -- (23,671)
Prepaid reinsurance premium (7,728) (4,204) --
Statutory voluntary reserve (6,286) -- --
Other, net 29,718 (5,003) 3,850
----------------------------------------
STATUTORY CAPITAL AND SURPLUS $ 522,876 $ 476,512 $ 371,800
----------------------------------------
</TABLE>
F-7
<PAGE>
AGGREGATE RESERVES FOR FUTURE BENEFITS AND LIABILITY FOR PREMIUM AND OTHER
DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits were
computed in accordance with applicable actuarial standards. Reserves for life
insurance policies are generally based on the 1958 and 1980 Commissioner's
Standard Ordinary Mortality Tables and various valuation rates ranging from 2.5%
to 6%. Accumulation and on-benefit annuity reserves are based principally on
individual annuity tables at various rates ranging from
2.5% to 8.75% and using the Commissioners Annuity Reserve Valuation Method
("CARVM").
The Company has established separate accounts to segregate the assets and
liabilities of certain life insurance and annuity contracts that must be
segregated from the Company's general assets under the terms of its contracts.
The assets consist primarily of marketable securities and are reported at market
value. Premiums, benefits and expenses of these contracts are reported in the
statutory basis statements of operations.
An analysis of Annuity Actuarial Reserves and Deposit Liabilities by Withdrawal
Characteristics as of December 31, 1999 (including general and separate account
liabilities) is as follows:
<TABLE>
<CAPTION>
% of
Amount Total
<S> <C> <C>
--------------------
Subject to discretionary withdrawal:
--------------------
With market value adjustment $ 4,564 0.0%
At book value less current surrender charge of 5% or more 1,427,302 3.2%
At market value 42,431,996 95.4%
--------------------
Total with adjustment or at market value 43,863,862 98.6%
At book value without adjustment (minimal or no charge or
adjustment): 573,583 1.3%
Not subject to discretionary withdrawal: 34,816 0.1%
--------------------
Total, gross 44,472,261 100.0%
Reinsurance ceded --
------------
Total, net $44,472,261
------------
</TABLE>
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds that are deemed
ineligible to be held at amortized cost by the NAIC Securities Valuation Office
("SVO") are carried at the appropriate SVO published value. When a reduction in
the value of a security is deemed to be unrecoverable, the decline in value is
reported as a realized loss and the carrying value is adjusted accordingly.
Short-term investments consist of money market funds and are stated at cost,
which approximates fair value. Common stocks are carried at fair value with the
current year change in the difference from cost reflected in surplus. Mortgage
loans, which are carried at cost and approximate fair value, include investments
in assets backed by mortgage loan pools. Other invested assets are generally
recorded at fair value.
The Asset Valuation Reserve ("AVR") is designed to provide a standardized
reserving process for realized and unrealized losses due to default and equity
risks associated with invested assets. The AVR balances were $4,935 and $21,782
as of December 31, 1999 and 1998, respectively. Additionally, the Interest
Maintenance Reserve ("IMR") captures net realized capital gains and losses, net
of applicable income taxes, resulting from changes in interest rates and
amortizes these gains or losses into income over the life of the bond or
mortgage sold. The IMR balance as of December 31, 1999 is an asset balance of
$981 and is reflected as a component of non-admitted assets in Unassigned Funds
in accordance with statutory accounting practices. The IMR balance as of
December 31, 1998 is a liability balance of $452 and is reflected as an other
liability. The net capital (losses) gains transferred to the IMR in 1999, 1998
and 1997 were $(1,255), $852 and $(719), respectively. The amount of income
(expense) amortized from the IMR in 1999, 1998 and 1997 included in the
Company's Statements of Operations, was $178, $(207), and $(85), respectively.
Realized capital gains and losses, net of taxes, not included in the IMR are
reported in the statutory basis statements of operations. Realized investment
gains and losses are determined on a specific identification basis.
CODIFICATION
The NAIC adopted the Codification of Statutory Accounting Principles in March
1998. The proposed effective date for this statutory accounting guidance is
January 1, 2001. It is expected that Connecticut, the Company's domiciliary
state, will adopt these accounting standards and, therefore, the Company will
make the necessary accounting and reporting changes required for implementation.
The Company has not yet determined the impact that these new accounting
standards will have on its statutory basis financial statements.
F-8
<PAGE>
3. INVESTMENTS:
(a) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
-----------------------------
Interest income from bonds and short-term investments $113,646 $123,370 $100,475
Interest income from policy loans 3,494 3,133 1,958
Interest and dividends from other investments 6,371 4,482 1,005
-----------------------------
Gross investment income 123,511 130,985 103,438
Less: investment expenses 1,189 1,003 1,153
-----------------------------
NET INVESTMENT INCOME $122,322 $129,982 $102,285
-----------------------------
</TABLE>
(b) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND
SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
-----------------------------
Gross unrealized capital gains $ 561 $ 10,905 $23,357
Gross unrealized capital losses (6,441) (833) (1,906)
-----------------------------
Net unrealized capital (losses) gains (5,880) 10,072 21,451
Balance, beginning of year 10,072 21,451 7,979
-----------------------------
CHANGE IN NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND
SHORT-TERM INVESTMENTS $(15,952) $(11,379) $13,472
-----------------------------
</TABLE>
(c) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON COMMON STOCKS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Gross unrealized capital gains $2,508 $ 2,204 $ 537
Gross unrealized capital losses (24) (1,871) (1,820)
--------------------------
Net unrealized capital gains (losses) 2,484 333 (1,283)
Balance, beginning of year 333 (1,283) (3,447)
--------------------------
CHANGE IN NET UNREALIZED CAPITAL GAINS ON COMMON STOCKS $2,151 $ 1,616 $ 2,164
--------------------------
</TABLE>
(d) COMPONENTS OF NET REALIZED CAPITAL (LOSSES) GAINS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Bonds and short-term investments $(37,959) $1,314 $ (120)
Common stocks 104 1,624 421
Other invested assets 172 (1) (307)
--------------------------
Realized capital (losses) gains (37,683) 2,937 (6)
Capital gains benefit -- -- (831)
--------------------------
Net realized capital (losses) gains (37,683) 2,937 825
Less: amounts transferred to the IMR (1,255) 852 (719)
--------------------------
NET REALIZED CAPITAL (LOSSES) GAINS $(36,428) $2,085 $1,544
--------------------------
</TABLE>
Sales and maturities of investments in bonds and short-term investments for the
years ended December 31, 1999, 1998 and 1997 resulted in proceeds of $1,367,027,
$1,354,563 and $1,435,820, gross realized capital gains of $1,106, $1,705, and
$964 and gross realized capital losses of $39,065, $391, and $1,084,
respectively, before transfers to the IMR. Sale of common stocks for the years
ended December 31, 1999, 1998 and 1997 resulted in proceeds of $939, $33,088,
and $10,168, gross realized capital gains of $115, $1,688, and $421 and gross
realized capital losses of $11, $64, and $0, respectively.
(e) DERIVATIVE INVESTMENTS
The Company had no significant derivative holdings as of December 31, 1999, 1998
or 1997.
(f) CONCENTRATION OF CREDIT RISK
Excluding U.S. government and government agency investments, the Company is not
exposed to any significant concentrations of credit risk in fixed maturities of
a single issuer greater than 10% of capital and surplus as of December 31, 1999.
F-9
<PAGE>
(g) BONDS, SHORT-TERM INVESTMENTS AND COMMON STOCKS
<TABLE>
<CAPTION>
1999
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
----------------------------------------------
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored $ 4,768 $ 1 $ (37) $ 4,732
-- Guaranteed and sponsored -- asset backed 170,746 -- -- 170,746
States, municipalities and political subdivisions 10,401 -- (48) 10,353
International governments 7,351 94 (15) 7,430
Public utilities 18,413 92 (73) 18,432
All other corporate -- excluding asset-backed 592,233 374 (6,194) 586,413
All other corporate -- asset-backed 539,688 -- -- 539,688
Short-term investments 228,105 -- -- 228,105
Certificates of deposit 5,158 -- (74) 5,084
Parents, subsidiaries and affiliates 117,057 -- -- 117,057
----------------------------------------------
TOTAL BONDS AND SHORT-TERM INVESTMENTS $1,693,920 $561 $(6,441) $1,688,040
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------
Common stock -- unaffiliated $ 4,562 $1,105 $ (24) $ 5,643
Common stock -- affiliated 35,384 1,403 -- 36,787
--------------------------------------------
TOTAL COMMON STOCKS $39,946 $2,508 $ (24) $42,430
--------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1998
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
----------------------------------------------
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored $ 4,982 $ 35 $ (2) $ 5,015
-- Guaranteed and sponsored -- asset-backed 75,615 -- -- 75,615
States, municipalities and political subdivisions 10,402 415 -- 10,817
International governments 7,466 568 -- 8,034
Public utilities 94,475 1,330 (39) 95,766
All other corporate -- excluding asset-backed 607,679 8,473 (792) 615,360
All other corporate -- asset-backed 505,900 -- -- 505,900
Short-term investments 343,783 -- -- 343,783
Certificates of deposit 130,216 84 -- 130,300
Parents, subsidiaries and affiliates 117,057 -- -- 117,057
----------------------------------------------
TOTAL BONDS AND SHORT-TERM INVESTMENTS $1,897,575 $10,905 $(833) $1,907,647
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------
Common stock -- unaffiliated $ 4,933 $ 290 $ (50) $ 5,173
Common stock -- affiliated 35,384 1,914 (1,821) 35,477
--------------------------------------------
TOTAL COMMON STOCKS $40,317 $2,204 $(1,871) $40,650
--------------------------------------------
</TABLE>
The amortized cost and estimated fair value of bonds and short-term investments
as of December 31, 1999 by estimated maturity year are shown below. Asset-backed
securities, including mortgage-backed securities and collaterialized mortgage
obligations, are distributed to maturity year based on the Company's estimates
of the rate of
F-10
<PAGE>
future prepayments of principal over the remaining lives of the securities.
Expected maturities differ from contractual maturities due to call or prepayment
provisions.
<TABLE>
<CAPTION>
Amortized Estimated
Maturity Cost Fair Value
<S> <C> <C>
--------------------------
One year or less $ 545,290 $ 543,397
Over one year through five years 692,881 690,476
Over five years through ten years 370,835 369,548
Over ten years 84,914 84,619
--------------------------
TOTAL $1,693,920 $1,688,040
--------------------------
</TABLE>
Bonds with a carrying value of $10,457 were on deposit as of December 31, 1999
with various regulatory authorities as required.
(h) FAIR VALUE OF FINANCIAL INSTRUMENTS-BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1999 1998
-------------------------- --------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
------------------------------------------------------
ASSETS
Bonds and short-term investments $1,694 $1,688 $1,898 $1,908
Common stocks 42 42 41 41
Policy loans 59 59 47 47
Mortgage loans 64 64 60 60
Other invested assets 3 3 2 2
LIABILITIES
Deposit funds and other benefits $2,051 $2,017 $2,078 $2,053
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments: fair value of bonds, short-term
investments, common stock, and other invested assets approximate those
quotations published by the NAIC; policy loans and mortgage loans carrying
amounts approximates fair value; and fair value of liabilities on deposit funds
and other benefits is determined by forecasting future cash flows and
discounting the forecasted cash flows at current market rates.
4. REINSURANCE:
The Company cedes insurance to other insurers in order to limit its maximum
losses. Such transfer does not relieve the Company of its primary liability to
the policyholder. Failure of reinsurers to honor their obligations could result
in losses to the Company. The Company reduces this risk by evaluating the
financial condition of reinsurers and monitoring for possible concentrations of
credit risk.
The Company cedes significant portions of its variable annuity business written
since 1994 to RGA Reinsurance Company ("RGA"). Certain core annuity products
were excluded from this reinsurance arrangement beginning in the second quarter
of 1999 and, as such, the amounts ceded to RGA have declined significantly.
In 1995, The Hartford was "spun-off" from ITT Industries, Inc. and became its
own, autonomous entity. In conjunction with this spin-off, the assets and
liabilities of Lyndon Insurance Company (Lyndon) were merged into the Company.
The statutory net assets contributed to the Company as a result of this
transaction were approximately $112 million and were reflected as an increase in
Gross Paid-In and Contributed Surplus at December 31, 1995. This amount was
approximately $41 million lower than the value of net assets contributed on a
GAAP basis.
The majority of the business written in Lyndon was assumed from an unaffiliated
insurer. In 1998, this unaffiliated insurer recaptured the inforce blocks of
business it had been ceding to the Company through Lyndon. In conjunction with
this commutation transaction, the Company transferred statutory basis reserves
of $26,404. Additionally, the Company received fair value consideration for the
bonds it transferred which exceeded the statutory statement value of these
assets by $25,622. As a result of this activity, the Company recognized a
pre-tax gain from this transaction of $52,026 in its 1998 Statements of
Operations.
There were no material reinsurance recoverables from reinsurers outstanding as
of and for the years ended, December 31, 1999 and 1998.
F-11
<PAGE>
The effect of reinsurance as of and for the years ended December 31, is
summarized as follows:
<TABLE>
<CAPTION>
1999 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 784,502 $ 53 $ (192,934) $ 591,621
Policy and Contract Claim
Liabilities $ 7,827 $ 203 $ (353) $ 7,677
Premium and Annuity Considerations $ 674,219 $ 1,261 $ (53,691) $ 621,789
Annuity and Other Fund Deposits $6,195,917 $ -- $(3,204,554) $2,991,363
Death, Annuity, Disability and
Other Benefits $ 65,251 $ 1,104 $ (12,713) $ 53,642
Surrenders $2,541,449 $ -- $(1,290,636) $1,250,813
</TABLE>
<TABLE>
<CAPTION>
1998 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 713,375 $ 50 $ (134,285) $ 579,140
Policy and Contract Claim
Liabilities $ 5,895 $ 85 $ (313) $ 5,667
Premium and Annuity Considerations $ 483,328 $24,954 $ (38,939) $ 469,343
Annuity and Other Fund Deposits $6,461,470 $ -- $(4,410,219) $2,051,251
Death, Annuity, Disability and
Other Benefits $ 64,331 $ 1,574 $ (16,401) $ 49,504
Surrenders $1,481,797 $ -- $ (742,134) $ 739,663
</TABLE>
<TABLE>
<CAPTION>
1997 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Premium and Annuity Considerations $ 266,427 $51,630 $ (21,412) $ 296,645
Annuity and Other Fund Deposits $6,515,347 $ -- $(4,534,101) $1,981,246
Death, Annuity, Disability and
Other Benefits $ 79,779 $ 839 $ (7,126) $ 73,492
Surrenders $ 882,094 $ -- $ (427,677) $ 454,417
</TABLE>
5. RELATED PARTY TRANSACTIONS:
Transactions between the Company and its affiliates, relate principally to tax
settlements, reinsurance, insurance coverages, rental and service fees, capital
contributions and payments of dividends. In addition, certain affiliated
insurance companies purchased group annuity contracts from the Company to fund
pension costs and claim annuities to settle casualty claims. Substantially all
general insurance expenses related to the Company, including rent and benefit
plan expenses, are initially paid by The Hartford. Direct expenses are allocated
using specific identification and indirect expenses are allocated using other
applicable methods. Indirect expenses include those for corporate areas which,
depending on type, are allocated based on either a percentage of direct expenses
or on utilization.
The Company has also invested in bonds of its affiliates, Hartford Financial
Services Corporation and HL Investment Advisors, Inc., and common stock of its
subsidiary, Hartford Life, LTD.
For additional information, see Notes 4, 6, and 8.
6. FEDERAL INCOME TAXES:
The Company and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. Federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were filing separate Federal, state and local
income tax returns.
As long as The Hartford continues to own at least 80% of the combined voting
power and 80% of the value of the outstanding capital stock of HLI, the Company
will be included for Federal income tax purposes in the affiliated group of
which The Hartford is the common parent. The Hartford and its non-life
subsidiaries filed a single consolidated Federal income tax return for 1998 and
1997 and intend to file a separate consolidated Federal income tax return for
1999. The life insurance companies filed a separate consolidated Federal income
tax return for 1998 and 1997 and intend to file a separate consolidated Federal
income tax return for 1999. Federal income taxes (received) paid by the Company
for operations and capital gains (losses) were $(8,815), $25,780, and $(14,499)
in 1999, 1998 and 1997, respectively. The effective tax rate was (73)%, 27%, and
(28)% in 1999, 1998 and 1997, respectively.
F-12
<PAGE>
The following schedule provides a reconciliation of the tax provision (including
realized capital gains(losses)) at the U.S. Federal Statutory rate to Federal
income tax (benefit) expense (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
------------------
Tax provision at U.S. Federal Statutory rate $ 5 $48 $ 20
Tax deferred acquisition costs 31 25 25
Statutory to tax reserve differences (7) 8 1
Investments (31) (60) (61)
Other (8) 15 (1)
------------------
FEDERAL INCOME TAX (BENEFIT) EXPENSE $(10) $36 $(16)
------------------
</TABLE>
7. CAPITAL AND SURPLUS AND SHAREHOLDER DIVIDEND RESTRICTIONS:
The maximum amount of dividends which can be paid to shareholders by Connecticut
domiciled insurance companies, without prior approval, is generally restricted
to the greater of 10% of surplus as of the preceding December 31st or the net
gain from operations for the previous year. Dividends are paid as determined by
the Board of Directors and are not cumulative. No dividends were paid in 1999,
1998 or 1997. The amount available for dividend in 2000 is approximately
$60,855.
8. PENSION, RETIREMENT, AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:
All employees that work for The Hartford's life insurance companies are included
in The Hartford's non-contributory defined benefit pension plans. These plans
provide pension benefits that are based on years of service and the employee's
compensation during the last ten years of employment. The Hartford's funding
policy is to contribute annually an amount between the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974,
as amended, and the maximum amount that can be deducted for U.S. Federal income
tax purposes. Generally, pension costs are funded through the purchase of group
pension contracts sold by affiliates. The costs that were allocated to the
Company for pension related expenses were $762, $1,045 and $840 for 1999, 1998
and 1997, respectively.
Employees of The Hartford's life insurance companies are also provided, through
The Hartford, certain health care and life insurance benefits for eligible
retired employees. The contribution for health care benefits depends on the
retiree's date of retirement and years of service. In addition, this benefit
plan has a defined dollar cap, which limits average company contributions. The
Hartford has prefunded a portion of the health care and life insurance
obligations through trust funds where such prefunding can be accomplished on a
tax effective basis. Postretirement health care and life insurance benefits
expense allocated to the Company was not material to the results of operations
for 1999, 1998 or 1997.
The assumed rate in the per capita cost of health care (the health care trend
rate) was 7.1% for 1999, decreasing ratably to 5.0% in the year 2003. Increasing
the health care trend rates by one percent per year would have an immaterial
impact on the accumulated postretirement benefit obligation and the annual
expense. To the extent that the actual experience differs from the inherent
assumptions, the effect will be amortized over the average future service of
covered employees.
Substantially all of The Hartford's life insurance companies' employees are
eligible to participate in The Hartford's Investment and Savings Plan. Under
this plan, designated contributions, which may be invested in Class A Common
Stock of HLI or certain other investments, are matched to a limit of 3% of
compensation.
9. SEPARATE ACCOUNTS:
The Company maintains separate account assets totaling $44.9 billion and $32.9
billion as of December 31, 1999 and 1998, respectively. Separate account assets
are segregated from other investments and reported at fair value. Separate
account liabilities are determined in accordance with prescribed actuarial
methodologies, which approximate the market value less applicable surrender
charges. The resulting surplus is recorded in the general account statement of
operations as a component of Net Transfers to Separate Accounts. The Company's
separate accounts are non-guaranteed, wherein the policyholder assumes
substantially all the investment risk and rewards. Investment income (including
investment gains and losses) and interest credited to policyholders on separate
account assets are not separately reflected in the statutory statements of
operations.
Separate account management fees, net of minimum guarantees, were $493 million,
$363 million, and $252 million in 1999, 1998 and 1997, respectively, and are
recorded as a component of fee income on the Company's statutory basis
Statements of Operations.
F-13
<PAGE>
10. COMMITMENTS AND CONTINGENT LIABILITIES:
(a) LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for alleged economic and punitive damages
have been asserted. Some of these cases have been filed as purported class
actions and some cases have been filed in certain jurisdictions that permit
punitive damage awards disproportionate to the actual damages incurred. Although
there can be no assurances, at the present time, the Company does not anticipate
that the ultimate liability, arising from such pending or threatened litigation,
will have a material adverse effect on the statutory capital and surplus of the
Company.
(b) GUARANTY FUNDS
Under insurance guaranty fund laws in each state, the District of Columbia and
Puerto Rico, insurers licensed to do business can be assessed by state insurance
guaranty associations for certain obligations of insolvent insurance companies
to policyholders and claimants. Recent regulatory actions against certain large
life insurers encountering financial difficulty have prompted various state
insurance guaranty associations to begin assessing life insurance companies for
the deemed losses. Most of these laws do provide, however, that an assessment
may be excused or deferred if it would threaten an insurer's solvency and
further provide annual limits on such assessments. Part of the assessments paid
by the Company pursuant to these laws may be used as credits for a portion of
the associated premium taxes. The Company paid guaranty fund assessments of
approximately $523, $1,043 and $1,544 in 1999, 1998, and 1997, respectively, of
which $318, $995, and $548 in 1999, 1998 and 1997, respectively were estimated
to be creditable against premium taxes.
(c) TAX MATTERS
The Company's Federal income tax returns are routinely audited by the Internal
Revenue Service ("IRS"). The Company's 1997 and 1996 Federal income tax returns
are currently under audit by the IRS. As of March 31, 2000, the audit was in its
initial stage and no material issues had been raised.
F-14
<PAGE>
PART C
<PAGE>
OTHER INFORMATION
Item 27. Exhibits
(a) Resolution of the Board of Directors of Hartford Life and
Annuity Insurance Company ("Hartford") authorizing the
establishment of the Separate Account.(1)
(b) Not Applicable.
(c) Principal Underwriting Agreement.(1)
(d) Form of Flexible Premium Variable Life Insurance Policy.(2)
(e) Form of Application for Flexible Premium Variable Life
Insurance Policies.(2)
(f) Certificate of Incorporation of Hartford(3) and Bylaws of
Hartford.(1)
(g) Form of Reinsurance Contract.(4)
(h) Form of Participation Agreement.(4)
(i) Not Applicable.
(j) Not Applicable.
(k) Opinion and consent of Christine Hayer Repasy, Senior Vice
President, General Counsel and Corporate Secretary.
(l) Opinion and Consent of Thomas P. Kalmbach, FSA, MAAA.
(m) Not Applicable.
(n) Consent of Arthur Andersen LLP, Independent Public
Accountants.
(o) No financial statement will be omitted.
(p) Not Applicable.
(q) Memorandum describing transfer and redemption procedures.(1)
(r) Power of Attorney.
(s) Organizational Chart.
-----------------
1 Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-6, File No. 33-89988, of Hartford Life
and Annuity Insurance Company filed with the Securities and Exchange
Commission on May 1, 1996.
2 Incorporated by reference to the Initial Filing of the Registration
Statement on Form S-6, File No. 333-67373, of Hartford Life and Annuity
Insurance Company filed with the Securities and Exchange Commission on
November 17, 1998.
3 Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement on Form S-6, File No. 33-89988, of Hartford Life
and Annuity Insurance Company filed with the Securities and Exchange
Commission on July 20, 1998.
4 Incorporated by reference to the Post-Effective Amendment No. 1 of the
Registration Statement on Form S-6, File No. 333-67373, of Hartford
Life and Annuity Insurance Company filed with the Securities and
Exchange Commission on April 13, 1999
<PAGE>
Item 28. Officers and Directors.
<TABLE>
<CAPTION>
--------------------------------------------- -------------------------------------------------------------------------
NAME POSITION WITH HARTFORD
<S> <C>
--------------------------------------------- -------------------------------------------------------------------------
David A. Carlson Vice President
--------------------------------------------- -------------------------------------------------------------------------
Peter W. Cummins Senior Vice President
--------------------------------------------- -------------------------------------------------------------------------
Bruce W. Ferris Vice President
--------------------------------------------- -------------------------------------------------------------------------
Timothy M. Fitch Vice President & Actuary
--------------------------------------------- -------------------------------------------------------------------------
Mary Jane B. Fortin Vice President & Chief Accounting Officer
--------------------------------------------- -------------------------------------------------------------------------
David T. Foy Senior Vice President, Chief Financial Officer and Treasurer, Director*
--------------------------------------------- -------------------------------------------------------------------------
Joe M. Thomson Senior Vice President
--------------------------------------------- -------------------------------------------------------------------------
John C. Walters Executive Vice President, Director*
--------------------------------------------- -------------------------------------------------------------------------
Lois W. Grady Senior Vice President
--------------------------------------------- -------------------------------------------------------------------------
Stephen T. Joyce Senior Vice President
--------------------------------------------- -------------------------------------------------------------------------
Michael D. Keeler Vice President
--------------------------------------------- -------------------------------------------------------------------------
Robert A. Kerzner Senior Vice President
--------------------------------------------- -------------------------------------------------------------------------
Thomas M. Marra President, Director*
--------------------------------------------- -------------------------------------------------------------------------
Steven L. Matthiesen Vice President & Actuary
--------------------------------------------- -------------------------------------------------------------------------
Deanne Osgood Vice President
--------------------------------------------- -------------------------------------------------------------------------
Craig R. Raymond Senior Vice President and Chief Actuary
--------------------------------------------- -------------------------------------------------------------------------
Christine Hayer Repasy Senior Vice President, General Counsel, and Corporate Secretary, Director*
--------------------------------------------- -------------------------------------------------------------------------
Lowndes A. Smith Chairman of the Board, Chief Executive Officer, Director*
--------------------------------------------- -------------------------------------------------------------------------
Joe M. Thomson Senior Vice President
--------------------------------------------- -------------------------------------------------------------------------
John C. Walters Executive Vice President, Director*
--------------------------------------------- -------------------------------------------------------------------------
David M. Znamierowski Senior Vice President and Chief Investment Officer, Director*
--------------------------------------------- -------------------------------------------------------------------------
</TABLE>
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
-------------
* Denotes Board of Directors of Hartford.
<PAGE>
Item 29. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Filed herewith as Exhibit 1.7.
Item 30: Indemnification
Sections 33-770 to 33-778, inclusive, of the Connecticut General
Statutes ("CGS") provide that a corporation may provide indemnification
of or advance expenses to a director, officer, employee or agent.
Reference is hereby made to Section 33-771(e) of CGS regarding
indemnification of directors and Section 33-776(d) of CGS regarding
indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide, in general, that Connecticut
corporations incorporated prior to January 1, 1997 shall, except to the
extent that their certificate of incorporation expressly provides
otherwise, indemnify their directors, officers, employees and agents
against "liability" (defined as the obligation to pay a judgment,
settlement, penalty, fine, including an excise tax assessed with
respect to an employee benefit plan, or reasonable expenses incurred
with respect to a proceeding) when (1) a determination is made pursuant
to Section 33-775 that the party seeking indemnification has met the
standard of conduct set forth in Section 33-771 or (2) a court has
determined that indemnification is appropriate pursuant to Section
33-774. Under Section 33-775, the determination of and the
authorization for indemnification are made (a) by the disinterested
directors, as defined in Section 33-770(3); (b) by special counsel; (c)
by the shareholders; or (d) in the case of indemnification of an
officer, agent or employee of the corporation, by the general counsel
of the corporation or such other officer(s) as the board of directors
may specify. Also, Section 33-772 provides that a corporation shall
indemnify an individual who was wholly successful on the merits or
otherwise against reasonable expenses incurred by him in connection
with a proceeding to which he was a party because he was a director of
the corporation. In the case of a proceeding by or in the right of the
corporation or with respect to conduct for which the director, officer,
agent or employee was adjudged liable on the basis that he received a
financial benefit to which he was not entitled, indemnification is
limited to reasonable expenses incurred in connection with the
proceeding against the corporation to which the individual was named a
party.
Under the Depositor's bylaws, the Depositor must indemnify both
directors and officers of the Depositor for (1) any claims and
liabilities to which they become subject by reason of being or having
been directors or officers of the Depositor and (2) legal and other
expenses incurred in defending against such claims, in each case, to
the extent such is consistent with statutory provisions.
Section 33-777 of CGS specifically authorizes a corporation to procure
indemnification insurance on behalf of an individual who was a
director, officer, employer or agent of the corporation. Consistent
with the statute, the directors and officers of the Depositor and
Hartford Equity Sales Company, Inc. ("HESCO") are covered under a
directors and officers liability insurance policy issued to The
Hartford Financial Services Group, Inc. and its subsidiaries.
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Item 31. Principal Underwriters
(a) HESCO acts as principal underwriter for the following
investment companies:
Hartford Life Insurance Company - Separate Account VL I
Hartford Life Insurance Company - Separate Account VL II
Hartford Life Insurance Company - ICMG Secular Trust
Separate Account
Hartford Life Insurance Company - ICMG Registered Variable
Life Separate Account A
Hartford Life and Annuity Insurance Company - Separate
Account VL I
Hartford Life and Annuity Insurance Company - Separate
Account VL II
Hartford Life and Annuity Insurance Company - ICMG Registered
Variable Life Separate Account One
(b) Directors and Officers of HESCO
<TABLE>
<CAPTION>
Positions and Offices
Name With Underwriter
------ -----------------------
<S> <C>
David A. Carlson Vice President
Peter W. Cummins Senior Vice President
David T. Foy Treasurer
J. Richard Garrett Vice President
Christine Hayer Repasy Senior Vice President, General Counsel and
Corporate Secretary, Director
George R. Jay Controller
Robert A. Kerzner Executive Vice President, Director
Joseph F. Mahoney Executive Vice President
Thomas M. Marra President, Director
Lowndes A. Smith Chief Executive Officer
John C. Walters Executive Vice President
</TABLE>
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
<PAGE>
Item 32. Location of Accounts and Records
All of the accounts, books, records or other documents required to
be kept by Section 31(a) of the Investment Company Act of 1940 and
rules thereunder, are maintained by Hartford at 200 Hopmeadow
Street, Simsbury, Connecticut 06089.
Item 33. Management Services
All management contracts are discussed in Part A and Part B of this Registration
Statement.
Item 34. Representation of Reasonableness of Fees
Hartford hereby represents that the aggregate fees and charges under the Policy
are reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by Hartford.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act and the Investment Company
Act, the Registrant certifies that it meets all of the requirements for
effectiveness of this registration statement under rule 485(b) under the
Securities Act and has duly caused this registration statement to be signed
on its behalf by the undersigned, duly authorized, in the Town of Simsbury,
and State of Connecticut on the 4th day of December, 2000.
HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY - SEPARATE ACCOUNT VL II
(Registrant)
*By: David T. Foy
------------------------------------
David T. Foy, Senior Vice President
and Treasurer
*By: /s/ Christopher M. Grinnell
------------------------------
Christopher M. Grinnell
Attorney-In-Fact
HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY (Depositor)
*By: David T. Foy
------------------------------------
David T. Foy, Senior Vice President
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons and in the capacities and
on the dates indicated.
David T. Foy, Senior Vice President, Chief
Financial Officer and Treasurer, Director*
Christine Hayer Repasy, Senior Vice President,
General Counsel and Corporate Secretary,
Director*
Thomas M. Marra, President, Director* *By: /s/ Christopher M. Grinnell
Lowndes A. Smith, Chairman of the Board, ----------------------------
Chief Executive Officer, Director* Christopher M. Grinnell
John C. Walters, Executive Vice President, Attorney-in-Fact
Director* Date: December 4, 2000
David M. Znamierowski, Senior Vice President
And Chief Investment Officer, Director*
<PAGE>
EXHIBIT INDEX
1.3 Opinion and Consent of Christine Hayer Repasy, Senior Vice President,
General Counsel and Corporate Secretary.
1.4 Opinion and Consent of Thomas P. Kalmbach, FSA, MAAA.
1.5 Consent of Arthur Andersen LLP, Independent Public Accountants.
1.6 Power of Attorney.
1.7 Organizational Chart.
