<PAGE>
Securities and Exchange Commission
Washington, D.C.
Form N-4
Registration Statement Under the Securities Act of 1933
and/or
Registration Statement Under the Investment Company Act of 1940
Hartford Life Insurance Company -
Separate Account Two (DC Variable Account II)
(Exact Name of Registrant)
Hartford Life Insurance Company
(Name of Depositor)
P.O. Box 2999
Hartford, CT 06104-2999
(Address of Depositor's Principal Offices)
Depositor's Telephone Number: (203) 843-8847
Rodney J. Vessels, Esquire
P.O. Box 2999
Hartford, CT 06104-2999
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.
Calculation of Registration Fee Under Securities Act of 1933
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Title of Amount Proposed Maximum Proposed Maximum Amount of
Securities Being Offering Aggregate Registration
Being Requested Registered Price Per Unit Offering Price Fee
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Hartford Life Insurance Pursuant to Regulation 270. 24f-2 PAID
Company, Separate Account under the Investment Company Act
Two, Units of Interest of 1940. Registrant hereby elects to
register an indefinite number of units of
interest in this Separate Account.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that his Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
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CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 Item No. Prospectus Heading
------------ ------------------
1. Cover Page Cover Page
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Information Accumulation Unit Values
5. General Description of Registrant, The Contracts and Separate Account Two;
Portfolio Companies Hartford Life Insurance Company and the
Funds; Miscellaneous
6. Deductions Charges Under the Contract
7. General Description of Variable Operation of the Contract; Payment of
Annuity Contracts Benefits; The Contracts and Separate
Account Two
8. Annuity Period Payment of Benefits
9. Death Benefit Payment of Benefits; Operation of the
Contract
10. Purchases and Contract Value Operation of the Contract
11. Redemptions Payment of Benefits
12. Taxes Federal Tax Considerations
13. Legal Proceedings Miscellaneous - Are there any material
legal proceedings affecting the
Separate Account?
14. Table of Contents of the Table of Contents of the
Statement of Additional Statement of Additional Information
Information
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N-4 Item No. Prospectus Heading
------------ ------------------
15. Cover Page Part B; Statement of Additional
Information
16. Table of Contents Tables of Contents
17. General Information and Description of Hartford Life Insurance
History Company
18. Services None
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Calculation of Yield and
Data Return
22. Annuity Payments Annuity Period
23. Financial Statements Financial Statements
24. Financial Statements and Financial Statements and
Exhibits Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Depositor Common Control with the Depositor
or Registrant or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts and Records
31. Management Services Management Services
32. Undertakings Undertakings
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HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO (DC-II)
The group variable annuity contracts (hereinafter the "Contract" or "Contracts")
described in this Prospectus are issued by Hartford Life Insurance Company
("Hartford Life"). The Contracts provide for both an Accumulation Period and an
Annuity Period. Contributions are held in a division of Hartford Life Insurance
Company Separate Account Two ("DC-II") during the Accumulation Period and during
the Annuity Period.
The Contracts are issued to Employers or to a trustee or custodian of the
Employer's plan, to allow their employees to participate in a Tax Sheltered
Annuity as described under Section 403(b) of the Internal Revenue Code or an
Individual Retirement Annuity as described under Section 408 of the Internal
Revenue Code.
The following Sub-Accounts are available under the Contracts. Opposite each
Sub-Account is the name of the underlying investment ("Fund") for that Sub-
Account.
Advisers Fund Sub-Account - shares of Hartford Advisers Fund,
Inc. ("Advisers Fund")
Bond Fund Sub-Account - shares of Hartford Bond Fund, Inc.
("Bond Fund")
Capital Appreciation Fund Sub-Account - shares of Hartford Capital
Appreciation Fund, Inc. (formerly
"Hartford Aggressive Growth Fund,
Inc.") ("Capital Appreciation
Fund")
Dividend and Growth Fund Sub-Account - shares of Hartford Dividend and
Growth Fund, Inc. ("Dividend and
Growth Fund")
Index Fund Sub-Account - shares of Hartford Index Fund, Inc.
("Index Fund")
International Opportunities Fund - shares of Hartford International
Sub-Account Opportunities Fund, Inc.
("International Opportunities
Fund")
Mortgage Securities Fund Sub-Account - shares of Hartford Mortgage
Securities Fund, Inc. ("Mortgage
Securities Fund")
Responsively Invested Balanced Fund - shares of Calvert Responsively
Sub-Account Invested Balanced Fund Series of
Acacia Capital Corporation.
(formerly Calvert Socially
Responsive Fund) ("Responsibly
Invested Balanced Fund")
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Stock Fund Sub-Account - shares of Hartford Stock Fund, Inc.
("Stock Fund")
AMS/TCI Advantage Fund Sub-Account - shares of Twentieth Century
Investments TCI Advantage ("AMS/TCI
Advantage Fund")
AMS/TCI Growth Fund Sub-Account - shares of Twentieth Century
Investments TCI Growth ("AMS/TCI
Growth Fund")
AMS/Fidelity VIP II Asset Manager Fund - shares of Fidelity Investments
Sub-Account Variable Insurance Products II
Asset Manager ("AMS/Fidelity VIP II
Asset Manager Fund")
AMS/Fidelity VIP II Contrafund Fund - shares of Fidelity Investments
Sub-Account Variable Insurance Products II
Contrafund Fund ("AMS/Fidelity VIP
II Contrafund Fund")
AMS/Fidelity VIP Growth Fund Sub-Account - shares of Fidelity Investments
Variable Insurance Products Growth
Fund ("AMS/Fidelity VIP Growth
Fund")
AMS/Fidelity VIP Overseas Fund - shares of Fidelity Investments
Sub-Account Variable Insurance Products
Overseas Fund ("AMS/Fidelity VIP
Overseas Fund")
This Prospectus sets forth the information concerning DC-II that investors ought
to know before investing. This Prospectus should be kept for future reference.
Additional information about DC-II has been filed with the Securities and
Exchange Commission and is available without charge upon request. To obtain the
Statement of Additional Information send a written request to Hartford Life
Insurance Company, Attn: RPVA Administration, P.O. Box 2999, Hartford, CT
06104-2999. The Table of Contents for the Statement of Additional Information
may be found on page ___ of this Prospectus. The Statement of Additional
Information is incorporated by reference to this Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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THIS PROSPECTUS IS NOT VALID UNLESS ATTACHED TO THE CURRENT PROSPECTUS OF THE
APPLICABLE ELIGIBLE FUNDS LISTED ABOVE WHICH CONTAINS A FULL DESCRIPTION OF
THOSE FUNDS. INVESTORS ARE ADVISED TO RETAIN THESE PROSPECTUSES FOR FUTURE
REFERENCE.
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Prospectus Dated: __________
Statement of Additional Information Dated: ___________
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TABLE OF CONTENTS
SECTION PAGE
------- ----
GLOSSARY OF SPECIAL TERMS. . . . . . . . . . . . . . . . . . . . . . . . .
FEE TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE RELATED INFORMATION . . . . . . . . . . . . . . . . . . . . .
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE CONTRACT AND SEPARATE ACCOUNT TWO . . . . . . . . . . . . . . . . . .
What are the Contracts? . . . . . . . . . . . . . . . . . . . . . . . .
Who can buy these Contracts? . . . . . . . . . . . . . . . . . . . . . .
What is the Separate Account and how does it operate? . . . . . . . . .
OPERATION OF THE CONTRACT . . . . . . . . . . . . . . . . . . . . . . . .
How are Contributions credited? . . . . . . . . . . . . . . . . . . . .
May I change the amount of my Contributions? . . . . . . . . . . . . . .
May I make changes in my Sub-Account allocations?. . . . . . . . . . . .
May I transfer assets between Sub-Accounts? . . . . . . . . . . . . . .
How do I transfer assets between Sub-Accounts or change my
Sub-Account allocations? . . . . . . . . . . . . . . . . . . . . . . . .
What happens if the Contractholder fails to make Contributions? . . . .
May I assign or transfer the Contract? . . . . . . . . . . . . . . . . .
May I request a loan from my Individual Account? . . . . . . . . . . . .
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How do I know what my account is worth? . . . . . . . . . . . . . . . .
How is the Accumulation Unit value determined? . . . . . . . . . . . . .
How are the underlying Fund shares valued? . . . . . . . . . . . . . . .
PAYMENT OF BENEFITS .. . . . . . . . . . . . . . . . . . . . . . . . . . .
What would my Beneficiary receive as death proceeds? . . . . . . . . . .
How can a Contract be redeemed or surrendered? . . . . . . . . . . . . .
Can payment of the redemption or surrender value ever be postponed
beyond the seven day period? . . . . . . . . . . . . . . . . . . . . . .
May I surrender once Annuity payments have started?. . . . . . . . . . .
Can a Contract be suspended by a Contractholder? . . . . . . . . . . . .
How do I elect an Annuity Commencement Date and Form of Annuity? . . . .
What is the minimum amount that I may select as an Annuity Payment?. . .
How are Contributions made to establish my Annuity account?. . . . . . .
What are the available Annuity Options under the Contracts?. . . . . . .
Systematic Withdrawal Option . . . . . . . . . . . . . . . . . . . . . .
How are Variable Annuity payments determined?. . . . . . . . . . . . . .
Can a Contract be modified?. . . . . . . . . . . . . . . . . . . . . . .
CHARGES UNDER THE CONTRACT . . . . . . . . . . . . . . . . . . . . . . . .
How are the charges under these Contracts made?. . . . . . . . . . . . .
What do the sales charges cover? . . . . . . . . . . . . . . . . . . . .
What is the mortality, expense and administrative risk charge? . . . . .
Are there any other administrative charges?. . . . . . . . . . . . . . .
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Is there ever a time where the sales charges or Annual
Contract Fee does not apply? . . . . . . . . . . . . . . . . . . . . . .
Experience Rating of Contracts . . . . . . . . . . . . . . . . . . . . .
How much are the deductions for Premium Taxes on these Contracts?. . . .
Are there any other deductions?. . . . . . . . . . . . . . . . . . . . .
HARTFORD LIFE INSURANCE COMPANY AND THE FUNDS. . . . . . . . . . . . . . .
What is Hartford Life? . . . . . . . . . . . . . . . . . . . . . . . . .
What are the Funds?. . . . . . . . . . . . . . . . . . . . . . . . . . .
Does Hartford Life have any interest in the Funds? . . . . . . . . . . .
FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . .
What are some of the federal tax consequences which affect these
Contracts? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What are my voting rights? . . . . . . . . . . . . . . . . . . . . . . .
Will other Contracts be participating in the Separate Account? . . . . .
How are the Contracts sold?. . . . . . . . . . . . . . . . . . . . . . .
Who is the custodian of the Separate Account's assets? . . . . . . . . .
Are there any material legal proceedings affecting the Separate Account?
Are you relying on any experts as to any portion of this Prospectus? . .
How may I get additional information?. . . . . . . . . . . . . . . . . .
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION . . . . . . . .
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GLOSSARY OF SPECIAL TERMS
ACCUMULATION PERIOD: The period before the commencement of Annuity payments.
ACCUMULATION UNIT: An accounting unit of measure used to calculate values
before Annuity payments begin.
ANNUAL CONTRACT FEE: A fee charged for establishing and maintaining a
Participant's Individual Account under a Contract.
ANNUITANT: A Participant on whose behalf Annuity payments are to be made under
a Contract.
ANNUITY: A series of payments for life, or for life with a minimum number of
payments or a determinable sum guaranteed, or for a joint lifetime and
thereafter during the lifetime of the survivor, or for payments for a designated
period.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to commence.
ANNUITY PERIOD: The period following the commencement of Annuity payments.
ANNUITY UNIT: An accounting unit of measure in DC-II used to calculate the
amount of Variable Annuity payments.
BENEFICIARY: The person(s) designated to receive Contract values in the event
of the Participant's or Annuitant's death.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: Securities and Exchange Commission.
CONTRACTHOLDER: The Employer or entity owning the Contract.
CONTRACT YEAR: A period of 12 months commencing with the effective date of the
Contract or with any anniversary thereof.
CONTRIBUTION(S): The amount(s) paid or transferred to Hartford Life by the
Contractholder on behalf of Participants pursuant to the terms of the Contracts.
DATE OF COVERAGE: The date on which the application on behalf of a Participant
is received by Hartford Life.
DC-II: A division of Hartford Life Insurance Company Separate Account Two.
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EMPLOYER: An employer who establishes a Tax Sheltered Annuity Plan or an
Individual Retirement Annuity plan for its employees.
FIXED ANNUITY: An Annuity providing for guaranteed payments which remain fixed
in amount throughout the payment period and which do not vary with the
investment experience of DC-II.
FUNDS: The Funds described commencing on page ____ of this Prospectus.
GENERAL ACCOUNT: The General Account of Hartford Life which consists of all
assets of Hartford Life other than those allocated to the separate accounts of
Hartford Life.
HARTFORD LIFE: Hartford Life Insurance Company.
INDIVIDUAL RETIREMENT ANNUITY: An annuity contract purchased by an Employer on
behalf of its employees and which provides for special tax treatment under
Section 408 of the Code.
IRS: Internal Revenue Service.
MINIMUM DEATH BENEFIT: The minimum amount payable upon the death of a
Participant prior to age 65 and before Annuity payments have commenced.
PARTICIPANT: Any employee of an Employer/Contractholder electing to participate
in the Contract. The term "Participant" includes a Participant Owner under an
Individual Retirement Annuity under Section 408 of the Code.
PARTICIPANT'S CONTRACT YEAR: A period of twelve (12) months commencing with the
Date of Coverage of a Participant and each successive 12 month period
thereafter.
PARTICIPANT'S INDIVIDUAL ACCOUNT: An account to which DC-II Accumulation Units
are allocated on behalf of a Participant under the Contract .
PREMIUM TAX: A tax charged by a state or municipality on premiums, purchase
payments or contract values.
TAX SHELTERED ANNUITY (also commonly referred to as "Tax Deferred Annuity): An
annuity Contract purchased by an Employer on behalf of its employees and which
qualifies for special tax treatment under Sections 403(b) of the Code.
SEPARATE ACCOUNT: Hartford Life Insurance Company Separate Account Two.
SUB-ACCOUNT: Accounts established within DC-II with respect to a Fund.
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VALUATION DAY: Every day the New York Stock Exchange is open for business
exclusive of the following holidays: Martin Luther King Day, Lincoln's
Birthday, Columbus Day, Veteran's Day, the day before Independence Day and the
day after Thanksgiving. The value of DC-II is determined at the close of the
New York Stock Exchange (currently 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between successive Valuation Days.
VARIABLE ANNUITY: An Annuity providing for payments varying in amount in
accordance with the investment experience of the assets held in the underlying
securities of DC-II.
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Fee Table
(to be inserted by amendment)
<PAGE>
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SUMMARY
A. CONTRACTS OFFERED
Group variable annuity contracts are offered for issuance to Employers to
allow employee participation and special tax treatment under Section 403(b)
and Section 408 of the Code.
The Contracts are limited to plans established and sponsored by Employers for
their employees. The Contract is normally issued to the Employer or to the
trustee or custodian of the Employer's plan.
B. ACCUMULATION PERIOD UNDER THE CONTRACTS
During the Accumulation Period under the Contracts, Contributions submitted
by the Contractholder are used to purchase variable account interests.
Contributions allocated to purchase variable interests may, after the
deductions described hereafter, be invested in selected Sub-Accounts of
DC-II.
C. CONTINGENT DEFERRED SALES CHARGES
There is no deduction for sales expenses at the time Contributions are
allocated to the Contracts. However, a contingent deferred sales charge may
be assessed against a Participant's Individual Account when it is withdrawn.
The number of Participant Contract Years completed prior to withdrawal will
determine the amount of the contingent deferred sales charge. The amount or
term of the contingent deferred sales charge may be reduced (see "Experience
Rating of Contracts", page ___). Such charges will in no event ever exceed
8.50% when applied as a percentage against the sum of all Contributions to a
Participant's Individual Account.
The charge is a percentage of the amount surrendered and equals:
Contract Year
of Withdrawal Maximum Charge
------------- --------------
1-5 5%
6 4%
7 3%
8 2%
9 1%
10 or more 0%
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No deduction for contingent deferred sales charges will be made in certain
cases. (See "Is there ever a time when the sales charges do not apply?"
commencing on page ____.)
Hartford Life reserves the right to limit any increase in the Contributions
made to a Participant's Individual Account under any Contract to no more than
three times the total Contributions made on behalf of such Participant during
the initial 12 consecutive months following the Date of Coverage. Increases
in excess of those described will be accepted only with the consent of
Hartford Life and subject to the then current deductions being made under the
Contracts.
D. TRANSFER BETWEEN ACCOUNTS
During the Accumulation Period a Participant may allocate monies held in DC-
II among the available Sub-Accounts of DC-II. Currently, there is no charge
for up to 12 transfers per Participant Contract Year. A fee of $5.00 may be
assessed for each transfer made in excess of 12 per Participant Contract
Year. No two (2) transfers may occur on consecutive Valuation Days. There
may be additional restrictions under certain circumstances. (See "May I
transfer assets between Sub-Accounts?" page .)
E. ANNUITY PERIOD UNDER THE CONTRACTS
At the end of the Accumulation Period, Contract values held with respect to a
Participant's Individual Account may, at the direction of the Participant, be
allocated to provide Fixed and/or Variable Annuities under the Contracts.
(See "How are contributions made to establish my Annuity account?" commencing
on page ____.) However, Hartford Life will not assume responsibility in
determining or monitoring minimum distributions beginning at age 70 1/2 .
F. MINIMUM DEATH BENEFITS
A Minimum Death Benefit is provided in the event of death of the Participant
prior to the earlier of Participant's 65th birthday or the Annuity
Commencement Date (see "What would my Beneficiary receive as death proceeds?"
commencing on page ____).
G. ANNUITY OPTIONS
The Annuity Commencement Date will not be deferred beyond the date
Participants become age 70 1/2 or such earlier date as may be required by
applicable law and/or regulation. If a Participant does not elect otherwise,
Hartford Life reserves the right to begin Annuity payments automatically at
age 65 under an option providing for a life Annuity with 120 monthly payments
certain (see "What are the available Annuity options under the Contracts?"
commencing on page ____).
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H. DEDUCTIONS FOR PREMIUM TAXES
Deductions will be made for the payment of any Premium Taxes that may be
levied against the Contract at the time imposed under applicable law (see
"Charges Under The Contract", on page ____).
I. ASSET CHARGE IN THE SEPARATE ACCOUNT
During both the Accumulation Period and the Annuity Period a charge is made
by Hartford Life for providing the mortality, expense and administrative
undertakings under the Contracts. Such charge is an annual rate of 1.25%
(.85% for mortality, .15% for expense and .25% for administrative
undertakings) of the average daily net assets of DC-II. The rate charged for
the mortality, expense and administrative undertakings under the Contracts
may be reduced (see "Experience Rating of Contracts", page ____) and may be
periodically increased beyond a rate of 1.25%, subject to a maximum annual
rate of 2.00%. However, no increase will occur unless the Commission shall
have first approved any such increase. (See "Charges Under The Contract",
page ____.)
J. ANNUAL CONTRACT FEE
An Annual Contract Fee may be charged against the value of each Participant's
Individual Account under a Contract at the end of a Participant's Contract
Year. The maximum Annual Contract Fee is $30.00 per year on each
Participant's Individual Account. (See "Charges Under The Contract", page
____.) The Annual Contract Fee may be reduced or waived (see "Experience
Rating of Contracts, page ____).
K. MINIMUM PAYMENT
The minimum initial Contribution that may be made on behalf of a
Participant's Individual Account under a Contract is $30.00.
L. INDIVIDUAL ACCOUNT LOANS
Participants may request a loan from Participant's Individual Account subject
to a single $100.00 non-refundable loan processing fee. Loans are subject to
a minimum of $2,000 and may not exceed the lesser of (1) 50% of the
Participant's Individual Account value, or (2) $50,000, reduced by the
highest outstanding balance of any loan to such Participant during the
twelve-month period ending on the day before the loan is made. (See "May I
Request a Loan from my Individual Account", page ___.)
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M. PAYMENT ALLOCATION TO DC-II
The Contracts permit the allocation of Contributions, in multiples of 10% of
each Contribution, among the fifteen (15) Sub-Accounts of DC-II. There is no
minimum amount that may be allocated to any Sub-Account.
N. VOTING RIGHTS OF CONTRACTHOLDERS
Contractholders and/or vested Participants will have the right to vote on
matters affecting the underlying Fund to the extent that proxies are
solicited by such Fund. If a Contractholder does not vote, Hartford Life
shall vote such interest in the same proportion as shares of the Fund for
which instructions have been received by Hartford Life (see "What are my
voting rights?" commencing on page ____).
PERFORMANCE RELATED INFORMATION
DC-II may advertise certain performance related information concerning its
Sub-Accounts. Performance information about the Sub-Account is based on the
Sub-Account's past performance only and is no indication of future performance.
The Advisers Fund, Bond Fund, Capital Appreciation Fund, Dividend and Growth
Fund, Index Fund, International Opportunities Fund, Mortgage Securities Fund,
Responsively Invested Balanced Fund, Stock Fund, AMS/TCI Growth Fund, AMS/TCI
Advantage Fund, AMS/Fidelity VIP II Asset Manager Fund, AMS/Fidelity VIP Growth
Fund, AMS/Fidelity VIP II Contrafund Fund, and AMS/Fidelity VIP Overseas Fund
Sub-Accounts may include total return in advertisements or other sales material.
When the Sub-Account advertises its total return, it will usually be calculated
for one year, five years, and ten years or some other relevant periods if the
Sub-Account has not been in existence for at least ten years. Total return is
measured by comparing the value of an investment in the Sub-Account at the
beginning of the relevant period to the value of the investment at the end of
the period (assuming the deduction of any contingent deferred sales charge which
would be payable if the investment were redeemed at the end of the period).
The Bond Fund, Mortgage Securities Fund and TCI Advantage Fund Sub-Accounts may
advertise yield in addition to total return. The yield will be computed in the
following manner: The net investment income per unit earned during a recent one
month period is divided by the unit value on the last day of the period. This
figure reflects the recurring charges on the Separate Account level including
the Annual Contract Fee.
Total return at the Separate Account level includes all Contract charges: sales
charges, mortality and expense risk charges, and the Annual Contract Fee and is
therefore lower than total return at the Fund level, with no comparable charges.
Likewise, yield at the Separate Account level
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includes all recurring charges (except sales charges), and is therefore lower
than yield at the Fund level, with no comparable charges.
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INTRODUCTION
This Prospectus has been designed to provide you with the necessary information
to make a decision on purchasing a Contract offered by Hartford Life in DC-II,
or an interest therein, issued in conjunction with a Tax Sheltered Annuity plan
or an Individual Retirement Annuity plan of an Employer. This Prospectus
describes only the elements of the Contracts pertaining to the variable portion
of the Contract. The Contracts may contain a General Account option which is
not described in this Prospectus. Please read the Glossary of Special Terms on
page ____ prior to reading this Prospectus to familiarize yourself with the
terms being used.
THE CONTRACTS AND
SEPARATE ACCOUNT TWO
What are the Contracts?
The Contracts are group variable annuity contracts under which variable
account Contributions are held in a division of Hartford Life Insurance
Company Separate Account Two ("DC-II") during both the Accumulation Period
and the Annuity Period. The Contracts are issued to Employers or to a
trustee or custodian of the Employer's plan to allow their employees to
participate in a Tax Sheltered Annuity as described under Section 403(b) of
the Code or an Individual Retirement Annuity as described under Section 408
of the Code
During the Accumulation Period under the Contracts, Contributions submitted
by the Employer to the Contracts are used to purchase variable account
interests. Contributions allocated to purchase variable interests may, after
the deductions described hereafter, be invested in selected Sub-Accounts of
DC-II.
Who can buy these Contracts?
The group variable annuity Contracts offered under this Prospectus are
offered for use in annuity purchase plans adopted according to Section 403(b)
of the Code as adopted by public school systems, certain tax-exempt
organizations described in 501(c)(3) of the Code and including employee
pension plans established for employees by a state, a political subdivision
of a state, or an agency or instrumentality of either a state or a political
subdivision of a state, as well as for Individual Retirement Annuity plans
adopted according to section 408 of the Code. A group Contract is issued to
an Employer or to a trustee or custodian of the Employer's plan to provide a
Tax Sheltered Annuity or Individual Retirement Annuity plan for its
employees.
What is the Separate Account and how does it operate?
Separate Account Two is organized as a unit investment trust type of
investment company and has been registered as such with the Commission under
the Investment Company Act of
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1940, as amended. (On March 31, 1988, DC Variable Account II was transferred
to Separate Account Two and became a division thereof). Registration of the
Separate Account with the Commission does not involve supervision of the
management or investment practices or policies of the Separate Account or of
Hartford Life by the Commission. However, Hartford Life and the Separate
Account are subject to supervision and regulation by the Department of
Insurance of the State of Connecticut. The Separate Account meets the
definition of "separate account" under federal securities law.
Under Connecticut law, the assets of the Separate Account attributable to the
Contracts offered under this Prospectus are held for the benefit of the
owners of, and the persons entitled to payments under, those Contracts.
Also, in accordance with the Contracts, the assets in the Separate Account
attributable to Contracts participating in the Separate Account are not
chargeable with liabilities arising out of any other business Hartford Life
may conduct. So, you will not be affected by the rate of return of Hartford
Life's general account, nor by the investment performance of any of Hartford
Life's other separate accounts.
Contributions are allocated to one or more Sub-Accounts of the Separate
Account. Each Sub-Account is invested exclusively in the assets of one
underlying Fund. Contributions and proceeds of transfers between
Sub-Accounts are applied to purchase shares in the appropriate Fund at net
asset value determined as of the end of the Valuation Period during which the
Contributions were received or the transfer made. All distributions from the
Fund are reinvested at net asset value. The value of Participant's
Individual Account will therefore vary during the Accumulation Period in
accordance with the net income and fluctuation in the individual investments
within the underlying Fund portfolio or portfolios. During the Variable
Annuity payout period, Annuity payments and reserve values will vary in
accordance with these factors.
HARTFORD LIFE DOES NOT GUARANTEE THE INVESTMENT RESULTS OF THE SUB-ACCOUNTS
OR ANY OF THE UNDERLYING INVESTMENTS. THERE IS NO ASSURANCE THAT THE VALUE
OF A CONTRACT DURING THE YEARS PRIOR TO RETIREMENT OR THE AGGREGATE AMOUNT OF
THE VARIABLE ANNUITY PAYMENTS WILL EQUAL THE SUM OF PARTICIPANT CONTRIBUTIONS
MADE UNDER THE CONTRACT. SINCE EACH UNDERLYING FUND HAS DIFFERENT INVESTMENT
OBJECTIVES, EACH IS SUBJECT TO DIFFERENT RISKS. THESE RISKS ARE MORE FULLY
DESCRIBED IN THE ACCOMPANYING FUND PROSPECTUSES.
Hartford Life reserves the right, subject to compliance with the law, to
substitute the shares of any other registered investment company for the
shares of any Fund held by the Separate Account. Substitution may occur if
shares of the Fund(s) become unavailable or due to changes in applicable law
or interpretations of law. Current law requires notification to Participants
of any such substitution and approval of the Commission. Hartford Life also
reserves the right, subject to compliance with the law to offer additional
Sub-Accounts with differing investment objectives.
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The Separate Account may be subject to liabilities arising from another
division of the Separate Account whose assets are attributable to other
variable annuity Contracts or variable life insurance policies offered by the
Separate Account which are not described in this Prospectus.
Hartford Life may offer additional Separate Account Options from time to time
under these Contracts. Such new options will be subject to the then in
effect charges, fees, and or transfer restrictions for the Contracts for such
additional separate accounts.
OPERATION OF THE CONTRACT
How are Contributions credited?
The Contract will cover present and future employees of the Employer who
elect to participate in the Contract. The net Contributions to a
Participant's Individual Account under a Contract are applied to purchase
Accumulation Units in the selected Sub-Accounts. The number of Accumulation
Units purchased is determined by dividing the net Contribution by the
appropriate Accumulation Unit Value on the date the Contribution is credited
to the Participant's Individual Account. Initial Contributions are credited
to a Participant's Individual Account within two business days of receipt of
a properly completed application and the initial Contribution. Subsequent
Contributions are credited to a Participant's Individual Account on the date
following receipt of the Contribution by Hartford Life at its home office,
P.O. Box 2999, Hartford, CT 06104-2999.
If an application or any other information is incomplete when received, the
net Contribution will be credited to the Participant's Individual Account
within five business days. If an initial Contribution is not credited within
five business days, it will be immediately returned unless you have been
informed of the delay and request that the Contribution not be returned.
Subsequent Contributions cannot be credited on the same day of receipt unless
they are accompanied by adequate instructions.
The number of Sub-Account Accumulation Units will not change because of a
subsequent change in an Accumulation Unit's value, but the dollar value of an
Accumulation Unit will vary to reflect the investment experience of the
appropriate Fund shares that serve as the underlying investment for DC-II.
May I change the amount of my Contributions?
Under IRS regulations, a Participant may not change the salary reduction
agreement that establishes the fixed amount or fixed percentage of salary to
be contributed to the plan during a taxable year. See below for a discussion
of changes in Sub-Account allocations and transfers between Sub-Accounts.
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May I make changes in my Sub-Account allocations?
The Contract permits the allocation of Contributions, in multiples of 10%,
among the fifteen (15) Sub-Accounts of DC-II. There is no minimum amount
that may be allocated to any Sub-Account. Such changes must be requested in
the form and manner prescribed by Hartford Life.
May I transfer assets between Sub-Accounts?
During the Accumulation Period a Participant may transfer the value of
Participant's Individual Account allocations from one or more Sub-Accounts or
the General Account to any another Sub-Account, the General Account or to any
combination thereof.
Amounts allocated to the General Account, or amounts previously allocated to
the General Account during the 3 month period immediately preceding the date
such transfer is requested, may not be transferred to any Sub-Account which
Hartford Life considers to be a competing fixed income Sub-Account. Hartford
Life reserves the right to limit the maximum amount transferred from the
General Account during a Contract Year to 20% of the Participant's Individual
Account in any one Participant Contract Year.
Currently there is no charge for up to 12 transfers per Participant Contract
Year. A fee of $5.00 may be assessed for each transfer made in excess of 12
per Participant Contract Year. No two (2) transfers may occur on consecutive
Valuation Days.
In addition, the right, with respect to a Participant's Individual Account,
to monies between Sub-Accounts is subject to modification if Hartford Life
determines, in its sole opinion, that the exercise of that right by the
Contractholder/Participant is, or would be, to the disadvantage of other
Contractholders/Participants. Any modification could be applied to transfers
to or from the same or all of the Sub-Accounts and could include, but not be
limited to, the requirement of a minimum time period between each transfer,
not accepting transfer requests of an agent acting under a power of attorney
on behalf of more than one Participant or Contractholder, or limiting the
dollar amount that may be transferred between Sub-Accounts by a
Contractholder/Participant at any one time. Such restrictions may be applied
in any manner reasonably designed to prevent any use of the transfer right
which is considered by Hartford Life to be to the disadvantage of other
Contractholders/Participants.
How do I transfer assets between Sub-Accounts or change my Sub-Account
allocations?
Transfers between Sub-Accounts and changes in Sub-Account allocations may be
made by written request or by calling toll free 1-800-771-3051. Any
transfers or changes made in writing will be effected as of the date the
request is received by Hartford Life at its home office, P.O. Box 2999,
Hartford, CT 06104-2999. Telephone transfer changes may not be permitted in
some states. The policy of Hartford Life and its agents and affiliates is
that they
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will not be responsible for losses resulting from acting upon telephone requests
reasonably believed to be genuine. Hartford Life will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine;
otherwise, Hartford Life may be liable for any losses due to unauthorized or
fraudulent instructions. The procedures Hartford Life follows for transactions
initiated by telephone include requirements that Participants identify
themselves by their group number, participant number and social security number.
All transfer instructions by telephone are recorded.
What happens if the Contractholder fails to make Contributions?
A Contract will be deemed paid-up within 30 days after any anniversary date
of the Contract if the Contractholder has not remitted a Contribution to
Hartford Life during the preceding 12 month period. Effective with a change
of the Contract to paid-up status, no further Contributions will be accepted
by Hartford Life and each Participant's Individual Account will be considered
an inactive account until the commencement of Annuity payments or until the
value of the Participant's Individual Account is disbursed or applied in
accordance with the termination provisions (see "How can a Contract be
redeemed or surrendered" on page ____).
May I assign or transfer the Contract?
The Contracts and a Participant's interest therein may not be assigned,
transferred or pledged.
May I request a loan from my Individual Account?
During the Accumulation Period, a Participant under a Tax Sheltered Annuity
plan may request a loan from his or her Individual Account subject to a
single $100.00 non-refundable loan processing fee. The loan proceeds and the
loan processing fee will be deducted from the Participant's Individual
Account on a pro rata basis from the applicable Sub-Accounts on the date that
the loan proceeds are disbursed. A Participant may not request a loan until
the expiration of a 6 month period from the date that the remaining balance
of any prior loan is repaid to the Participant's Individual Account. Loans
are not available to Participants under an Individual Retirement Annuity
plan.
The loan amount may not exceed the lesser of (1) 50% of the value of a
Participant's Individual Account, or (2) $50,000, reduced by the highest
outstanding balance of any loan to such Participant during the twelve-month
period ending on the day before the loan is made. The minimum loan amount is
$2,000.
At the beginning of each calendar quarter, Hartford Life shall determine the
interest rate to be charged on all loans issued during such quarter. The
interest rate shall reflect current market interest rates and the prevailing
interest rate levels under the Contract. The maximum interest rate shall not
exceed the current guaranteed interest rate for the General Account plus 2%.
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Monthly loan payments (except for the initial payment) are due and payable at
the Home Office of Hartford Life on the last business day of each month. The
initial monthly loan payment is due and payable during the month in which the
loan proceeds are disbursed from the Participant's Individual Account.
Participant's Individual Account will be credited with the amount of monthly
loan payments (both principal and interest) minus a monthly loan balance
charge of .166% of the then outstanding loan balance. The monthly loan
balance charge will be retained by Hartford Life.
Prepayment of the outstanding loan balance is prohibited during the first
twelve (12) months following disbursement of the loan proceeds, except upon
termination of employment. Following the twelfth month, a Participant may
prepay all or any portion of the outstanding principal balance on the loan
and any unpaid interest accrued as of the date of the payment made by the
Participant. Participants may select a repayment term of 1 to 5 years (in 12
month increments) or, in the case of a loan for principle residence only, up
to 10 years (in 12 month increments), from the last business day of the first
month in which the loan amount is distributed from the Contract. Loan
balances which remain unpaid after a specified period will be treated as a
distribution subject to taxation.
Loans will have a permanent effect on the Participant's Individual Account
because the investment results of each Sub-Account will apply only to the
amount remaining in such Sub-Account. The longer a loan is outstanding, the
greater the impact is likely to be. Also, if not repaid, the outstanding
loan balance will reduce the death benefit otherwise payable to a
Beneficiary.
How do I know what my account is worth?
The value of a Participant's Individual Account under a Contract at any time
prior to the commencement of Annuity payments can be determined by
multiplying the total number of Sub-Account Accumulation Units credited to a
Participant's Individual Account by the current Accumulation Unit value for
the respective Sub-Account. There is no assurance that the value in the
Sub-Accounts will equal or exceed the Contributions made by the
Contractholder to such Sub-Accounts.
The value of the Accumulation Units in DC-II representing an interest in the
appropriate Fund shares that are held under the Contract were initially
established on the date that Contributions were credited to the appropriate
Sub-Account. The value of the respective Accumulation Units for any
subsequent day is determined by multiplying the Accumulation Unit value for
the preceding day by the net investment factor of the appropriate
Sub-Accounts (see "How is the Accumulation Unit value determined?" below).
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How is the Accumulation Unit value determined?
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 a "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 dividends or capital gains by that Fund if the
ex-dividend date occurs 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 and subtracting from that amount the amount of any charges
assessed during the Valuation Period then ending.
Participants should refer to the Prospectuses for each of the Funds which
accompany this Prospectus for a description of how the assets of each Fund
are valued since each determination has a direct bearing on the Accumulation
Unit value of the Sub-Account and therefore the value of a Participant's
Individual Account. The Accumulation Unit value is affected by the
performance of the underlying Fund(s), expenses and deduction of the charges
described in this Prospectus.
How are the underlying Fund shares valued?
The shares of the Fund are valued at net asset value on a daily basis. A
complete description of the valuation method used in valuing Fund shares may
be found in the accompanying Prospectus of each Fund.
PAYMENT OF BENEFITS
What would my Beneficiary receive as death proceeds?
The Contracts provide that in the event the Participant dies before the
selected Annuity Commencement Date or the date the Participant attains age 65
(whichever occurs first) the Minimum Death Benefit payable on such Contract
will be the greater of (a) the value of the Participant's Individual Account
determined as of the day written proof of death of such person is received by
Hartford Life, or (b) 100% of the total Contributions made to such Contract,
reduced by any prior partial withdrawals or outstanding loan indebtedness.
The benefit may be taken by the Beneficiary in a single sum, in which case
payment will be made within seven days of receipt of proof of death by
Hartford Life, unless subject to postponement as explained below. In lieu of
payment in one sum, a Beneficiary may elect that the amount be applied under
any annuity option available in Hartford Life's variable annuities then being
issued provided any such option must provide that a death benefit will be
distributed within five years of the Participant's death; or, if the benefit
is payable over a
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period not extending beyond the life expectancy of the Beneficiary or over
the life of the Beneficiary, such benefit must commence within one year of
the date of the Participant's death. The Contract further provides that if
the Beneficiary is the spouse of the Participant, such spouse may elect, in
lieu of the death benefit, to be treated as the Participant.
An election to receive death benefits under a form of Annuity must be made
prior to a lump sum settlement with Hartford Life and within one year after
the death by written notice to Hartford Life at its offices in Hartford,
Connecticut. Benefit proceeds due on death may be applied to provide
variable payments, fixed payments, or a combination of variable and fixed
payments. No election to provide Annuity payments will become operative
unless the initial Annuity payment is at least $20.00 on either a variable or
fixed basis, or $20.00 on each basis when a combination benefit is elected.
The manner in which the Annuity payments are determined and in which they may
vary from month to month are the same as applicable to a Participant's
Individual Account after retirement (see "How are contributions made to
establish my Annuity account?" page ____).
How can a Contract be redeemed or surrendered?
THERE ARE CERTAIN RESTRICTIONS ON SECTION 403(b) TAX-SHELTERED ANNUITIES. AS
OF DECEMBER 31, 1988, ALL SECTION 403(b) TAX-SHELTERED ANNUITIES HAVE LIMITS
ON FULL AND PARTIAL SURRENDERS. CONTRIBUTIONS TO THE CONTRACT MADE AFTER
DECEMBER 31, 1988 AND ANY INCREASES IN CASH VALUE AFTER DECEMBER 31, 1988 MAY
NOT BE DISTRIBUTED UNLESS THE CONTRACT OWNER/EMPLOYEE HAS (A) ATTAINED AGE 59
1/2, (B) TERMINATED EMPLOYMENT, (C) DIED, (D) BECOME DISABLED, OR (E)
EXPERIENCED FINANCIAL HARDSHIPS.
DISTRIBUTIONS DUE TO FINANCIAL HARDSHIP OR SEPARATION FROM SERVICE MAY STILL
BE SUBJECT TO A PENALTY TAX OF 10%.
HARTFORD LIFE WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A
WITHDRAWAL IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR
SITUATION; OR IN MONITORING WITHDRAWAL REQUESTS REGARDING PRE OR POST JANUARY
1, 1989 ACCOUNT VALUES.
On termination of Contributions to a Contract by the Contractholder on behalf
of a Participant prior to the selected Annuity Commencement Date for such
Participant, the Participant will have the following options, subject to the
restrictions above:
1. To continue a Participant's Individual Account in force under the
Contract. Under this option, on the selected Annuity Commencement Date,
the Participant will begin to receive Annuity payments under the selected
Annuity option under the Contract. (See
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"What are the available Annuity options under the Contracts?" commencing
on page ____.) At any time in the interim, a Participant may surrender
the Participant's Individual Account for a lump sum cash settlement in
accordance with item 3. below.
2. To elect Annuity payments immediately. The values in the Participant's
Individual Account may be applied, subject to Contract provisions, to
provide for Fixed or Variable Annuity payments, or a combination thereof,
commencing immediately, under the selected Annuity option under the
Contract. (See "What are the available Annuity options under the
Contracts?" commencing on page ____).
3. To surrender the Participant's Individual Account under the Contract for
a lump sum cash settlement, in which event the Annual Contract Fee and
any applicable contingent deferred sales charges will be deducted (See
"How are the charges under these Contracts made?" commencing on page
____). The amount received will be the net termination value next
computed after receipt of a written request for complete withdrawal by
Hartford Life at its home office, P.O. Box 2999, Hartford, CT 06104-2999.
Payment will normally be made as soon as possible but not later than
seven days after the written request is received by Hartford Life.
4. In the case of a partial withdrawal, the amount requested is withdrawn
from the specified Sub-Account(s) or, if no Sub-Account(s) are specified,
all applicable Sub-Account(s) on a pro rata basis. The contingent
deferred sales charge, if any, is deducted as a percentage of the amount
withdrawn (see "How are the charges under these Contracts made?" page
____). If the contingent deferred sales charge has been experience rated
(see "Experience Rating of Contracts", page ____), any amounts not
subject to the contingent deferred sales charge will be deemed to be
withdrawn last.
5. To begin making monthly, quarterly, semi-annual or annual withdrawals
while allowing the Participant's Individual Account to remain in the
Accumulation Period under the Contract. Participant's Individual Account
remains subject to the Annual Contract Fee and any fluctuations in the
investment results of the Sub-Accounts or any of the underlying
investments. A Participant may transfer the values of Participant's
Individual Account allocations from one or more Sub-Accounts or the
General Account to any another Sub-Account, the General Account or to any
combination thereof. See "Systematic Withdrawal Option" commencing on
page ____ for a complete description of the restrictions and limitations
of this option.
Can payment of the redemption or surrender value ever be postponed beyond the
seven day period?
Yes. It may be postponed whenever (a) the New York Stock Exchange is closed,
except for holidays or weekends, or trading on the New York Stock Exchange is
restricted as determined by the Commission; (b) the Commission permits
postponement and so orders; or
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(c) the Commission determines that an emergency exists making valuation of
the amounts or disposal of securities not reasonably practicable.
May I surrender once Annuity payments have started?
Except with respect to Option 5 (on a variable payout), once Annuity payments
have commenced, no surrender of a life Annuity benefit can be made for the
purpose of receiving a partial withdrawal or a lump sum settlement in lieu
thereof. Any surrender out of Option 5 will be subject to contingent
deferred sales charges, if applicable.
Can a Contract be suspended by a Contractholder?
A Contract may be suspended by the Contractholder by giving written notice at
least 90 days prior to the effective date of such suspension to Hartford Life
at its home office, P.O. Box 2999, Hartford, CT 06104-2999. A Contract will
be suspended automatically on its anniversary if the Contractholder fails to
assent to any modification of a Contract, as described under the caption "Can
a Contract be modified?" which modifications would have become effective on
or before that anniversary. Upon suspension, Contributions to Participant's
Individual Accounts will continue to be accepted on behalf of existing
Participants, subject to the Contract terms in effect prior to suspension.
Contributions will not be accepted on behalf of any new Participants.
Annuitants at the time of any suspension will continue to receive their
Annuity payments. The suspension of a Contract will not preclude a
Participant from applying an existing Participant's Individual Accounts under
DC-II to the purchase of Fixed or Variable Annuity benefits.
How do I elect an Annuity Commencement Date and Form of Annuity?
Participants select an Annuity Commencement Date, usually between their 50th
birthday and the date they become age 70 1/2, and an Annuity option. The
Annuity Commencement Date may not be deferred beyond the date a Participant
becomes age 70 1/2 or such earlier date as may be required by applicable law
and/or regulation. The Annuity Commencement Date and/or the Annuity option
may be changed from time to time, but any such change must be made at least
30 days prior to the date on which Annuity payments are scheduled to begin.
Annuity payments will normally be made on the first business day of each
month.
The Contract contains five optional Annuity forms, which may be selected on
either a Fixed or Variable Annuity basis, or a combination thereof. If a
Participant does not elect otherwise, Hartford Life reserves the right to
begin Annuity payments at age 65 under Option 2 with 120 monthly payments
certain. However, Hartford Life will not assume responsibility in
determining or monitoring minimum distributions beginning at age 70 1/2.
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When an annuity is purchased, unless otherwise specified, Accumulation Unit
values will be applied to provide a Variable Annuity under DC-II.
What is the minimum amount that I may select as an Annuity payment?
The minimum Annuity payment is $20.00. No election may be made which results
in a first payment of less than $20.00. If at any time Annuity payments are
or become less than $20.00, Hartford Life reserves the right to change the
frequency of payment to intervals that will result in payments of at least
$20.00.
How are Contributions made to establish my Annuity account?
During the Annuity Period, Contract values are applied to establish a Fixed
and/or Variable Annuity.
What are the available Annuity Options under the Contracts?
Option 1: Life Annuity
A Life Annuity is an Annuity payable during the lifetime of the Annuitant and
terminating with the last monthly payment preceding the death of the
Annuitant. Life Annuity Options (Options 1-4) offer the maximum level of
monthly payments of any of the options since there is no guarantee of a
minimum number of payments nor a provision for a death benefit payable to a
Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he or she dies prior to the due date of the second Annuity
payment, two if he or she dies prior to the due date of the third Annuity
payment, etc.
* Option 2: Life Annuity with 120, 180 or 240 Monthly Payments Certain
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that payments will be made for a minimum of 120,
180 or 240 months, as elected. If, at the death of the Annuitant, payments
have been made for less than the minimum elected number of months, then any
remaining guaranteed monthly payments will be paid to the Beneficiary or
Beneficiaries designated unless other provisions will have been made and
approved by Hartford Life.
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* Option 3: Unit Refund Life Annuity
This Annuity option is an Annuity payable monthly during the lifetime of the
Annuitant terminating with the last payment due prior to the death of the
Annuitant except that an additional payment will be made to the Beneficiary
or Beneficiaries if (a) below exceeds (b) below:
total amount applied under the option
at the Annuity Commencement Date
(a) =
----------------------------------------------------------------
Annuity Unit value at the Annuity Commencement Date
(b) = number of Annuity Units represented number of monthly
by each monthly Annuity payment made x Annuity payments made
The amount of the additional payments will be determined by multiplying such
excess by the Annuity Unit value as of the date that proof of death is
received by Hartford Life.
Option 4: Joint and Last Survivor Annuity
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
At the Annuitant's death, payments will continue to be made to the contingent
annuitant, if living, for the remainder of the contingent annuitant's life.
When the Annuity is purchased, the Annuitant elects what percentage (50%,
66 2/3% or 100%) of the monthly Annuity payment will continue to be paid to
the contingent annuitant.
It would be possible under this option for an Annuitant and designated second
person in the event of the common or simultaneous death of the parties to
receive only one payment in the event of death prior to the due date for the
second payment and so on.
* Option 5: Designated (Fixed) Period Annuity
An amount payable monthly for the number of years selected. Under the
Contracts the minimum number of years is three.
In the event of the Annuitant's death prior to the end of the designated
period, any then remaining payments will be paid to the Beneficiary or
Beneficiaries designated unless other provisions will have been made and
approved by Hartford Life. Option 5 is an option that does not involve life
contingencies and thus no mortality guarantee.
Surrenders are subject to the limitations set forth in the Contract and any
applicable
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contingent deferred sales charges (see "How are the charges under these
Contracts made?" page ____).
Other Annuity options may be made available from time to time.
* Options 2, 3 and 5 are available only if the guaranteed payment period is
less than the life expectancy of the Annuitant at the time the option becomes
effective. Such life expectancy shall be computed on the basis of the
mortality table prescribed by the IRS, or if none is prescribed, the
mortality table then in use by Hartford Life.
--------------------------------------------------------------------------------
Under any of the Annuity options above, except Option 5 (on a variable
basis), no surrenders are permitted after Annuity payments commence.
--------------------------------------------------------------------------------
Systematic Withdrawal Option ("SWO")
If permitted by IRS regulations and the terms of the Employer's plan,
Participants can make withdrawals while allowing Participant's Individual
Account to remain in the Accumulation Period under the Contract. Eligibility
under this provision is limited to Participants who have terminated their
employment with the Employer and have a minimum Individual Account balance of
$10,000 at the time they elect the SWO. The maximum payment amount is 1.5%
monthly, 4.5% quarterly, 9% semi-annually or 18% annually of Participant's
Individual Account at the time they elect the SWO. Payments are limited to
18% of Participant's Individual Account annually. The minimum payment amount
is $100. SWO payments are generally taxable as ordinary income and, if made
prior to age 59 1/2, an IRS tax penalty may apply. The contingent deferred
sales charge, if any would apply to a withdrawal, is waived on SWO payments.
Participants elect the specific dollar amount to be withdrawn, the frequency
of payments (monthly, quarterly, semi-annually or annually) and the duration
of payments (either a fixed number of payments or until the Participant's
Individual Account is depleted). The duration of payments may not extend
beyond the Participant's life expectancy as of the beginning date of SWO
payments or the joint and last survivor life expectancy of the Participant
and the Participant's Beneficiary. Participants may not elect the SWO if
they have an outstanding loan amount.
Participants can change the terms of their SWO as often as four times in each
calendar year. Participants can terminate their SWO at any time and elect
one of the five available Annuity options or a partial or full lump sum
withdrawal. If Participants elect a partial or full lump sum withdrawal
within 12 months of a SWO payment, the contingent deferred sales charge that
was previously waived, if any, will be deducted from Participant's Individual
Account upon withdrawal. SWO payments will be deducted from Participant's
Individual Account pro rata from each Sub-Account and the General Account in
which Participant's Individual Account is allocated.
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Hartford Life is not responsible for determining a withdrawal amount that
satisfies the Minimum Distribution Requirements. Participants may be
required to change their SWO payment amount to comply with the Minimum
Distribution Requirements. Participants should consult their tax adviser to
determine whether the amount of their SWO payments meet IRS Minimum
Distribution Requirements. See "Federal Tax Considerations" commencing on
page ____ for a discussion of the Minimum Distribution Requirements
applicable to Participants over age 70 1/2.
The SWO may only be elected pursuant to an election on a form provided by
Hartford Life. Election of the SWO does not affect any of Participant's
other rights under the Contracts.
How are Variable Annuity payments determined?
The value of the Annuity Unit for each Sub-Account in DC-II for any day is
determined by multiplying the value for the preceding day by the product of
(1) the net investment factor (see "How is the Accumulation Unit value
determined?" commencing on page ____) for the day for which the Annuity Unit
value is being calculated, and (2) a factor to neutralize the assumed net
investment rate discussed below.
When Annuity payments are to commence, the value of the Participant's
Individual Account is determined as the product of the value of the
Accumulation Unit credited to each Sub-Account as of the close of business on
the fifth business day preceding the date the first Annuity payment is due
and the number of Accumulation Units credited to each Sub-Account as of the
date the Annuity is to commence.
The Contract contains tables indicating the dollar amount of the first
monthly payment under the optional forms of Annuity for each $1,000 of value
of a Sub-Account under a Contract. The first monthly payment varies
according to the form of Annuity selected. The Contract contains Annuity
tables derived from the 1983a Individual Annuity Mortality Table with ages
set back one year and with an assumed interest rate ("A.I.R.") of 4.00% per
annum. The total first monthly Annuity payment is determined by multiplying
the value (expressed in thousands of dollars) of a Sub-Account (less any
applicable premium taxes) by the amount of the first monthly payment per
$1,000 of value obtained from the tables in the Contracts. With respect to
fixed annuities only, the current rate will be applied if it is higher than
the rate under the tables in the Contract.
Level Annuity payments would be produced if the net investment rate remained
constant and equal to the A.I.R. In fact, payments will vary up or down in
the proportion that the net investment rate varies up or down from the A.I.R.
A higher assumed interest rate may produce a higher initial payment but more
slowly rising and more rapidly falling subsequent payments than would a lower
interest rate assumption.
The amount of the first monthly Annuity payment, determined as described
above, is divided
<PAGE>
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by the value of an Annuity Unit for the appropriate Sub-Account as of the
close of business on the fifth business day preceding the day on which the
payment is due in order to determine the number of Annuity Units represented
by the first payment. This number of Annuity Units remains fixed during the
Annuity Period, and in each subsequent month the dollar amount of the Annuity
payment is determined by multiplying this fixed number of Annuity Units by
the then current Annuity Unit value.
Annuity payments will be made on the first day of each month following
selection. The Annuity Unit value used in calculating the amount of the
Annuity payments will be based on an Annuity Unit value determined as of the
close of business on a day not more than the fifth business day preceding the
date of the Annuity payment.
In order to comply with the requirements of the Supreme Court decision dated
July 6, 1983, in the case of Norris vs. Arizona Governing Committee, Annuity
rates will be based on a guaranteed Annuity rate table which is identical for
both males and females.
Here is an example of how a Variable Annuity payment is determined:
ILLUSTRATION OF ANNUITY PAYMENTS: (UNISEX) AGE 65, LIFE ANNUITY WITH 120
PAYMENTS CERTAIN
<TABLE>
<CAPTION>
<S> <C>
1. Net amount applied. . . . . . . . . . . . . . . . . . . . . $139,782.50
2. Initial monthly income per $1,000 of payment applied. . . . 6.13
3. Initial monthly payment (1 x 2 DIVIDED BY 1,000). . . . . . $ 856.87
4. Annuity Unit Value. . . . . . . . . . . . . . . . . . . . . 3.125
5. Number of monthly annuity units (3 DIVIDED BY 4). . . . . . 274.198
6. Assume annuity unit value for second month equal to . . . . 2.897
7. Second monthly payment (6 x 5). . . . . . . . . . . . . . . $ 794.35
8. Assume annuity unit value for third month equal to . . . . 3.415
9. Third month payment (8 x 5) . . . . . . . . . . . . . . . . $ 936.39
</TABLE>
The above figures illustrate the calculation of a Variable Annuity and have no
bearing on the actual record of DC-II.
Can a Contract be modified?
The Contracts may, subject to any federal and state regulatory restrictions,
be modified at any time by written agreement between the Contractholder and
Hartford Life. No modification will affect the amount or term of any
Annuities begun prior to the effective date of the modification, unless it is
required to conform the Contract to, or give the Contractholder the benefit
of, any federal or state statutes or any rule or regulation of the U.S.
Treasury Department or the IRS.
On or after the fifth anniversary of any Contract Hartford Life may change,
from time to
<PAGE>
-31-
time, any or all of the terms of the Contracts by giving 90 days advance
written notice to the Contractholder, except that the Annuity tables,
guaranteed interest rates and the contingent deferred sales charges which are
applicable at the time a Participant's Individual Account is established
under a Contract, will continue to be applicable. In addition, the
limitations on the deductions for the mortality, expense risks and
administrative undertakings and the Annual Contract Fee will continue to
apply in all Contract Years.
Hartford Life reserves the right to modify the Contract, but only if such
modification: (i) is necessary to make the Contract or DC-II comply with any
law or regulation issued by a governmental agency to which Hartford Life is
subject; or (ii) is necessary to assure continued qualification of the
Contract under the Code or other federal or state laws relating to retirement
annuities or annuity Contracts; or (iii) is necessary to reflect a change in
the operation of DC-II or the Sub-Account(s); (iv) provides additional
Separate Account options; or (v) withdraws Separate Account options. In the
event of any such modification Hartford Life will provide notice to the
Contractholder or to the payee(s) during the Annuity period. Hartford Life
may also make appropriate endorsement in the Contract to reflect such
modification.
CHARGES UNDER THE CONTRACT
How are the charges under these Contracts made?
There is no deduction for sales expenses at the time Contributions are
allocated to the Participant's Individual Accounts. However, a contingent
deferred sales charge may be assessed against a Participant's Individual
Account when it is withdrawn. The number of Participant Contract Years
completed prior to withdrawal will determine the amount of the contingent
deferred sales charge. The amount or term of the contingent deferred sales
charge may be reduced (see "Experience Rating of Contracts", page _). Such
charges will in no event ever exceed 8.50% when applied as a percentage
against the sum of all Contributions to a Participant's Individual Account.
The charge is a percentage of the amount surrendered and equals:
Contract Year
of Withdrawal Maximum Charge
------------- --------------
1-5 5%
6 4%
7 3%
8 2%
9 1%
10 or more 0%
In the case of a withdrawal in which you request a certain dollar amount be
withdrawn, the
<PAGE>
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sales charge is deducted from the amount withdrawn and the balance is paid to
you. Example: You request a total withdrawal, your account value is $1,000
and the applicable sales load is 5%. Your Sub-Accounts will be surrendered
by $1,000 and you will receive $950 (i.e., the $1,000 total withdrawal less
the 5% sales charge). This is the method applicable on a full surrender of
your Contract. In the case of a partial withdrawal in which you request to
receive a specified amount, the sales charge will be calculated on the total
amount that must be withdrawn from your Sub-Account(s) in order to provide
you with the amount requested. Example: You request to receive $1,000 and
the applicable sales load is 5%. Your Sub-Account(s) will be reduced by
$1,052.63 (i.e., a total withdrawal of $1,052.63 which results in a $52.63
sales charge ($1,052.63 x 5%) and a net amount paid to you of $1,000 as
requested).
What do the sales charges cover?
The contingent deferred sales charges, when applicable, will be used to cover
expenses relating to the sale and distribution of the Contracts, including
commissions paid to any distribution organization and its sales personnel,
the cost of preparing sales literature and other promotional activities. It
is anticipated that direct commissions paid on the sale of the Contracts will
not exceed 5.0% of a Contribution. To the extent that these charges do not
cover such distribution expenses they will be borne by Hartford Life from its
general assets, including surplus or possible profit from mortality and
expense risk charges.
What is the mortality, expense and administrative risk charge?
Although Variable Annuity payments made under the Contracts will vary in
accordance with the investment performance of the underlying Fund shares held
in the Sub-Account(s), the payments will not be affected by (a) Hartford
Life's actual mortality experience among Annuitants before or after
retirement or (b) Hartford Life's actual expenses, including certain
administrative expenses, if greater than the deductions provided for in the
Contracts because of the expense and mortality undertakings by Hartford Life.
In providing an expense undertaking, Hartford Life assumes the risk that the
deductions for contingent deferred sales charges, and the Annual Contract Fee
under the Contracts may be insufficient to cover the actual future costs.
The mortality undertaking provided by Hartford Life under the Contracts,
assuming the selection of one of the forms of life annuities, is to make
monthly Annuity payments (determined in accordance with the annuity tables
and other provisions contained in the Contract) regardless of how long all
Annuitants may live and regardless of how long all Annuitants as a group may
live. This undertaking assures that neither the longevity of an Annuitant
nor an improvement in life expectancy will have any adverse effect on the
monthly Annuity payments the Annuitant will receive under the Contract. It
thus relieves the Participant from the risk that they will outlive the funds
accumulated.
<PAGE>
-33
The mortality undertaking is based on Hartford Life's present actuarial
determination of expected mortality rates among all Annuitants. If actual
experience among Annuitants deviates from Hartford Life's actuarial
determination of expected mortality rates among Annuitants because, as a
group, their longevity is longer than anticipated, Hartford Life must provide
amounts from its general funds to fulfill its Contract obligations. In that
event, a loss will fall on Hartford Life. Conversely, if longevity among
Annuitants is lower than anticipated, a gain will result to Hartford Life.
Hartford Life also assumes the liability for payment of the Minimum Death
Benefit provided under the Contract.
The administrative undertaking provided by Hartford Life assures the
Contractholder that administration will be provided throughout the entire
life of the Contract.
For assuming these risks Hartford Life presently charges 1.25% (.85% for
mortality, .15% for expense and .25% for administrative undertakings) of the
average daily net assets of DC-II. The rate charged for the mortality,
expense and administrative undertakings under the Contracts may be reduced
(see "Experience Rating of Contracts", page ____) and may be periodically
increased beyond a rate of 1.25%, subject to a maximum annual rate of 2.00%.
However, no increase will occur unless the Commission shall have first
approved such increase.
Are there any other administrative charges?
An Annual Contract Fee will be deducted from the value of each Participant's
Individual Account under the Contracts. The maximum Annual Contract Fee is
$30.00 per year but may be reduced or waived (see "Experience Rating of
Contracts", page ____).
The Annual Contract Fee will be deducted on the last business day of each
Participant's Contract Year, provided, however, that if the value of a
Participant's Individual Account is redeemed in full at any time before the
last business day of the Participant's Contract Year, then the Annual
Contract Fee charge will be deducted from the proceeds of such redemption.
No deduction for the Annual Contract Fee will be made during the Annuity
Period under the Contracts. The Annual Contract Fee will be deducted from
the value of a Participant's Individual Account on a pro rata basis from the
Sub-Account(s) chosen.
Is there ever a time when the sales charges or Annual Contract Fee does not
apply?
The contingent deferred sales charge and Annual Contract Fee will not be
deducted on Contracts in the event of: (1) death of a Participant, (2)
disability, within the meaning of Code section 72(m)(7) (provided that such
disability would entitle the Participant to receive social security
disability benefits), (3) confinement in a nursing home, provided the
Participant is confined immediately following at least 90 days of continuous
confinement in a hospital or long term care facility, (4) separation from
service on or after the 5th Participant Contract Year for Participants age
59 1/2 or older, (5) financial hardship (e.g. an immediate and
<PAGE>
-34-
heavy financial need of the Participant other than purchase of a principal
residence or payment for post secondary education) or (6) if the value of a
Participant's Individual Account is paid out under one of the available
Annuity options under the Contracts or under the Systematic Withdrawal Option
(except that a surrender out of Annuity Option 5 is subject to sales charges,
if applicable). Some of the above events may not apply to Individual
Retirement Annuity Participants.
If otherwise eligible to make a withdrawal under the terms of the Employer's
plan, a Participant may withdraw up to 10% of the value of their Individual
Account on a non-cumulative basis each Participant Contract Year, after the
first, without application of a contingent deferred sales charge. The
minimum amount that can be withdrawn under this provision is $250.00.
Experience Rating of Contracts
Certain of the charges and fees described in this Prospectus may be reduced
("experience rated") for Contracts depending on the total number of
Participants, the sum of all Participant's Individual Account values and/or
anticipated present or future expense levels. Hartford Life, in its
discretion, may experience rate a Contract (either prospectively or
retrospectively) by: (1) reducing the amount or term of any applicable
contingent deferred sales charge, (2) reducing the amount of, or waiving the
Annual Contract Fee, (3) reducing the Transfer Fee, (4) reducing the
mortality, expense and administrative risk charges, or (5) by any combination
of the above. Reductions in these charges will not be unfairly
discriminatory against any person, including the affected
Contractholders/Participants funded by DC-II. Experience rating credits have
been given on certain cases.
How much are the deductions for Premium Taxes on these Contracts?
A deduction is also made for Premium Taxes, if applicable, imposed by a state
or other governmental entity. Certain states impose a Premium Tax, ranging
up to 3.50%. On any Contract subject to a Premium Taxes, Hartford Life will
pay the taxes when imposed by the applicable taxing authorities. Hartford
Life, at its sole discretion, will deduct the taxes from Contributions when
received, from the proceeds at surrender, or from the amount applied to
effect an Annuity at the time Annuity payments commence.
Are there any other deductions?
Participants may transfer monies between or among Sub-Accounts up to 12 times
per Participant Contract Year. Such transfers may be subject to charge of
$5.00 for each transfer made in excess of 12 per Participant Contract Year.
<PAGE>
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HARTFORD LIFE INSURANCE COMPANY AND THE FUNDS
What is Hartford Life?
Hartford Life was originally incorporated under the laws of Massachusetts on
June 5, 1902. It was subsequently redomiciled to Connecticut. It is a stock
life insurance company engaged in the business of writing health and life
insurance, both ordinary and group, in all states of the United States and
the District of Columbia. The offices of Hartford Life are located in
Simsbury, Connecticut; however, its mailing address is P.O. Box 2999,
Hartford CT 06104-2999. Hartford Life is ultimately 100% owned by Hartford
Fire Insurance Company, one of the largest multiple lines insurance carriers
in the United States. Hartford Fire is a subsidiary of ITT Corporation.
Hartford Life is rated A++ (superior) by A.M. Best and Company, Inc. on the
basis of its financial soundness and operating performance. Hartford Life
has an AA+ rating from Standard and Poor's and Duff and Phelps' highest
rating (AAA) on the basis of its claims-paying ability.
These ratings do not apply to the performance of DC-II. However, the
contractual obligations under this variable annuity are the general corporate
obligations of Hartford Life. These ratings do apply to Hartford Life's
ability to meet its insurance obligations under the Contracts.
What are the Funds?
Hartford Stock Fund, Inc. was organized on March 11, 1976. The Responsively
Invested Balanced Fund (formerly Socially Responsive Fund) is a series of the
Acacia Capital Corporation, which was incorporated on September 27, 1982.
Hartford Advisers Fund, Inc. and Hartford Bond Fund, Inc. were all organized
on December 1, 1982. Hartford Index Fund, Inc. was organized on May 16,
1983. Hartford Capital Appreciation Fund, Inc. was organized on September
20, 1983. Hartford Mortgage Securities Fund, Inc. was organized on October
5, 1984. Hartford International Opportunities Fund, Inc. was organized on
January 25, 1990. Hartford Dividend and Growth Fund, Inc. was organized on
March 16, 1994. All of the Funds were incorporated under the laws of the
State of Maryland and are collectively referred to as the "Funds."
[Description of the Twentieth Century TCI Growth Fund and TCI Advantage Fund]
[Description of the Fidelity Investments VIP Asset Manager Portfolio, VIP
Growth Portfolio, VIP Contrafund Portfolio, and VIP Overseas Portfolio.]
<PAGE>
-36-
The investment objectives of each of the Funds are as follows:
HARTFORD FUNDS
HARTFORD ADVISERS FUND, INC.
To achieve maximum long term total rate of return consistent with prudent
investment risk by investing in common stock and other equity securities, bonds
and other debt securities, and money market instruments. The investment adviser
will vary the investments of the Fund among equity and debt securities and money
market instruments depending upon its analysis of market trends. Total rate of
return consists of current income, including dividends, interest and discount
accruals and capital appreciation.
HARTFORD CAPITAL APPRECIATION FUND, INC. (formerly Hartford Aggressive Growth
Fund, Inc.)
To achieve growth of capital by investing in securities selected solely on the
basis of potential for capital appreciation; income, if any, is an incidental
consideration.
HARTFORD BOND FUND, INC.
To achieve maximum current income consistent with preservation of capital by
investing primarily in fixed-income securities.
HARTFORD DIVIDEND AND GROWTH FUND, INC.
To seek a high level of current income consistent with growth of capital and
reasonable investment risk.
HARTFORD INDEX FUND, INC.
To provide investment results that correspond to the price and yield performance
of publicly-traded common stocks in the aggregate, as represented by the
Standard & Poor's 500 Composite Stock Price Index (the "Index"). The Fund is
neither sponsored by, nor affiliated with, Standard & Poor's Corporation.
HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC.
To achieve long-term total return consistent with prudent investment risk
through investment primarily in equity securities issued by foreign companies.
HARTFORD MORTGAGE SECURITIES FUND, INC.
To achieve maximum current income consistent with safety of principal and
maintenance of
<PAGE>
-37-
liquidity by investing primarily in mortgage-related securities, including
securities issued by the Government National Mortgage Association ("GNMA").
RESPONSIVELY INVESTED BALANCED FUND (Calvert Responsibly Invested Balanced Fund
Series, Acacia Capital Corporation) (formerly Socially Responsive Fund)
To seek growth of capital through investments in enterprises which make a
significant contribution to society through products and services and through
the way they do business.
HARTFORD STOCK FUND, INC.
To achieve long-term capital growth primarily through capital appreciation, with
income a secondary consideration, by investing in equity-type securities.
TCI FUNDS
AMS/TCI GROWTH
To seek capital growth over time by investing primarily in common stocks that
are considered by the investment manager to have better-than-average prospects
for appreciation.
AMS/TCI ADVANTAGE
To provide reasonable share price stability through its holdings of money market
securities and bonds, provide competitive rates of current income with
government-backed securities, and offer the potential for long-term returns
higher than those of fixed income investments through its use of common stocks.
FIDELITY FUNDS
AMS/FIDELITY VIP II ASSET MANAGER
To seek high total return with reduced risk over the long term by allocating its
assets among stocks, bonds, and short-term fixed-income instruments.
AMS/FIDELITY VIP GROWTH
To seek capital appreciation primarily through purchase of common stocks,
although its investments are not restricted to any one type of security.
AMS/FIDELITY VIP II CONTRAFUND
To seek long term capital appreciation through purchase of equity of securities
of domestic or foreign companies that are undervalued or due to an overly
pessimistic appraisal by the public.
<PAGE>
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AMS/FIDELITY VIP OVERSEAS
To seek long term capital appreciation by investing primarily in foreign
securities whose principal business activities are outside of the United States.
ALL FUNDS
The Hartford Funds are available only to serve as the underlying investment for
the variable annuity contracts and variable life insurance Contracts issued by
Hartford Life. The Twentieth Century Funds and Fidelity Funds are made
available as the underlying investment for the Contracts, as well as for other
variable life and variable annuity products.
It is conceivable that in the future it may be disadvantageous for variable
annuity separate accounts and variable life insurance separate accounts to
invest in the Funds simultaneously. Although Hartford Life and the Funds do not
currently foresee any such disadvantages either to variable annuity
Contractholders or to variable life insurance Policy Owners, the Funds' Board of
Directors intends to monitor events in order to identify any material conflicts
between such Contractholders and Policy Owners and to determine what action, if
any, should be taken in response thereto. If the Board of Directors of the
Funds were to conclude that separate funds should be established for variable
life and variable annuity separate accounts, the variable annuity
Contractholders would not bear any expenses attendant to the establishment of
such separate funds.
Shares of the Responsively Invested Balanced Fund, a series of Acacia Capital
Corporation, which is unaffiliated with Hartford Life, are offered to other
unaffiliated separate accounts. Hartford Life and the Board of Trustees of
Acacia Capital Corporation intend to monitor events to identify any material
irreconcilable conflicts which may arise and to determine what action, if any,
should be taken in response thereto.
Shares of the Twentieth Century Funds and the Fidelity Funds are offered to
other unaffiliated separate accounts.
Hartford Life reserves the right, subject to compliance with the law, to
substitute the shares of any other registered investment company for the shares
of any Fund held by the Separate Account. Substitution may occur if shares of
the Fund(s) become unavailable or due to changes in applicable law or
interpretations of law. Current law requires notification to you of any such
substitution and approval of the Securities and Exchange Commission. Hartford
Life also reserves the right, subject to compliance with the law to offer
additional Funds with differing investment objectives.
<PAGE>
-39-
HARTFORD FUNDS
The Hartford Investment Management Company ("HIMCO") has been serving as
investment manager or adviser to each of the Hartford Funds. In addition,
Wellington Management Company ("Wellington") has served as sub-investment
adviser to certain of the Funds since August 1984.
HIMCO serves as investment manager for Hartford Advisers, Hartford Capital
Appreciation, Hartford Dividend and Growth, Hartford International Opportunities
and Hartford Stock Funds pursuant to an Investment Management Agreement between
each. Wellington serves as sub-investment adviser to each of these funds
pursuant to a Sub-Investment Advisory Agreement between Wellington and HIMCO on
behalf of each fund.
HIMCO serves as the investment adviser to Hartford Bond, Hartford Index, and
Hartford Mortgage Securities Funds pursuant to an Investment Advisory Agreement
between these funds and HIMCO.
The Calvert Asset Management Company serves as investment adviser and United
States Trust Company of Boston serves as sub-investment adviser to the
Responsively Invested Balanced Fund.
A full description of the Funds, their investment policies and restrictions,
risks, charges and expenses and all other aspects of their operations is
contained in the accompanying Funds' Prospectus which should be read in
conjunction with this Prospectus before investing, and in the Funds' Statement
of Additional Information which may be ordered from Hartford Life.
TWENTIETH CENTURY FUNDS
The Twentieth Century Funds are managed by Investors Research Corporation
("Investors Research"), whose principal business address is 4500 Main Street,
Kansas City, Missouri.
FIDELITY FUNDS
The Fidelity Funds are managed by Fidelity Management & Research Company
("Fidelity Management"), whose principal business address is 82 Devonshire
Street, Boston, Massachusetts. Fidelity Management is one of America's largest
investment management organizations. It is composed of a number of different
companies, which provide a variety of financial services and products. Fidelity
Management is the original Fidelity company, founded in 1946. It provides a
number of mutual funds and other clients with investment research and portfolio
management services. Various Fidelity companies perform certain activities
required to operate Variable Insurance Products Fund and Variable Insurance
Products Fund II.
<PAGE>
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Does Hartford Life have any interest in the Funds?
At December 31, 1994, certain Hartford Life group pension Contracts held
direct interest in shares as follows:
Percent of
Shares Total Shares
------ ------------
Hartford Advisers Fund, Inc. 10,709,364 0.56%
Hartford Capital Appreciation Fund, Inc. 5,313,800 1.31%
Hartford Index Fund, Inc. 9,462,900 9.14%
Hartford International Opportunities Fund, Inc. 5,547,408 1.16%
Hartford Mortgage Securities Fund, Inc. 16,249,689 5.26%
Hartford Stock Fund, Inc. 65,899 0.02%
FEDERAL TAX CONSIDERATIONS
What are some of the federal tax consequences which affect these Contracts?
A. General
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED AND THE TYPE OF PLAN
UNDER WHICH THE CONTRACT IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY
A PERSON, EMPLOYER OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A CONTRACT
DESCRIBED HEREIN.
It should be understood that any detailed description of the federal income
tax consequences regarding the purchase of these Contracts cannot be made in
this Prospectus and that special tax rules may be applicable with respect to
certain purchase situations not discussed herein. For detailed information,
a qualified tax adviser should always be consulted. This discussion is based
on Hartford Life's understanding of current federal income tax laws as they
are currently interpreted.
<PAGE>
-41-
B. Hartford Life and Separate Account Two
Separate Account Two is taxed as a part of Hartford Life which is taxed as a
life insurance company in accordance with the Life Insurance Company Income
Tax Act of 1959 (Part 1 of Subchapter L of the Code). No taxes are due on
interest, dividends and short-term or long-term capital gains earned by
Separate Account Two. The 1984 Tax Reform Act amended the federal income tax
law so that Hartford Life is not subject to tax on long-term capital gains
with respect to non-qualified Contracts. The 1984 Act eliminated the need to
have a reserve for taxes.
C. Information Regarding Tax Qualified Plans
THE TAX REFORM ACT OF 1986 AND TECHNICAL AND MISCELLANEOUS REVENUE ACT OF
1988 HAVE MADE SUBSTANTIAL CHANGES TO TAX FAVORED RETIREMENT PLANS. YOU
SHOULD CONSULT YOUR TAX ADVISER TO FULLY ADDRESS ALL CHANGES OCCURRING AS A
RESULT OF THE TAX REFORM ACT AND THEIR EFFECT ON QUALIFIED PLANS.
1. Contributions
a. Tax Sheltered Annuity Plans for Public School Teachers and Employers
and Employees of Certain Tax-Exempt Organizations
Contributions to tax sheltered annuity plans (described in Section
403(a) and 403(b) of the Code) by employers are not includable within
the employee's income to the extent those contributions do not exceed
the lesser of $9,500 or the exclusion allowance. Generally, the
exclusion allowance is equal to 20% of the employee's includable
compensation for his most recent full year of employment multiplied by
the number of years of his service, less the aggregate amount
contributed by the employer for Annuity Contracts which were not
included within the gross income of the employee for any prior taxable
year. There are special provisions which may allow an employee of an
educational institution, a hospital or a home health service agency to
elect an overall limitation different from the limitation described
above.
b. Individual Retirement Annuities ("IRAs")
Individuals may contribute and deduct the lesser of $2,000 or 100
percent of their compensation to an IRA. In the case of a spousal
IRA, the maximum deduction is the lesser of $2,250 or 100 percent of
compensation. The deduction for contributions is phased out between
$40,000 and $50,000 of adjusted gross income (AGI) for a married
individual (and between $25,000 and $35,000 for single individuals) if
either the individual or his or her spouse is an active Participant in
any Section 401(a), 403(a), 403(b) or 408(k) plan regardless of
whether the individual's interest is vested.
<PAGE>
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To the extent deductible contributions are not allowed, individuals
may make designated non-deductible contributions to an IRA, subject to
the above limits. Amounts may also be rolled over from a qualified
retirement plan.
2. Distributions
Annuity payments made under the Contracts are taxable under Section 72 of
the Code as ordinary income, in the year of receipt, to the extent that
they exceed the "excludable amount." The investment in the Contract is
normally the aggregate amount of the contributions made by or on behalf of
an employee which were included as a part of his taxable income and not
deducted. Thus, annual contributions deducted for an IRA are not included
in the investment in the Contract. The employee's investment in the
Contract is divided by the expected number of payments to be made under
the Contract. The amount so computed constitutes the "excludable amount,"
which is the amount of each annuity payment considered a return of
investment in each year and, therefore, not taxable. Once the employee's
investment in the Contract is recouped, the full amount of each payment
will be fully taxable. If the employee dies prior to recouping his or her
investment in the Contract, a deduction is allowed for the last taxable
year. The rules for determining the excludable amount are contained in
Section 72 of the Code.
Generally, distributions or withdrawals prior to age 59 1/2 may be
subject to an additional income tax of 10% of the amount includable in
income. This additional tax does not apply to distributions made after
the employee's death, on account of disability, and distributions in the
form of a life annuity and, except in the case of an IRA, certain
distributions after separation from service at or after age 55 and certain
distributions for eligible medical expenses. A life annuity is defined as
a scheduled series of substantially equal periodic payments for the life
or life expectancy of the Participant (or the joint lives or life
expectancies of the Participant and Beneficiary).
The taxation of withdrawals and other distributions varies depending on
the type of distribution and the type of plan from which the distribution
is made. With respect to the tax sheltered annuity Contracts under
Section 403(b), contributions to the Contract made after December 31, 1988
and any increases in cash values after that date may not be distributed
prior to attaining age 59 1/2, separation from service, death or
disability. Contributions (but not earnings) made after December 31, 1988
may also be distributed by reason of financial hardship.
Generally, in order to avoid a penalty tax, annuity payments, periodic
payments or annual distributions must commence by April 1 of the calendar
year following the year in which the Participant attains age 70 1/2. The
entire interest of the Participant must be distributed beginning no later
than this required beginning date over a period which may not extend
beyond a maximum of the lives or life expectancies of the Participant and
a designated Beneficiary. Each annual distribution must equal or exceed a
"minimum distribution
<PAGE>
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amount" which is determined by dividing the account balance by the
applicable life expectancy. This account balance is generally based upon
the account value as of the close of business on the last day of the
previous calendar year. With respect to a Section 403(b) plan, this
account balance is based upon earnings and contributions after December
31, 1986. In addition, minimum distribution incidental benefit rules may
require a larger annual distribution based upon dividing the account
balance by a factor promulgated by the IRS which ranges from 26.2 (at age
70) to 1.8 (at age 115). Special rules apply to require that
distributions be made to Beneficiaries after the death of the Participant.
A penalty tax of up to 50% of the amount which should be distributed may
be imposed by the Internal Revenue Service for failure to make such
distribution.
The withholding rules described in Section D below are applicable to
distributions from Tax Sheltered Annuities except that a distribution
which consists of the balance to the credit of an employee from a plan
described in Code Section 403(a) within one taxable year of the recipient
is subject to income tax withholding at a rate derived from a table
published by the Internal Revenue Service.
D. Federal Income Tax Withholding
That portion of a distribution from a Tax Sheltered Annuity which is taxable
income to the recipient is subject to federal income tax withholding,
pursuant to Section 3405 of the Internal Revenue Code. The application of
this provision is summarized below:
1. Eligible Rollover Distributions
a. The Unemployment Compensation Amendments Act of 1992 requires that
federal income taxes be withheld from certain distributions from
tax-qualified retirement plans and from tax-sheltered annuities under
Section 403(b). These provisions DO NOT APPLY to distributions from
individual retirement annuities under section 408.
b. If any portion of a distribution is an "eligible rollover
distribution", the law requires that 20% of that amount be withheld.
This amount is sent to the IRS as withheld income taxes. The
following types of payments DO NOT constitute an eligible rollover
distribution (and, therefore, the mandatory withholding rules will not
apply):
- the non-taxable portion of the distribution;
- distributions which are part of a series of equal (or substantially
equal) payments made at least annually for your lifetime (or your life
expectancy), or your lifetime and your Beneficiary's lifetime (or life
expectancies), or for a period of ten years or more.
- required minimum distributions made pursuant to section 401(a)(9) of
the IRC.
- corrective distribution for deferrals in excess of applicable IRS
limits.
<PAGE>
-44-
c. However, these mandatory withholding requirements do not apply in the
event of all or a portion of any eligible rollover distribution is
paid in a "direct rollover". A direct rollover is the direct payment
of an eligible rollover distribution or portion thereof to an
individual retirement arrangement or annuity (IRA) or to another
qualified employer plan. IF A DIRECT ROLLOVER IS ELECTED, NO INCOME
TAX WILL BE WITHHELD.
d. If any portion of a distribution is not an eligible rollover
distribution but is taxable, the mandatory withholding rules described
above do not apply. In this case, the voluntary withholding rules
described below apply.
2. Non-Eligible Rollover Distributions
a. Non-Periodic Distributions
The portion of a non-periodic distribution which constitutes taxable
income will be subject to federal income tax withholding unless the
recipient elects not to have taxes withheld. If an election not to
have taxes withheld is not provided, 10% of the taxable distribution
will be withheld as federal income tax. Election forms will be
provided at the time distributions are requested.
b. Periodic Distributions (distributions payable over a period greater
than one year)
The portion of a periodic distribution which constitutes taxable
income will be subject to federal income tax withholding as if the
recipient were married claiming three exemptions. A recipient may
elect not to have income taxes withheld or have income taxes withheld
at a different rate by providing a completed election form. Election
forms will be provided at the time distributions are requested.
E. Diversification Requirements
Section 817 of the Code provides that a variable annuity Contract (other than
a pension plan Contract) will not be treated as an annuity for any period
during which the investments made by the separate account or underlying fund
are not adequately diversified in accordance with regulations prescribed by
the Treasury. If a Contract is not treated as an annuity, the Contractholder
will be subject to income tax on the annual increases in cash value. The
Treasury has issued diversification regulations which, among other things,
require that no more than 55% of the assets of mutual fund (such as the
Hartford Life mutual funds) underlying a variable annuity Contract, be
invested in any one investment. In determining whether the diversification
standards are met, each United States Government Agency or instrumentality
shall be treated as a separate issuer. If the diversification standards are
not met, non-pension Contractholders will be subject to current tax on the
increase in cash value in the Contract.
<PAGE>
-45-
F. Non-Natural Persons, Corporations
The annual increase in the value of the Contract is currently includable in
gross income of a non-natural person. There is an exception for annuities
held by structured settlement companies and annuities held by an employer
with respect to a terminated pension plan. A non-natural person which is a
tax-exempt entity for federal tax purposes will not be subject to income tax
as a result of this provision.
<PAGE>
-46-
MISCELLANEOUS
What are my voting rights?
Hartford Life shall notify the Contractholder of any Fund shareholders'
meeting if the shares held for the Contractholder's accounts may be voted at
such meetings. Hartford Life shall also send proxy materials and a form of
instruction by means of which the Contractholder can instruct Hartford Life
with respect to the voting of the Fund shares held for the Contractholder's
account. In connection with the voting of Fund shares held by it, Hartford
Life shall arrange for the handling and tallying of proxies received from
Contractholders. Hartford Life as such, shall have no right, except as
hereinafter provided, to vote any Fund shares held by it hereunder which may
be registered in its name or the names of its nominees. Hartford Life will,
however, vote the Fund shares held by it in accordance with the instructions
received from the Contractholders for whose accounts the Fund shares are
held. If a Contractholder desires to attend any meeting at which shares held
for the Contractholder's benefit may be voted, the Contractholder may request
Hartford Life to furnish a proxy or otherwise arrange for the exercise of
voting rights with respect to the Fund shares held for such Contractholder's
account. In the event that the Contractholder gives no instructions or
leaves the manner of voting discretionary, Hartford Life will vote such
shares of the appropriate Fund, including any of its own shares, in the same
proportion as shares of that Fund for which instructions have been received.
Every Participant under a Contract issued with respect to DC-II who has a
full (100%) vested interest under a group Contract, shall receive proxy
material and a form of instruction by which Participants may instruct the
Contractholder with respect to the number of votes attributable to his
individual participation under a group Contract.
A Contractholder or Participant, as appropriate, is entitled to one full or
fractional vote for each full or fractional Accumulation or Annuity Unit
owned. The Contractholder has voting rights throughout the life of the
Contract. The vested Participant has voting rights for as long as
participation in the Contract continues. Voting rights attach only to
interests under DC-II.
During the Annuity period under a Contract the number of votes will decrease
as the assets held to fund Annuity benefits decrease.
Will other Contracts be participating in the Separate Account?
In addition to the Contracts described in this Prospectus, other forms of
group annuities are sold providing benefits which vary in accordance with the
investment experience of Separate Account.
<PAGE>
-47-
How are the Contracts sold?
Hartford Equity Sales Company, Inc. ("HESCO") currently serves as Principal
Underwriter for the securities issued with respect to DC-II. Hartford
Securities Distribution Company, Inc. ("HSD") will replace HESCO as principal
underwriter upon approval by the Commission, the National Association of
Securities Dealers, Inc. ("NASD") and applicable state regulatory
authorities.
Both HESCO and HSD are wholly-owned subsidiaries of Hartford Life. The
principal business address of HESCO and HSD is the same as Hartford Life.
The securities will be sold by salespersons of HESCO, and subsequently, HSD,
who represent Hartford Life as insurance and Variable Annuity agents and who
are registered representatives of Broker-Dealers who have entered into
distribution agreements with HESCO, and subsequently HSD.
HESCO is registered with the Commission under the Securities Exchange Act of
1934 as a Broker-Dealer and is a member of the NASD. HSD will be registered
with the Commission under the Securities Exchange Act of 1934 as a Broker-
Dealer and will become a member of the NASD.
Compensation will be paid by Hartford Life to registered representatives for
the sale of Contracts up to a maximum of 5.0% on Contributions and .50% on
Participant's Individual Account values. Sales compensation may be reduced.
Who is the custodian of the Separate Account's assets?
Hartford Life is the custodian of the Separate Account's assets.
Are there any material legal proceedings affecting the Separate Account?
No.
Are you relying on any experts as to any portion of this Prospectus?
The financial statements and schedules included in this Prospectus and
elsewhere in the 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 on the authority of said
firm as experts in giving said reports.
<PAGE>
-48-
How may I get additional information?
Inquiries will be answered by calling your representative or by writing:
Hartford Life Insurance Company
ATTN: RPVA Administration
P.O. Box 2999
Hartford, CT 06104-2999
<PAGE>
-49-
TABLE OF CONTENTS
FOR
STATEMENT OF ADDITIONAL INFORMATION
SECTION PAGE
------- ----
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY . . . . . . . . . . .
SAFEKEEPING OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . .
DISTRIBUTION OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . .
ANNUITY PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Electing the Annuity Commencement Date and Form of Annuity . . . . . . .
C. Optional Annuity Forms . . . . . . . . . . . . . . . . . . . . . . . . .
OPTION 1: Life Annuity. . . . . . . . . . . . . . . . . . . . . . . . . . .
OPTION 2: Life Annuity With 120, 180 or 240 Monthly Payments Certain. . . .
OPTION 3: Unit Refund Life Annuity. . . . . . . . . . . . . . . . . . . . .
OPTION 4: Joint and Last Survivor Annuity . . . . . . . . . . . . . . . . .
OPTION 5: Payments for a Designated Period. . . . . . . . . . . . . . . . .
CALCULATION OF YIELD AND RETURN. . . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
-50-
This form must be completed for all tax-sheltered annuities.
SECTION 403(B)(11) ACKNOWLEDGMENT FORM
The Hartford Variable Annuity Contract which you have recently purchased is
subject to certain restrictions imposed by the Tax Reform Act of 1986.
Contributions to the Contract after December 31, 1988 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:
a. attained age 59 1/2
b. terminated employment
c. died, or
d. become disabled.
Distributions of post December 31, 1988 contributions may also be made if you
have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made because of financial
hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Hartford variable annuity. Please refer to your
Plan.
Please complete the following and return to:
Hartford Life Insurance Company
Attn: RPVA Administration
P.O. Box 2999
Hartford, CT 06104-2999
............................................
Name of Contractholder/Participant
Address
City or Plan/School District
Date:
<PAGE>
51
-------------------------
To Obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life Insurance Company
Attn: RPVA Administration
P.O. Box 2999
Hartford, CT 06104-2999
Please send a Statement of Additional Information for the Separate Account Two
(DC Variable Account II) to me at the following address:
--------------------------------
Name
--------------------------------
Address
--------------------------------
City/State Zip Code
------------------------
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO (DC VARIABLE ACCOUNT II)
Group Variable Annuity Contracts Issued by
Hartford Life Insurance Company
With Respect to DC-II
This Statement of Additional Information is not a Prospectus. The information
contained herein should be read in conjunction with the Prospectus.
To obtain a Prospectus, send a written request to Hartford Life Insurance
Company, Attn: RPVA Administration, P.O. Box 2999, Hartford, CT 06104-2999.
Date of Prospectus: May 1, 1995
Date of Statement of Additional Information: May 1, 1995
<PAGE>
-2-
TABLE OF CONTENTS
SECTION PAGE
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY . . . . . . .
SAFEKEEPING OF ASSETS. . . . . . . . . . . . . . . . . . . .
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . .
DISTRIBUTION OF CONTRACTS. . . . . . . . . . . . . . . . . .
ANNUITY PERIOD . . . . . . . . . . . . . . . . . . . . . . .
A. Annuity Payments. . . . . . . . . . . . . . . . . . .
B. Electing the Annuity Commencement Date and Form of Annuity
C. Optional Annuity Forms. . . . . . . . . . . . . . . .
OPTION 1: Life Annuity . . . . . . . . . . . . . . .
OPTION 2: Life Annuity With 120, 180 or 240 Monthly Payments Certain
OPTION 3: Unit Refund Life Annuity . . . . . . . . .
OPTION 4: Joint and Last Survivor Annuity. . . . . .
OPTION 5: Designated (Fixed) Period Annuity. . . . .
CALCULATION OF YIELD AND RETURN. . . . . . . . . . . . . . .
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . .
<PAGE>
-3-
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company ("Hartford Life") was originally incorporated
under the laws of Massachusetts on June 5, 1902. It was subsequently
redomiciled to Connecticut. It is a stock life insurance company engaged in the
business of writing health and life insurance, both ordinary and group, in all
states of the United States and the District of Columbia. The offices of
Hartford Life are located in Simsbury, Connecticut; however its mailing address
is P.O. Box 2999, Hartford, Connecticut 06104-2999. Hartford Life is ultimately
100% owned by Hartford Fire Insurance Company, one of the largest multiple lines
insurance carriers in the United States. Hartford Fire Insurance Company is a
subsidiary of ITT Corporation.
At December 31, 1994, certain Hartford Life group pension contracts held direct
interest in shares as follows:
Percent of
Shares Total Shares
------ ------------
Hartford Advisers Fund, Inc. 10,709,364 0.56%
Hartford Capital Appreciation Fund, Inc. 5,313,800 1.31%
Hartford Index Fund, Inc. 9,462,900 9.14%
Hartford International Opportunities Fund, Inc. 5,547,408 1.16%
Hartford Mortgage Securities Fund, Inc. 16,249,689 5.26%
Hartford Stock Fund, Inc. 65,899 0.02%
SAFEKEEPING OF ASSETS
Hartford Life holds the assets of the Separate Account in its custody for
safekeeping and performs those services normally performed by a custodian.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, periodically audits the
Separate Account and annually certifies all of the financial statements of the
Separate Account. The financial statements included in this Statement of
Additional Information have been audited by Arthur Andersen LLP as indicated in
their report with respect thereto, and are included herein in reliance upon the
report of said firm as experts in accounting and auditing.
<PAGE>
-4-
DISTRIBUTION OF CONTRACTS
Hartford Equity Sales Company, Inc. ("HESCO") currently serves as Principal
Underwriter for the securities issued with respect to the Separate Account.
Hartford Securities Distribution Company, Inc. ("HSD") will replace HESCO as
principal underwriter upon approval by the Commission, the National Association
of Securities Dealers, Inc. ("NASD") and applicable state regulatory
authorities.
Both HESCO and HSD are wholly-owned subsidiaries of Hartford Life Insurance
Company. The principal business address of HESCO and HSD is the same as
Hartford Life Insurance Company.
The securities will be sold by salespersons of HESCO, and subsequently, HSD, who
represent Hartford Life as insurance and Variable Annuity agents and who are
registered representatives or Broker-Dealers who have entered into distribution
agreements with HESCO, and subsequently HSD.
HESCO is registered with the Commission under the Securities and Exchange Act of
1934 as a Broker-Dealer and is a member of the NASD. HSD will be registered
with the Commission under the Securities Exchange Act of 1934 as a Broker-Dealer
and will become a member of the NASD.
Compensation will be paid by Hartford Life to registered representatives for the
sale of contracts up to a maximum of 5.0% on Contributions and .50% on
Participant's Individual Account values. Sales compensation may be reduced.
The offering of the Separate Account contracts is continuous.
ANNUITY PERIOD
A. Annuity Payments
Variable Annuity payments are determined on the basis of (1) a mortality
table set forth in the contracts which reflects the age of the Annuitant
and the type of Annuity payment option selected, and (2) the investment
performance of the investment medium selected. Fixed Annuity payments will
be no less than those calculated at rates based on the annuity tables
contained in the contracts.
The amount of the Annuity payments will not be affected by adverse
mortality experience or by an increase in expenses in excess of the expense
deduction for which provision has been made (see "Charges Under the
Contracts," in the Prospectus).
<PAGE>
-5-
The Annuitant will be paid the value of a fixed number of Annuity Units
each month. The value of such units and the amounts of the monthly
Variable Annuity payments will, however, reflect investment income
occurring after retirement, and thus the payments will vary with the
investment experience of the Fund shares selected.
Illustration of Calculation of Annuity Unit Value
-------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
1. Net Investment Factor for period . . . . . . . . . . . . . .000498
2. Adjustment for 4% Assumed Rate of Net Investment Return. . .999892
3. 2x(1+1.000000) . . . . . . . . . . . . . . . . . . . . . . 1.000390
4. Annuity Unit value, beginning of period. . . . . . . . . . .995995
5. Annuity Unit value, end of period (3x4). . . . . . . . . . .996383
</TABLE>
B. Electing the Annuity Commencement Date and Form of Annuity
Depending on the Contract involved, the Contract Owner or Participant
selects an Annuity Commencement Date, usually between a Participant's 50th
and 75th birthdays, and an Annuity option. The Annuity Commencement Date
may not be deferred beyond the Participant's 75th birthday. The Annuity
Commencement Date and/or the Annuity option may be changed from time to
time, but any such change must be made at least 30 days prior to the date
on which Annuity payments are scheduled to begin. Annuity payments will be
made on the first business day of each month.
The contracts contain the five optional Annuity forms described below,
which may be selected on either a Fixed or Variable Annuity basis, or a
combination thereof. If a Contract Owner does not elect otherwise,
Hartford Life reserves the right to begin Annuity payments at age 65 under
Option 2 with 120 monthly payments certain.
When an Annuity is purchased for an Annuitant, unless otherwise specified,
DC-I or DC-II Accumulation Unit values will be applied to provide a
Variable Annuity under DC-II.
The minimum Annuity payment is $20. No election may be made which results
in a first payment of less than $20. If at any time Annuity payments are
or become less than $20.00, Hartford Life has the right to change the
frequency of payment to such intervals as will result in payments of at
least $20.00.
<PAGE>
-6-
C. Optional Annuity Forms
OPTION 1: Life Annuity
A life Annuity is an Annuity payable during the lifetime of the Annuitant
and terminating with the last monthly payment preceding the death of the
Annuitant. Life Annuity Options (Options 1-4) offers the maximum level of
monthly payments of any of the options since there is no guarantee of a
minimum number of payments nor a provision for a death benefit payable to a
Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity
payment, two if he died before the due date of the third Annuity payment,
etc.
* OPTION 2: Life Annuity with 120, 180 or 240 Monthly Payments Certain
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that if, at the death of the Annuitant,
payments have been made for less than 120, 180 or 240 months, as elected,
then the present value as of the date of the Participant's death at the
current dollar amount at the date of death of any remaining guaranteed
monthly payments will be paid in one sum to the Beneficiary or
Beneficiaries designated unless other provisions will have been made and
approved by Hartford Life.
Illustration of Annuity Payments
Individual Age 65, Life Annuity
With 120 Payments Certain
-------------------------
<TABLE>
<CAPTION>
<S> <C>
1. Net amount applied . . . . . . . . . . . . . . . . . . . 13,978.25
2. Initial monthly income per $1,000 of payment applied . . 5.93
3. Initial monthly payment (1x2/1,000). . . . . . . . . . . 82.89
4. Annuity Unit value . . . . . . . . . . . . . . . . . . . .953217
5. Number of monthly Annuity Units (3DIVIDED BY4) . . . . . 86.959
6. Assume Annuity Unit value for second month equal to. . . .963723
7. Second monthly payment (6x5) . . . . . . . . . . . . . . 83.80
8. Assume Annuity Unit value for third month equal to . . . .964917
9. Third month payment (8x5). . . . . . . . . . . . . . . . 83.91
</TABLE>
For the purpose of this illustration, purchase is assumed to have been made
on the 5th business day preceding the first payment date. In determining
the second and subsequent payments the annuity unit value of the 5th
business day preceding the annuity due date is used.
<PAGE>
-7-
* OPTION 3: Unit Refund Life Annuity
This Annuity option is an Annuity payable monthly during the lifetime of
the Annuitant terminating with the last payment due prior to the death of
the Annuitant except that an additional payment will be made to the
Beneficiary or Beneficiaries if (a) below exceeds (b) below:
total amount applied under the option
at the Annuity Commencement Date
(a) =
------------------------------------------------------------
Annuity Unit value at the Annuity Commencement Date
(b) = number of Annuity Units represented x number of monthly
by monthly Annuity payment made Annuity payments made
The amount of the additional payments will be determined by multiplying
such excess by the Annuity Unit value as of the date that proof of death is
received by Hartford Life.
For example, if $20,000 were applied to the purchase of an Annuity under
this option, the value of an Annuity Unit was $1.25 on the Annuity
Commencement Date, the number of Annuity Units represented by each monthly
payment was 91.68 (the number applicable to an individual electing this
option to commence at age 65), 60 monthly Annuity payments were made prior
to the date of death, and the value of an Annuity Unit on the date of
receipt of proof of an Annuitant's death was $1.50, the amount paid to the
Beneficiary would be $15,748.80, computed as follows:
$20,000 (91.68 x 60) = 10,499.200
------- -
$1.25
or
16,000.000 - 5,500.800 = 10,499.200
10,499.200 x $1.50 = $15,748.80
OPTION 4: Joint and Last Survivor Annuity
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of
the survivor, ceasing with the last payment prior to the death of the
survivor.
<PAGE>
-8-
It would be possible under this Option for an Annuitant and designated
second person in the event of the common or simultaneous death of the
parties to receive only one payment in the event of death prior to the due
date for the second payment and so on.
* OPTION 5: Payments for a Designated Period
An amount payable monthly for the number of years. Under most group
contracts, the minimum number of years is three.
In the event of the Annuitant's death prior to the end of the designated
period, any then remaining balance of proceeds will be paid in one sum to
the Beneficiary or Beneficiaries designated unless other provisions will
have been made and approved by Hartford Life.
Option 5 is an option that does not involve life contingencies and thus no
mortality guarantee.
Surrenders under Option 5 will be subject to the limitations set forth in
the Contract and any applicable contingent deferred sales charges (see "How
do I select an Annuity Commencement Date and Form of Annuity?" in the
Prospectus.)
*On Qualified Plans, Options 2, 3 and 5 are available only if the
guaranteed payment period is less than the life expectancy of the Annuitant
at the time the option becomes effective. Such life expectancy shall be
computed on the basis of the mortality table prescribed by the IRS, or if
none is prescribed, the mortality table then in use by Hartford Life.
CALCULATION OF YIELD AND RETURN
YIELD OF THE HVA MONEY MARKET FUND AND U.S. GOVERNMENT MONEY MARKET FUND
SUB-ACCOUNTS. As summarized in the Prospectus under the heading "Performance
Related Information," the yield of the Money Market Fund and U.S. Government
Money Market Fund Sub-Accounts for a seven-day period (the "base period") will
be computed by determining the "net change in value" (calculated as set forth
below) of a hypothetical account having a balance of one share at the beginning
of the period, dividing the net change in account value by the value of the
account at the beginning of the base period to obtain the base period return,
and multiplying the base period return by 365/7 with the resulting yield figure
carried to the nearest hundredth of one percent. Net changes in value of a
hypothetical account will include net investment income of the account (accrued
daily dividends as declared by the underlying funds, less daily expense and
contract charges of the account) for the period, but will not include realized
gains or losses or unrealized appreciation or depreciation on the underlying
fund shares.
<PAGE>
-9-
The Money Market Fund and U.S. Government Money Market Fund Sub-Accounts yield
and effective yield will vary in response to fluctuations in interest rates and
in the expenses of the two Sub-Accounts.
The current yield and effective yield reflect recurring charges on the Separate
Account level, including the maximum Annual Contract Fee.
Money Market Fund Sub-Account
The yield and effective yield for the seven day period ending December 31, 1994
is as follows:
($30 Annual Contract Fee)
Yield 3.87%
Effective Yield 3.95%
U.S. Government Money Market Fund Sub-Account
The yield and effective yield for the sub-account for the seven day period
ending December 31, 1994 is as follows:
($30 Annual Contract Fee)
Yield 3.57%
Effective Yield 3.63%
YIELDS OF HARTFORD BOND FUND AND HARTFORD MORTGAGE SECURITIES FUND SUB-ACCOUNTS.
As summarized in the Prospectus under the heading "Performance Related
Information," yields of these two Sub-Accounts will be computed by annualizing a
recent month's net investment income, divided by a Fund share's net asset value
on the last trading day of that month. Net changes in the value of a
hypothetical account will assume the change in the underlying mutual funds "net
asset value per share" for the same period in addition to the daily expense
charged assessed, at the sub-account level for the respective period. The Bond
Fund and Mortgage Securities Fund Sub-Accounts' yields will vary from time to
time depending upon market conditions and, the composition of the underlying
funds' portfolios. Yield should also be considered relative to changes in the
value of the Sub Accounts' shares and to the relative risks associated with the
investment objectives and policies of the Bond Fund and Mortgage Securities
Fund.
The yield reflects recurring charges on the Separate Account level, including
the Annual Contract Fee.
<PAGE>
-10-
The Bond and Mortgage Securities Fund Sub-Accounts' yield will vary from time to
time depending upon market conditions and, the composition of the underlying
funds' portfolios. Yield should also be considered relative to changes in the
value of the Sub-Accounts' shares and to the relative risks associated with the
investment objectives and policies of the Funds.
Bond Fund Sub-Account
Yield calculations of the Sub-Account used for illustration purposes reflect the
interest earned by the Sub-Account, less applicable asset charges assessed
against a Contract Owner's contract over the base period. The following is the
method used to determine the yield for the 30 day period ended December 31,
1994.
Example:
Current Yield Formula for the Sub-Account 2*[((A-B)/(C*D) + 1) (6) - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the period
that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the period.
Yield = 5.87%
Mortgage Securities Fund Sub-Account
Yield calculations of the Sub-Account used for illustration purposes reflect the
interest earned by the Sub-Account, less applicable asset charges assessed
against a Contract Owner's account over the base period. The following is the
method used to determine the yield for the 30 days period ended December 31,
1994.
Example:
Current Yield Formula for the Sub-Account 2*[((A-B)/(C*D) + 1)(6) - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the period
that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the period.
Yield = 6.51%
<PAGE>
-11-
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
The method of calculating yields described above for these Sub-Accounts differs
from the method used by the Sub-Accounts prior to May 1, 1988. The denominator
of the fraction used to calculate yield was previously the average unit value
for the period calculated. That denominator will hereafter be the unit value of
the Sub-Accounts on the last trading day of the period calculated.
CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the heading
"Performance Related Information", total return is a measure of the change in
value of an investment in a Sub-Account over the period covered. The formula
for total return used herein includes three steps: (1) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of units owned at the end of the period by the unit
value per unit on the last trading day of the period; (2) assuming redemption at
the end of the period and deducting any applicable contingent deferred sales
charge and (3) dividing this account value for the hypothetical investor by the
initial $1,000 investment and annualizing the result for periods of less than
one year. Total return will be calculated for one year, five years and ten
years or some other relevant periods if a Sub-Account has not been in existence
for at least ten years.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. Each Sub-Account may from time to time include its
total return in advertisements or in information furnished to present or
prospective shareholders. Each Sub-Account may from time to time include its
yield and total return in advertisements or information furnished to present or
prospective shareholders. Each Sub-Account may from time to time include in
advertisements its total return (and yield in the case of certain Sub-Accounts)
the ranking of those performance figures relative to such figures for groups of
other annuities analyzed by Lipper Analytical Services as having the same
investment objectives.
The total return and yield may also be used to compare the performance of the
Sub-Accounts against certain widely acknowledged outside standards or indices
for stock and bond market performance. The Standard & Poor's Composite Index of
500 Stocks (the "S&P 500") is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of common stocks
of companies listed on the New York Stock Exchange, although the common stocks
of a few companies listed on the American Stock Exchange or traded
over-the-counter are included. The 500 companies represented include 400
industrial, 60 transportation and 40 financial services concerns. The S&P 500
represents about 80% of the market value of all issues traded on the New York
Stock Exchange.
<PAGE>
-12-
The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market value-weighted and
unmanaged index showing the changes in the aggregate market value of
approximately 3,500 stocks relative to the base measure of 100.00 on February 5,
1971. The NASDAQ Index is composed entirely of common stocks of companies
traded over-the-counter and often through the National Association of Securities
Dealers Automated Quotations ("NASDAQ") system. Only those over-the-counter
stocks having only one market maker or traded on exchanges are excluded.
The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency.
The manner in which total return and yield will be calculated for public use is
described above. The following table summarizes the calculation of total return
and yield for each Sub-Account, where applicable, through December 31, 1994.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company Separate Account Two
and to the Owners of Units of Interest therein:
We have audited the accompanying statement of assets and liabilities of
Hartford Life Insurance Company Separate Account Two as of December 31,
1994, and the related statement of operations for the year then ended and
statement of changes in net assets for each of the two years in the period
then ended. These financial statements are the responsibility of the
Company'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 Hartford Life
Insurance Company Separate Account Two as of December 31, 1994, the results
of its operations for the year then ended and the changes in its net assets
for each of the two years in the period then ended, in conformity with
generally accepted accounting principles.
Hartford, Connecticut
February 10, 1995 Arthur Andersen LLP
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1994
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
MONEY ADVISERS MONEY MARKET
BOND FUND STOCK FUND MARKET FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund, Inc.
Shares 172,229,725
Cost $ 176,180,319
Market Value................... $159,488,170 -- -- -- --
Hartford Stock Fund, Inc.
Shares 230,631,116
Cost $ 615,215,162
Market Value................... -- $646,103,848 -- -- --
HVA Money Market Fund, Inc.
Shares 241,684,272
Cost $ 241,684,272
Market Value................... -- -- $241,684,272 -- --
Hartford Advisers Fund, Inc.
Shares 1,125,337,358
Cost $1,820,221,520
Market Value................... -- -- -- $1,801,079,934 --
Hartford U.S. Government Money
Market Fund, Inc.
Shares 1,211,232
Cost$ 1,211,232
Market Value................... -- -- -- -- $ 1,211,232
Hartford Aggressive Growth Fund,
Inc.
Shares 221,151,687
Cost $ 581,410,587
Market Value................... -- -- -- -- --
Hartford Mortgage Securities
Fund, Inc.
Shares 216,900,409
Cost $ 233,653,118
Market Value................... -- -- -- -- --
Hartford Index Fund, Inc.
Shares 62,005,461
Cost $ 85,135,111
Market Value................... -- -- -- -- --
Hartford International
Opportunities Fund, Inc.
Shares 255,913,841
Cost $ 287,607,489
Market Value................... -- -- -- -- --
Hartford Dividend and Growth
Fund, Inc.
Shares 30,033,209
Cost $ 30,342,155
Market Value................... -- -- -- -- --
Calvert Socially Responsive
Series, Inc.
Shares 688,923
Cost $ 985,530
Market Value................... -- -- -- -- --
Smith Barney Shearson Daily
Dividend Fund, Inc.
Shares 645,916
Cost $ 645,916
Market Value................... -- -- -- -- --
Smith Barney Shearson
Appreciation Fund, Inc.
Shares 11,551
Cost$ 74,714
Market Value................... -- -- -- -- --
Smith Barney Shearson Government
and Agencies Fund
Shares 48,101
Cost$ 48,101
Market Value................... -- -- -- -- --
Dividends Receivable............. -- -- -- -- --
Due from Hartford Life Insurance
Company........................ 67,001 493,463 -- 694,443 9,658
Receivable from fund shares
sold........................... -- -- 416,033 -- --
------------ ------------ ----------- ----------- -------------
Total Assets..................... 159,555,171 646,597,311 242,100,305 1,801,774,377 1,220,890
------------ ------------ ----------- ----------- -------------
LIABILITIES:
Due to Hartford Life Insurance
Company........................ -- -- 411,062 -- --
Payable for fund shares
purchased...................... 67,024 494,846 -- 693,465 9,289
------------ ------------ ----------- ----------- -------------
Total Liabilities................ 67,024 494,846 411,062 693,465 9,289
------------ ------------ ----------- ----------- -------------
Net Assets (variable annuity
contract liabilities).......... $159,488,147 $646,102,465 $241,689,243 $1,801,080,912 $ 1,211,601
------------ ------------ ----------- ----------- -------------
------------ ------------ ----------- ----------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
28
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE DIVIDEND
AGGRESSIVE SECURITIES INTERNATIONAL AND GROWTH
GROWTH FUND FUND INDEX FUND OPPORTUNITIES FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ------------- ------------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund, Inc.
Shares 172,229,725
Cost $ 176,180,319
Market Value................... -- -- -- -- --
Hartford Stock Fund, Inc.
Shares 230,631,116
Cost $ 615,215,162
Market Value................... -- -- -- -- --
HVA Money Market Fund, Inc.
Shares 241,684,272
Cost $ 241,684,272
Market Value................... -- -- -- -- --
Hartford Advisers Fund, Inc.
Shares 1,125,337,358
Cost $1,820,221,520
Market Value................... -- -- -- -- --
Hartford U.S. Government Money
Market Fund, Inc.
Shares 1,211,232
Cost$ 1,211,232
Market Value................... -- -- -- -- --
Hartford Aggressive Growth Fund,
Inc.
Shares 221,151,687
Cost $ 581,410,587
Market Value................... $632,467,289 -- -- -- --
Hartford Mortgage Securities
Fund, Inc.
Shares 216,900,409
Cost $ 233,653,118
Market Value................... -- $213,512,425 -- -- --
Hartford Index Fund, Inc.
Shares 62,005,461
Cost $ 85,135,111
Market Value................... -- -- $94,384,095 -- --
Hartford International
Opportunities Fund, Inc.
Shares 255,913,841
Cost $ 287,607,489
Market Value................... -- -- -- $300,880,462 --
Hartford Dividend and Growth
Fund, Inc.
Shares 30,033,209
Cost $ 30,342,155
Market Value................... -- -- -- -- $29,855,712
Calvert Socially Responsive
Series, Inc.
Shares 688,923
Cost $ 985,530
Market Value................... -- -- -- -- --
Smith Barney Shearson Daily
Dividend Fund, Inc.
Shares 645,916
Cost $ 645,916
Market Value................... -- -- -- -- --
Smith Barney Shearson
Appreciation Fund, Inc.
Shares 11,551
Cost$ 74,714
Market Value................... -- -- -- -- --
Smith Barney Shearson Government
and Agencies Fund
Shares 48,101
Cost$ 48,101
Market Value................... -- -- -- -- --
Dividends Receivable............. -- -- -- -- --
Due from Hartford Life Insurance
Company........................ 670,264 -- -- 34,067 169,314
Receivable from fund shares
sold........................... -- 72,115 122,769 -- --
--------------- ------------ ------------- ------------------ -----------
Total Assets..................... 633,137,553 213,584,540 94,506,864 300,914,529 30,025,026
--------------- ------------ ------------- ------------------ -----------
LIABILITIES:
Due to Hartford Life Insurance
Company........................ -- 67,937 122,812 -- --
Payable for fund shares
purchased...................... 668,624 -- -- 34,906 169,722
--------------- ------------ ------------- ------------------ -----------
Total Liabilities................ 668,624 67,937 122,812 34,906 169,722
--------------- ------------ ------------- ------------------ -----------
Net Assets (variable annuity
contract liabilities).......... $632,468,929 $213,516,603 $94,384,052 $300,879,623 $29,855,304
--------------- ------------ ------------- ------------------ -----------
--------------- ------------ ------------- ------------------ -----------
<CAPTION>
SMITH
SMITH BARNEY
BARNEY SMITH SHEARSON
SHEARSON BARNEY GOVERNMENT
DAILY SHEARSON AND
SOCIALLY DIVIDEND APPRECIATION AGENCIES
RESPONSIVE FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund, Inc.
Shares 172,229,725
Cost $ 176,180,319
Market Value................... -- -- -- --
Hartford Stock Fund, Inc.
Shares 230,631,116
Cost $ 615,215,162
Market Value................... -- -- -- --
HVA Money Market Fund, Inc.
Shares 241,684,272
Cost $ 241,684,272
Market Value................... -- -- -- --
Hartford Advisers Fund, Inc.
Shares 1,125,337,358
Cost $1,820,221,520
Market Value................... -- -- -- --
Hartford U.S. Government Money
Market Fund, Inc.
Shares 1,211,232
Cost$ 1,211,232
Market Value................... -- -- --
Hartford Aggressive Growth Fund,
Inc.
Shares 221,151,687
Cost $ 581,410,587
Market Value................... -- -- -- --
Hartford Mortgage Securities
Fund, Inc.
Shares 216,900,409
Cost $ 233,653,118
Market Value................... -- -- -- --
Hartford Index Fund, Inc.
Shares 62,005,461
Cost $ 85,135,111
Market Value................... -- -- -- --
Hartford International
Opportunities Fund, Inc.
Shares 255,913,841
Cost $ 287,607,489
Market Value................... -- -- -- --
Hartford Dividend and Growth
Fund, Inc.
Shares 30,033,209
Cost $ 30,342,155
Market Value................... -- -- -- --
Calvert Socially Responsive
Series, Inc.
Shares 688,923
Cost $ 985,530
Market Value................... $ 992,739 -- -- --
Smith Barney Shearson Daily
Dividend Fund, Inc.
Shares 645,916
Cost $ 645,916
Market Value................... -- $ 645,916 -- --
Smith Barney Shearson
Appreciation Fund, Inc.
Shares 11,551
Cost$ 74,714
Market Value................... -- -- $ 117,210 --
Smith Barney Shearson Government
and Agencies Fund
Shares 48,101
Cost$ 48,101
Market Value................... -- -- -- $48,101
Dividends Receivable............. 31,623 -- -- 8
Due from Hartford Life Insurance
Company........................ 7,760 -- -- --
Receivable from fund shares
sold........................... -- 1,130 30 195
--------------- ----------- ----------- -----------
Total Assets..................... 1,032,122 647,046 117,240 48,304
--------------- ----------- ----------- -----------
LIABILITIES:
Due to Hartford Life Insurance
Company........................ -- 1,130 19 211
Payable for fund shares
purchased...................... 7,784 -- -- --
--------------- ----------- ----------- -----------
Total Liabilities................ 7,784 1,130 19 211
--------------- ----------- ----------- -----------
Net Assets (variable annuity
contract liabilities).......... $ 1,024,338 $ 645,916 $ 117,221 $48,093
--------------- ----------- ----------- -----------
--------------- ----------- ----------- -----------
</TABLE>
29
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ---------- ---------------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Qualified 1.00%................................................. 386,894 $ 3.081636 $ 1,192,266
Bond Fund Non-Qualified 1.00%............................................. 2,747,334 3.034781 8,337,557
Bond Fund 1.25%........................................................... 85,397,157 1.606681 137,205,990
Bond Fund .25%............................................................ 130,046 1.048603 136,367
Stock Fund Qualified 1.00%................................................ 1,015,114 4.177385 4,240,521
Stock Fund Non-Qualified 1.00%............................................ 3,743,893 3.994491 14,954,948
Stock Fund 1.25%.......................................................... 248,563,344 2.180436 541,976,464
Stock Fund .25%........................................................... 1,226,382 1.123066 1,377,308
Money Market Fund Qualified 1.00%......................................... 1,193,859 2.261057 2,699,383
Money Market Fund Non-Qualified 1.00%..................................... 14,166,909 2.262124 32,047,305
Money Market Fund 1.25%................................................... 138,396,161 1.462471 202,400,371
Money Market Fund .25%.................................................... 186,512 1.064380 198,520
Advisers Fund Qualified 1.00%............................................. 4,660,625 2.959828 13,794,648
Advisers Fund Non-Qualified 1.00%......................................... 15,416,951 2.959828 45,631,522
Advisers Fund 1.25%....................................................... 858,013,683 1.990804 1,708,137,073
Advisers Fund .25%........................................................ 1,344,430 1.088404 1,463,283
U.S. Government Money Market Fund Qualified 1.00%......................... 20,769 1.810814 37,609
U.S. Government Money Market Fund 1.25%................................... 48,432 1.408971 68,240
Aggressive Growth Fund Qualified 1.00%.................................... 938,226 4.368563 4,098,699
Aggressive Growth Fund Non-Qualified 1.00%................................ 2,983,029 4.366578 13,025,628
Aggressive Growth Fund 1.25%.............................................. 220,935,895 2.615288 577,810,995
Aggressive Growth Fund .25%............................................... 2,691,355 1.233577 3,319,994
Mortgage Securities Fund Qualified 1.00%.................................. 1,431,871 2.084988 2,985,434
Mortgage Securities Fund Non-Qualified 1.00%.............................. 11,296,904 2.084988 23,553,908
Mortgage Securities Fund 1.25%............................................ 112,417,272 1.636791 184,003,579
Mortgage Securities Fund .25%............................................. 105,417 1.037405 109,360
Index Fund 1.25%.......................................................... 50,799,238 1.749714 88,884,138
Index Fund .25%........................................................... 205,039 1.099141 225,367
International Opportunities Fund Qualified 1.00%.......................... 556,691 1.194697 665,077
International Opportunities Fund Non-Qualified 1.00%...................... 2,439,349 1.194654 2,914,179
International Opportunities Fund 1.25%.................................... 246,259,349 1.181321 290,911,341
International Opportunities Fund .25%..................................... 1,080,735 1.295734 1,400,346
Dividend and Growth Fund Qualified 1.00%.................................. 36,668 1.011382 37,085
Dividend and Growth Fund Non-Qualified 1.00%.............................. 335,338 1.011382 339,155
Dividend and Growth Fund 1.25%............................................ 29,145,963 1.009335 29,418,040
Dividend and Growth Fund .25%............................................. 59,971 1.017552 61,024
Smith Barney Shearson Daily Dividend, Inc. Qualified 1.00%................ 96,101 2.458044 236,221
Smith Barney Shearson Daily Dividend, Inc. Non-Qualified 1.00%............ 161,059 2.543759 409,695
Smith Barney Shearson Appreciation Fund, Inc. Qualified 1.00%............. 23,909 4.902844 117,221
Smith Barney Shearson Government and Agencies, Inc. Qualified 1.00%....... 21,677 2.218682 48,093
---------------
Sub-total Individual Sub-Accounts......................................... 3,940,473,954
---------------
GROUP SUB-ACCOUNTS:
Bond Fund Qualified 1.00% QP.............................................. 1,668,221 3.609357 6,021,205
Bond Fund 1.25% DCII...................................................... 1,122,768 3.499674 3,929,323
Bond Fund .15% DCII....................................................... 305,816 3.261226 997,336
Stock Fund Qualified 1.00% QP............................................. 4,283,748 6.985679 29,924,886
Stock Fund Qualified .825% QP............................................. 1,435,480 5.600682 8,039,665
Stock Fund Non-Qualified 1.00% NQ......................................... 88,837 5.481096 486,923
Stock Fund Non-Qualified .825% NQ......................................... 890,205 5.610519 4,994,510
Stock Fund 1.25% DCII..................................................... 3,884,750 6.771260 26,304,653
Stock Fund .15% DCII...................................................... 858,147 5.201059 4,463,271
Money Market Fund Qualified .375% QP...................................... 2,095 2.802645 5,871
Money Market Fund 1.25% DCII.............................................. 905,063 2.511791 2,273,329
Money Market Fund .15% DCII............................................... 265,801 2.416025 642,182
Advisers Fund 1.25% DCII.................................................. 8,279,212 2.875723 23,808,720
Advisers Fund .15% DCII................................................... 528,996 3.268187 1,728,857
U.S. Government Money Market Fund 1.25% DCII.............................. 483,107 1.758459 849,524
U.S. Government Money Market Fund .15% DCII............................... 37,301 2.003628 74,738
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
30
<PAGE>
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ---------- ---------------
GROUP SUB-ACCOUNTS -- (CONTINUED)
<S> <C> <C> <C>
Aggressive Growth Fund 1.25% DCII......................................... 6,922,578 $ 4.256870 $ 29,468,515
Aggressive Growth Fund .15% DCII.......................................... 599,956 4.785486 2,871,082
Mortgage Securities Fund 1.25% DCII....................................... 993,777 2.033647 2,020,991
Mortgage Securities Fund .15% DCII........................................ 78,285 2.268923 177,623
Index Fund 1.25% DCII..................................................... 2,375,877 1.737856 4,128,933
Index Fund .15% DCII...................................................... 216,621 1.875849 406,348
International Opportunities Fund 1.25% DCII............................... 3,640,068 1.181488 4,300,697
International Opportunities Fund .15% DCII................................ 333,919 1.241199 414,460
Socially Responsive Fund 1.25% DCII....................................... 692,817 1.417414 982,008
---------------
Sub-total Group Sub-Accounts.............................................. 159,315,650
---------------
TOTAL ACCUMULATION PERIOD................................................... 4,099,789,604
---------------
ANNUITY CONTRACTS IN THE ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Non-Qualified 1.00%............................................. 704 3.034781 2,138
Bond Fund 1.25%........................................................... 129,039 1.606681 207,325
Stock Fund Non-Qualified 1.00%............................................ 7,925 3.994491 31,657
Stock Fund 1.25%.......................................................... 191,847 2.180436 418,310
Money Market Fund Qualified 1.00%......................................... 20,342 2.261057 45,994
Money Market Fund Non-Qualified 1.00%..................................... 129,600 2.262124 293,172
Money Market Fund 1.25%................................................... 434,331 1.462471 635,196
Advisers Fund Qualified 1.00%............................................. 5,523 2.959828 16,347
Advisers Fund Non-Qualified 1.00%......................................... 75,862 2.959828 224,538
Advisers Fund 1.25%....................................................... 786,775 1.990804 1,566,314
U.S. Government Money Market Fund Qualified 1.00%......................... 25,034 1.810814 45,331
Aggressive Growth Fund Non-Qualified 1.00%................................ 5,273 4.366578 23,026
Aggressive Growth Fund 1.25%.............................................. 53,426 2.615288 139,725
Mortgage Securities Fund Qualified 1.00%.................................. 8,740 2.084988 18,223
Mortgage Securities Fund Non-Qualified 1.00%.............................. 118,956 2.084988 248,021
Mortgage Securities Fund 1.25%............................................ 82,741 1.636791 135,429
Index Fund 1.25%.......................................................... 26,043 1.749714 45,568
International Opportunities Fund 1.25%.................................... 132,984 1.181321 157,097
---------------
Sub-total Individual Sub-Accounts......................................... 4,253,411
---------------
GROUP SUB-ACCOUNTS:
Bond Fund Qualified 1.00% QP.............................................. 91,006 3.609357 328,473
Bond Fund 1.25% DCII...................................................... 308,096 3.499674 1,078,236
Bond Fund 1.00% DCII...................................................... 14,445 3.595086 51,932
Stock Fund Qualified 1.00% QP............................................. 233,773 6.985679 1,633,062
Stock Fund Qualified .825% QP............................................. 54,011 5.600682 302,500
Stock Fund Non-Qualified 1.00% NQ......................................... 728 5.481096 3,988
Stock Fund Non-Qualified .825% NQ......................................... 65,133 5.610519 365,428
Stock Fund 1.25% DCII..................................................... 964,557 6.771260 6,531,268
Stock Fund 1.00% DCII..................................................... 4,948 6.963798 34,458
Stock Fund .15% DCII...................................................... 3,585 5.201059 18,646
Money Market Fund 1.25% DCII.............................................. 178,327 2.511791 447,919
Advisers Fund 1.25% DCII.................................................. 1,609,483 2.875723 4,628,427
Advisers Fund .15% DCII................................................... 24,841 3.268187 81,184
U.S. Government Money Market Fund 1.25% DCII.............................. 77,431 1.758459 136,159
Aggressive Growth Fund 1.25% DCII......................................... 402,001 4.256870 1,711,264
Mortgage Securities Fund 1.25% DCII....................................... 129,833 2.033647 264,035
Index Fund 1.25% DCII..................................................... 399,168 1.737856 693,697
International Opportunities Fund 1.25% DCII............................... 98,542 1.181488 116,426
Socially Responsive Fund 1.25% DCII....................................... 29,864 1.417414 42,330
---------------
Sub-total Group Sub-Accounts.............................................. 18,469,432
---------------
TOTAL ANNUITY PERIOD........................................................ 22,722,843
---------------
GRAND TOTAL................................................................. $ 4,122,512,447
---------------
---------------
</TABLE>
31
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
MONEY MONEY MARKET
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends........................ $ 10,129,126 $ 13,298,486 $8,730,379 $ 57,979,079 $ 42,603
EXPENSES:
Mortality and expense
undertakings................... (1,981,904) (7,426,331) (2,661,371) (21,578,163) (13,685)
------------ ------------ ----------- -------------- -------------
Net investment income (loss)... 8,147,222 5,872,155 6,069,008 36,400,916 28,918
------------ ------------ ----------- -------------- -------------
Capital gains income............. 3,020,067 34,722,942 -- 47,447,226 --
------------ ------------ ----------- -------------- -------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
security transactions.......... (421,917) (203,916) -- 414,315 --
Net unrealized appreciation
(depreciation) of investments
during the period.............. (19,519,205) (59,765,259) -- (154,737,742) --
------------ ------------ ----------- -------------- -------------
Net gains (losses) on
investments.................. (19,941,122) (59,969,175) -- (154,323,427) --
------------ ------------ ----------- -------------- -------------
Net increase (decrease) in net
assets resulting from
operations................... $ (8,773,833) $(19,374,078) $6,069,008 $ (70,475,285) $ 28,918
------------ ------------ ----------- -------------- -------------
------------ ------------ ----------- -------------- -------------
</TABLE>
* From Inception, March 8, 1994, to December 31, 1994.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
32
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE DIVIDEND
AGGRESSIVE SECURITIES INTERNATIONAL AND GROWTH
GROWTH FUND FUND INDEX FUND OPPORTUNITIES FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
--------------- ------------- ------------- ------------------ -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends........................ $ 2,216,268 $ 15,801,876 $ 2,259,862 $ 3,567,586 $ 419,546
EXPENSES:
Mortality and expense
undertakings................... (6,812,975) (2,897,906) (1,104,316) (3,151,951) (135,382)
--------------- ------------- ------------- ------------------ -----------
Net investment income (loss)... (4,596,707) 12,903,970 1,155,546 415,635 284,164
--------------- ------------- ------------- ------------------ -----------
Capital gains income............. 42,093,901 1,176,728 -- -- --
--------------- ------------- ------------- ------------------ -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
security transactions.......... 316,913 (2,117,604) 177,595 (38,119) 1,622
Net unrealized appreciation
(depreciation) of investments
during the period.............. (28,599,970) (19,218,450) (1,319,890) (9,418,006) (486,442)
--------------- ------------- ------------- ------------------ -----------
Net gains (losses) on
investments.................. (28,283,057) (21,336,054) (1,142,295) (9,456,125) (484,820)
--------------- ------------- ------------- ------------------ -----------
Net increase (decrease) in net
assets resulting from
operations................... $ 9,214,137 $ (7,255,356) $ 13,251 $(9,040,490) $ (200,656)
--------------- ------------- ------------- ------------------ -----------
--------------- ------------- ------------- ------------------ -----------
<CAPTION>
SMITH SMITH BARNEY
BARNEY SHEARSON
SHEARSON SMITH BARNEY GOVERNMENT
DAILY SHEARSON AND
SOCIALLY DIVIDEND APPRECIATION AGENCIES
RESPONSIVE FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends........................ $ 31,623 $24,231 $ 1,969 $ 1,757
EXPENSES:
Mortality and expense
undertakings................... (11,158) (6,845) (1,226) (488)
--------------- ----------- ------------- ------------
Net investment income (loss)... 20,465 17,386 743 1,269
--------------- ----------- ------------- ------------
Capital gains income............. -- -- 6,550 --
--------------- ----------- ------------- ------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
security transactions.......... (180) -- (476) --
Net unrealized appreciation
(depreciation) of investments
during the period.............. (59,462) -- (9,210) --
--------------- ----------- ------------- ------------
Net gains (losses) on
investments.................. (59,642) -- (9,686) --
--------------- ----------- ------------- ------------
Net increase (decrease) in net
assets resulting from
operations................... $ (39,177) $17,386 $(2,393) $ 1,269
--------------- ----------- ------------- ------------
--------------- ----------- ------------- ------------
</TABLE>
33
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
MONEY MONEY MARKET
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 8,147,222 $ 5,872,155 $ 6,069,008 $ 36,400,916 $ 28,918
Capital gains income............. 3,020,067 34,722,942 -- 47,447,226 --
Net realized gain (loss) on
security transactions.......... (421,917) (203,916) -- 414,315 --
Net unrealized appreciation
(depreciation) of investments
during the period.............. (19,519,205) (59,765,259) -- (154,737,742) --
------------ ------------ ----------- --------------- -------------
Net increase (decrease) in net
assets resulting from
operations..................... (8,773,833) (19,374,078) 6,069,008 (70,475,285) 28,918
------------ ------------ ----------- --------------- -------------
UNIT TRANSACTIONS:
Purchases........................ 29,721,918 105,127,448 72,433,601 419,190,064 205,153
Net transfers.................... (10,176,062) 20,445,965 10,951,538 14,104,761 (151,291)
Surrenders....................... (11,477,200) (25,527,779) (33,930,464) (88,886,489) (65,287)
Net annuity transactions......... 284,001 1,000,538 596,459 2,114,613 (29,641)
------------ ------------ ----------- --------------- -------------
Net increase (decrease) in net
assets resulting from unit
transactions................... 8,352,657 101,046,172 50,051,134 346,522,949 (41,066)
------------ ------------ ----------- --------------- -------------
Total increase (decrease) in net
assets......................... (421,176) 81,672,094 56,120,142 276,047,664 (12,148)
NET ASSETS:
Beginning of period.............. 159,909,323 564,430,371 185,569,101 1,525,033,248 1,223,749
------------ ------------ ----------- --------------- -------------
End of period.................... $159,488,147 $646,102,465 $241,689,243 $ 1,801,080,912 $1,211,601
------------ ------------ ----------- --------------- -------------
------------ ------------ ----------- --------------- -------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1993
<CAPTION>
U.S.
GOVERNMENT
MONEY MONEY MARKET
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 7,572,358 $ 8,308,344 $ 2,813,416 $ 25,701,741 $ 18,672
Capital gains income............. 99,084 18,638,665 -- 20,817,465 --
Net realized gain (loss) on
security transactions.......... 215,618 447,050 -- 182,805 --
Net unrealized appreciation
(depreciation) of investments
during the period.............. 1,690,700 30,785,479 -- 65,119,250 --
------------ ------------ ----------- --------------- -------------
Net increase (decrease) in net
assets resulting from
operations..................... 9,577,760 58,179,538 2,813,416 111,821,261 18,672
------------ ------------ ----------- --------------- -------------
UNIT TRANSACTIONS:
Purchases........................ 64,035,095 163,937,277 83,799,945 714,972,050 194,811
Net transfers.................... 4,924,354 25,227,185 (35,854,970) 105,616,425 (65,248)
Surrenders....................... (6,989,348) (15,906,440) (25,784,152) (50,149,218) (212,373)
Net annuity transactions......... 343,986 669,968 118,488 968,114 72,905
------------ ------------ ----------- --------------- -------------
Net increase (decrease) in net
assets resulting from unit
transactions................... 62,314,087 173,927,990 22,279,311 771,407,371 (9,905)
------------ ------------ ----------- --------------- -------------
Total increase (decrease) in net
assets......................... 71,891,847 232,107,528 25,092,727 883,228,632 8,767
NET ASSETS:
Beginning of period.............. 88,017,476 332,322,843 160,476,376 641,804,616 1,214,982
------------ ------------ ----------- --------------- -------------
End of period.................... $159,909,323 $564,430,371 $185,569,101 $ 1,525,033,248 $1,223,749
------------ ------------ ----------- --------------- -------------
------------ ------------ ----------- --------------- -------------
</TABLE>
* From Inception, March 8, 1994, to December 31, 1994.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
34
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
MORTGAGE
AGGRESSIVE SECURITIES INTERNATIONAL DIVIDEND AND
GROWTH FUND FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
--------------- ------------- ------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ (4,596,707) $ 12,903,970 $ 1,155,546 $ 415,635 $ 284,164
Capital gains income............. 42,093,901 1,176,728 -- -- --
Net realized gain (loss) on
security transactions.......... 316,913 (2,117,604) 177,595 (38,119) 1,622
Net unrealized appreciation
(depreciation) of investments
during the period.............. (28,599,970) (19,218,450) (1,319,890) (9,418,006) (486,442)
--------------- ------------- ------------- ------------------ ------------
Net increase (decrease) in net
assets resulting from
operations..................... 9,214,137 (7,255,356) 13,251 (9,040,490) (200,656)
--------------- ------------- ------------- ------------------ ------------
UNIT TRANSACTIONS:
Purchases........................ 147,740,784 19,118,960 11,954,835 93,762,262 13,185,613
Net transfers.................... 33,684,129 (49,453,490) (438,563) 55,977,196 17,422,326
Surrenders....................... (18,517,067) (20,146,010) (3,246,522) (7,306,583) (551,979)
Net annuity transactions......... 396,915 137,102 59,473 (104,557) --
--------------- ------------- ------------- ------------------ ------------
Net increase (decrease) in net
assets resulting from unit
transactions................... 163,304,761 (50,343,438) 8,329,223 142,328,318 30,055,960
--------------- ------------- ------------- ------------------ ------------
Total increase (decrease) in net
assets......................... 172,518,898 (57,598,794) 8,342,474 133,287,828 29,855,304
NET ASSETS:
Beginning of period.............. 459,950,031 271,115,397 86,041,578 167,591,795 --
--------------- ------------- ------------- ------------------ ------------
End of period.................... $ 632,468,929 $213,516,603 $94,384,052 $ 300,879,623 $29,855,304
--------------- ------------- ------------- ------------------ ------------
--------------- ------------- ------------- ------------------ ------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1993
<CAPTION>
MORTGAGE
AGGRESSIVE SECURITIES INTERNATIONAL DIVIDEND AND
GROWTH FUND FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
--------------- ------------- ------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 1,600,110 $ 12,652,275 $ 799,021 $ (291,109) $ 14,203
Capital gains income............. 3,197,599 -- -- -- --
Net realized gain (loss) on
security transactions.......... 1,188,667 109,955 25,192 (11,820) (75)
Net unrealized appreciation
(depreciation) of investments
during the period.............. 49,594,313 (1,569,545) 4,591,529 23,588,342 26,706
--------------- ------------- ------------- ------------------ ------------
Net increase (decrease) in net
assets resulting from
operations..................... 55,580,689 11,192,685 5,415,742 23,285,413 40,834
--------------- ------------- ------------- ------------------ ------------
UNIT TRANSACTIONS:
Purchases........................ 195,275,139 95,499,459 30,471,477 67,601,208 302,593
Net transfers.................... 22,666,403 (19,922,573) 879,825 46,857,348 1,511
Surrenders....................... (8,251,678) (18,992,076) (2,314,111) (1,636,768) (44,747)
Net annuity transactions......... 576,660 (52,421) 30,208 268,086 4,631
--------------- ------------- ------------- ------------------ ------------
Net increase (decrease) in net
assets resulting from unit
transactions................... 210,266,524 56,532,389 29,067,399 113,089,874 263,988
--------------- ------------- ------------- ------------------ ------------
Total increase (decrease) in net
assets......................... 265,847,213 67,725,074 34,483,141 136,375,287 304,822
NET ASSETS:
Beginning of period.............. 194,102,818 203,390,323 51,558,437 31,216,508 473,039
--------------- ------------- ------------- ------------------ ------------
End of period.................... $ 459,950,031 $271,115,397 $86,041,578 $ 167,591,795 $ 777,861
--------------- ------------- ------------- ------------------ ------------
--------------- ------------- ------------- ------------------ ------------
<CAPTION>
SMITH BARNEY
SHEARSON
SMITH BARNEY SMITH BARNEY GOVERNMENT
SHEARSON SHEARSON AND
SOCIALLY DAILY APPRECIATION AGENCIES
RESPONSIVE FUND DIVIDEND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 20,465 $ 17,386 $ 743 $ 1,269
Capital gains income............. -- -- 6,550 --
Net realized gain (loss) on
security transactions.......... (180) -- (476) --
Net unrealized appreciation
(depreciation) of investments
during the period.............. (59,462) -- (9,210) --
--------------- ------------- ------------- ------------
Net increase (decrease) in net
assets resulting from
operations..................... (39,177) 17,386 (2,393) 1,269
--------------- ------------- ------------- ------------
UNIT TRANSACTIONS:
Purchases........................ 376,701 -- 50 --
Net transfers.................... (75,712) (18,624) 2,681 --
Surrenders....................... (19,945) (84,827) (2,515) (6,354)
Net annuity transactions......... 4,610 -- -- --
--------------- ------------- ------------- ------------
Net increase (decrease) in net
assets resulting from unit
transactions................... 285,654 (103,451) 216 (6,354)
--------------- ------------- ------------- ------------
Total increase (decrease) in net
assets......................... 246,477 (86,065) (2,177) (5,085)
NET ASSETS:
Beginning of period.............. 777,861 731,981 119,398 53,178
--------------- ------------- ------------- ------------
End of period.................... $1,024,338 $ 645,916 $117,221 $ 48,093
--------------- ------------- ------------- ------------
--------------- ------------- ------------- ------------
SMITH BARNEY
SHEARSON
SMITH BARNEY SMITH BARNEY GOVERNMENT
SHEARSON SHEARSON AND
SOCIALLY DAILY APPRECIATION AGENCIES
RESPONSIVE FUND DIVIDEND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 13,390 $ 459 $ 1,816 $ 901
Capital gains income............. -- 3,734 -- --
Net realized gain (loss) on
security transactions.......... -- 234 (1,362) --
Net unrealized appreciation
(depreciation) of investments
during the period.............. -- 3,565 4,504 --
--------------- ------------- ------------- ------------
Net increase (decrease) in net
assets resulting from
operations..................... 13,390 7,992 4,958 901
--------------- ------------- ------------- ------------
UNIT TRANSACTIONS:
Purchases........................ -- 50 -- --
Net transfers.................... (89,601) -- -- --
Surrenders....................... (5,845) (1,830) (55,563) (4,573)
Net annuity transactions......... -- -- -- --
--------------- ------------- ------------- ------------
Net increase (decrease) in net
assets resulting from unit
transactions................... (95,446) (1,780) (55,563) (4,573)
--------------- ------------- ------------- ------------
Total increase (decrease) in net
assets......................... (82,056) 6,212 (50,605) (3,672)
NET ASSETS:
Beginning of period.............. 814,037 113,186 50,605 56,850
--------------- ------------- ------------- ------------
End of period.................... $ 731,981 $ 119,398 $-- $ 53,178
--------------- ------------- ------------- ------------
--------------- ------------- ------------- ------------
</TABLE>
35
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. ORGANIZATION:
Separate Account Two (the Account) is a separate investment account within
Hartford Life 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.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date.
b) SECURITY VALUATION--The investment in shares of the Hartford, Shearson
and Calvert Socially Responsive Series mutual funds are valued at the
closing net asset value per share as determined by the appropriate Fund
as of December 31, 1994.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no
federal income taxes are payable with respect to the operations of the
Account.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS--The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives a maximum annual fee of 1.25% of
the Account's average daily net assets.
b) DEDUCTION OF ANNUAL MAINTENANCE FEE--Annual maintenance fees are
deducted through termination of units of interest from applicable
contract owners' accounts, in accordance with the terms of the contracts.
36
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Hartford
Life Insurance Company (a Connecticut corporation and wholly-owned subsidiary
of Hartford Life and Accident Insurance Company) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of
income, stockholder's equity and cash flows for each of the three years in
the period ended December 31, 1994. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Hartford Life Insurance Company and subsidiaries as of
December 31, 1994 and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles.
As discussed in the accompanying notes to the consolidated financial
statements, the Company adopted new accounting standards promulgated by the
Financial Accounting Standards Board, changing its methods of accounting
as of January 1, 1994, for debt and equity securities, and effective
January 1, 1992, for postretirement benefits other than pensions and
postemployment benefits.
Hartford, Connecticut
January 30, 1995 Arthur Andersen LLP
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Hartford Life
Insurance Company (a Connecticut corporation and wholly-owned subsidiary of
Hartford Life and Accident Insurance Company) and subsidiaries as of December
31, 1994 and 1993, and the related consolidated statements of income,
stockholder's equity and cash flow for each of the three years in the period
ended December 31, 1994. These consolidated financial statements and the
schedules referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and schedules 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Hartford Life Insurance Company and subsidiaries as of December 31, 1994 and
1993, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
As discussed in the accompanying notes to the consolidated financial statements,
the Company adopted new accounting standards promulgated by the Financial
Accounting Standards Board, changing its methods of accounting, as of January 1,
1994, for debt and equity securities, and, effective January 1, 1992, for
postretirement benefits other than pensions and postemployment benefits.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules listed in the
Index to Consolidated Financial Statements and Schedules are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not a required part of the basic consolidated financial statements. These
schedules have been subjected to the auditing procedures applied in the audits
of the basic consolidated financial statements and, in our opinion, fairly
state in all material respects the financial data required to be set forth
therein in relation to the basic consolidated financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 30, 1995
F-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1994 1993 1992
<S> <C> <C> <C>
REVENUES:
Premiums and other considerations $1,100 $ 747 $ 259
Net investment income 1,292 1,051 907
Net realized gains on investments 7 16 5
------ ------ ------
2,399 1,814 1,171
BENEFITS, CLAIMS AND EXPENSES:
Benefits, claims and claim
adjustment expenses 1,405 1,046 797
Amortization of deferred policy
acquisition costs 145 113 55
Dividends to policyholders 419 227 47
Other insurance expenses 227 210 138
------ ------ ------
2,196 1,596 1,037
INCOME BEFORE INCOME TAX AND
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES 203 218 134
Income tax expense 65 75 45
------ ------ ------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES 138 143 89
Cumulative effect of changes in
accounting principles net of tax benefit of $7 - - (13)
------ ------ ------
NET INCOME $ 138 $ 143 $ 76
------ ------ ------
------ ------ ------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-3
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1994 1993
-------- --------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, available for sale, at fair
value in 1994 and at amortized cost in 1993
(amortized cost, $14,464 in 1994; fair
value, $12,845 in 1993) $13,429 $12,597
Equity securities, at fair value 68 90
Mortgage loans, at outstanding principal balance 316 228
Policy loans, at outstanding balance 2,614 1,397
Other investments 107 40
------- -------
16,534 14,352
Cash 20 1
Premiums and amounts receivable 160 327
Reinsurance recoverable 5,466 5,532
Accrued investment income 378 241
Deferred policy acquisition costs 1,809 1,334
Deferred income tax 590 114
Other assets 83 101
Separate account assets 22,809 16,284
------- -------
$47,849 $38,286
------- -------
------- -------
LIABILITIES AND STOCKHOLDER'S EQUITY
Future policy benefits $1,890 $1,659
Other policyholder funds 21,328 18,234
Other liabilities 1,000 916
Separate account liabilities 22,809 16,284
------- -------
47,027 37,093
Common stock - authorized 1,000 shares, $5,690
par value, issued and outstanding 1,000 shares 6 6
Capital surplus 826 676
Unrealized losses on securities, net of tax (654) (5)
Retained earnings 644 516
------- -------
822 1,193
------- -------
$47,849 $38,286
------- -------
------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
UNREALIZED
GAINS(LOSSES) TOTAL
COMMON CAPITAL ON RETAINED STOCKHOLDER'S
STOCK SURPLUS SECURITIES EARNINGS EQUITY
----- ------- ---------- -------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1991 $ 6 $ 439 $ 1 $ 297 $ 743
Net Income 76 76
Capital Contribution - 25 - - 25
Excess of assets over liabilities on
reinsurance assumed from affiliate - 34 - - 34
Change in unrealized losses on equity
securities, net of tax - - (1) - (1)
------ ------- ------- ------- -------
BALANCE, DECEMBER 31, 1992 6 498 0 373 877
------ ------- ------- ------- -------
Net Income - - - 143 143
Capital Contribution - 180 - - 180
Excess of assets over liabilities on
reinsurance assumed from affiliate - (2) - - (2)
Change in unrealized losses on equity
securities, net of tax - - (5) - (5)
------ ------- ------- ------- -------
BALANCE, DECEMBER 31, 1993 6 676 (5) 516 1,193
------ ------- ------- ------- -------
Net Income - - - 138 138
Capital Contribution - 150 - - 150
Dividends Paid - - - (10) (10)
Change in unrealized losses on securities,
net of tax * - - (649) - (649)
------ ------- ------- ------- -------
BALANCE, DECEMBER 31, 1994 $ 6 $ 826 $ (654) $ 644 $ 822
------ ------- ------- ------- -------
------ ------- ------- ------- -------
<FN>
* The 1994 change in unrealized losses on securities, net of tax, includes a
gain of $91 due to adoption of SFAS #115 as discussed in note 1b to the
consolidated financial statements.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-5
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASHFLOW
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
NET INCOME $ 138 $ 143 $ 76
Cumulative effect of accounting changes - - 13
Adjustments to net income:
Net realized investment gains before tax (7) (16) (5)
Net policyholder investment losses
(gains) before tax 5 (15) (15)
Net deferred policy acquisition costs (441) (292) (278)
Net amortization of premium (discount) on
fixed maturities 41 2 (16)
Deferred income tax benefits (128) (121) (14)
(Increase) decrease in premiums and
amounts receivable 10 (28) (14)
Increase in accrued investment income (106) (4) (116)
Decrease(increase) in other assets 101 (36) 88
Decrease(increase) in reinsurance
recoverable 75 (121) 0
Increase in liability for future policy
benefits 224 360 527
Increase in other liabilities 191 176 92
-------- --------- --------
CASH PROVIDED BY OPERATING ACTIVITIES 103 48 338
-------- --------- --------
INVESTING ACTIVITIES:
Purchases of fixed maturity investments (9,127) (12,406) (8,948)
Proceeds from sales of fixed maturity
investments 5,708 8,813 5,728
Maturities and principal paydowns of
long-term investments 1,931 2,596 1,207
Net purchases of other investments (1,338) (206) (106)
Net sales (purchases) of short-term
investments 135 (564) 221
-------- --------- --------
CASH USED FOR INVESTING ACTIVITIES (2,691) (1,767) (1,898)
-------- --------- --------
FINANCING ACTIVITIES:
Net receipts from investment and UL-type
contracts credited to policyholder account
balances 2,467 1,513 1,512
Capital contribution 150 180 25
Excess of assets over liabilities on
reinsurance assumed from affiliate - - 34
Dividends paid (10) - -
-------- --------- --------
CASH PROVIDED BY FINANCING
ACTIVITIES 2,607 1,693 1,571
-------- --------- --------
NET INCREASE(DECREASE) IN CASH 19 (26) 11
Cash at beginning of period 1 27 16
-------- --------- --------
CASH AT END OF PERIOD $ 20 $ 1 $ 27
-------- --------- --------
-------- --------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-6
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS)
1. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION:
These consolidated financial statements include Hartford Life
Insurance Company (the Company or HLIC) and its wholly-owned
subsidiaries, ITT Hartford Life and Annuity Company (ILA) and ITT
Hartford International Life Reassurance Corporation (HLR), formerly
American Skandia Life Reinsurance Corporation. HLIC is a wholly-owned
subsidiary of Hartford Life and Accident Insurance Company (HLA).
The Company is ultimately owned by Hartford Fire Insurance Company
(Hartford Fire), which is ultimately owned by ITT Hartford Group,
Inc., a subsidiary of ITT Corporation (ITT).
The consolidated financial statements are prepared in conformity with
generally accepted accounting principles which differ in certain
material respects from the accounting practices prescribed or
permitted by various insurance regulatory authorities.
Certain reclassifications have been made to prior year financial
statements to conform to current year classifications.
(B) CHANGES IN ACCOUNTING PRINCIPLES:
Effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS)No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions" and SFAS No. 112,
Employers' Accounting for Postemployment Benefits", using the
immediate recognition method. Accordingly, a cumulative adjustment
(through December 31, 1991) of $7 after-tax has been recognized at
January 1, 1992.
Effective January 1, 1994, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities".
The new standard requires, among other things, 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 effect those
intentions. The classification determines the appropriate accounting
carrying value (cost basis or fair value) and, in the case of fair
value, whether the adjustment impacts Stockholder's Equity directly or
is reflected in the Consolidated Statements of Income. Investments in
equity securities had previously been recorded at fair value with the
corresponding impact included in Stockholder's Equity. Under SFAS No.
115, the Company's fixed maturities are classified as "available for
sale" and accordingly, these investments are reflected at fair value
with the corresponding impact included as a component of Stockholder's
Equity designated as "Unrealized Loss on Securities, Net of Tax."
As with the underlying investment security, unrealized gains and
losses on derivative financial instruments are considered in
determining the fair value of the portfolios. The impact of adoption
was an increase to stockholder's equity of $91.
The Company's cash flows were not impacted by these changes in
accounting principles.
(C) REVENUE RECOGNITION:
Revenues for universal life policies and investment products consist
of policy charges for the cost of insurance,
F-7
<PAGE>
policy administration and surrender charges assessed to policy account
balances. Premiums for traditional life insurance policies are
recognized as revenues when they are due from policyholders. Deferred
acquisition costs are amortized using the retrospective deposit method
for universal life and other types of contracts where the payment
pattern is irregular or surrender charges are a significant source of
profit and the prospective deposit method is used where investment
margins are the primary source of profit.
(D) FUTURE POLICY BENEFITS AND OTHER POLICYHOLDER FUNDS:
Liabilities for future policy benefits are computed by the net level
premium method using interest rate assumptions varying from 3% to 11%
and withdrawal, mortality and morbidity assumptions which vary by
plan, year of issue and policy durations and include a provision for
adverse deviation. Liabilities for universal life insurance and
investment products represent policy account balances before
applicable surrender charges.
(E) POLICYHOLDER REALIZED GAINS AND LOSSES:
Realized gains and losses on security transactions associated with the
Company's immediate participation guaranteed contracts are excluded
from revenues, since under the terms of the contracts the realized
gains and losses will be credited to policyholders in future years as
they are entitled to receive them.
(F) DEFERRED POLICY ACQUISITION COSTS:
Policy acquisition costs, including commissions and certain
underwriting expenses associated with acquiring traditional life
insurance products, are deferred and amortized over the lesser of the
estimated or actual contract life. For universal life insurance and
investment products, acquisition costs are being amortized generally
in proportion to the present value of expected gross profits from
surrender charges, investment, mortality and expense margins.
(G) INVESTMENTS:
Investments in fixed maturities are classified as available for sale
and accordingly reflected at fair value with the corresponding impact
of unrealized gains and losses, net of tax, included as a component of
stockholder's equity. Securities and derivative instruments,
including swaps, caps, floors, futures, forward commitments and
collars, are based on dealer quotes or quoted market prices for the
same or similar securities. While the Company has the ability and
intent to hold all fixed income securities until maturity, due to
contract obligations, interest rates and tax laws, portfolio activity
occurs. These trades are motivated by the need to optimally position
investment portfolios in reaction to movements in capital markets or
distribution of policyholder liabilities. When an other than temporary
reduction in the value of publicly traded securities occurs, the
decrease is reported as a realized loss and the carrying value is
adjusted accordingly. Real estate is carried at cost less accumulated
depreciation. Equity securities, which include common stocks, are
carried at market value with the after-tax difference from cost
reflected in stockholder's equity. Realized investment gains and
losses, after deducting life and pension policyholders share are
reported as a component of revenue and are determined on a specific
identification basis.
(H) DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses a variety of derivative financial instruments as part
of an overall risk management strategy. These instruments, including
swaps, caps, collars and exchange traded financial futures, are used
as a means of hedging exposure to price, foreign currency and/or
interest rate risk on planned investment purchases or existing assets
and liabilities. The Company does not hold or issue derivative
financial instruments for trading purposes. The Company's minimum
correlation threshold for hedge designation is 80%. If correlation,
which is assessed monthly and measured based on a rolling three month
average, falls below 80%, hedge accounting will be terminated. Gains
or losses on futures purchased in anticipation of the future receipt
of product cash flows are deferred and, at the time of the ultimate
purchase, reflected as a basis adjustment to the purchased asset.
Gains or losses on futures used in invested asset risk management are
deferred and adjusted into the basis of the hedged asset when the
contract is closed. The basis adjustments are amortized into
investment income over the remaining asset life.
F-8
<PAGE>
Open forward commitment contracts are marked to market through
Stockholder's Equity. Such contracts are recorded at settlement by
recording the purchase of the specified securities at the previously
committed price. Gains or losses resulting from the termination of
the forward commitment contracts before the delivery of the securities
are recognized immediately in the income statement as a component of
investment income.
The Company's accounting for interest rate swaps and purchased or
written caps, floors, and options used to manage risk is in accordance
with the concepts established in SFAS 80, "Accounting for Futures
Contracts", the American Institute of Certified Public Accountants
Statement of Position 86-2, "Accounting for Options" and various EITF
pronouncements, except for written options which are written in all
cases in conjunction with other assets and derivatives as part of an
overall risk management strategy. Such synthetic instruments are
accounted for as hedges. Derivatives, used as part of a risk
management strategy, must be designated at inception and have
consistency of terms between the synthetic instrument and the
financial instrument being replicated. Synthetic instrument
accounting, consistent with industry practice, provides that the
synthetic asset is accounted for like the financial instrument it is
intended to replicate. Interest rate swaps and purchased or written
caps, floors and options which fail to meet management criteria are
accounted for at fair market value with the impact reflected in net
income.
Interest rate swaps involve the periodic exchange of payments without
the exchange of underlying principal or notional amounts. Net
payments are recognized as an adjustment to income. Should the swap
be terminated, the gains or losses are adjusted into the basis of the
asset or liability and amortized over the remaining life. The basis
of the underlying asset or liability is adjusted to reflect changing
market conditions such as prepayment experience. Should the asset be
sold or liability terminated, the gains or losses on the terminated
position are immediately recognized in earnings. Interest rate swaps
purchased in anticipation of an asset purchase ("anticipatory
transaction") are recognized consistent with the underlying asset
components. That is, the settlement component is recognized in the
Statement of Income while the change in market is recognized as an
unrealized gain or loss.
Premiums paid on purchased floor or cap agreements and the premium
received on issued cap or floor agreements used for risk management,
as well as the net payments, are adjusted into the basis of the
applicable asset and amortized over the asset life. Gains or losses
on termination of such positions are adjusted into the basis of the
asset or liability and amortized over the remaining asset life.
Forward exchange contracts and foreign currency swaps are accounted
for in accordance with SFAS 52. Changes in the spot rate of
instruments designated as hedges of the net investment in a foreign
subsidiary are reflected in the cumulative translation adjustment
component of stockholder's equity.
(I) RELATED PARTY TRANSACTIONS:
Transactions of the Company with its parent and affiliates relate
principally to tax settlements, insurance coverage, rental and service
fees and payment of dividends and capital contributions. 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 expenses, are initially paid by Hartford Fire. Direct
expenses are allocated to the Company using specific identification
and indirect expenses are allocated using other applicable methods.
The rent paid to Hartford Fire for the space occupied by the Company
was $3 in 1994, 1993, and 1992 respectively. The Company expects to
pay rent of $3 in 1995, 1996, 1997,1998, and 1999 respectively and
$60 thereafter, over the contract life of the lease.
See also Note (4) for the related party coinsurance agreements.
F-9
<PAGE>
2. INVESTMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Interest income $1,247 $1,007 $894
Income from other investments 54 53 15
------ ------ ------
GROSS INVESTMENT INCOME 1,301 1,060 909
Less: investment expenses 9 9 2
------ ------ ------
NET INVESTMENT INCOME $1,292 $1,051 $907
------ ------ ------
------ ------ ------
</TABLE>
(B) UNREALIZED GAINS (LOSSES) ON EQUITY SECURITIES:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gross unrealized gains $ 2 $ 3 $ 2
Gross unrealized losses (11) (11) (2)
Deferred income tax expense (benefit) (3) (3) 0
------ ------ ------
NET UNREALIZED LOSSES AFTER TAX (6) (5) 0
Balance at beginning of year (5) 0 1
------ ------ ------
CHANGE IN NET UNREALIZED LOSSES ON
EQUITY SECURITIES $ (1) $ (5) $(1)
------ ------ ------
------ ------ ------
</TABLE>
(C) UNREALIZED GAINS (LOSSES) ON FIXED MATURITIES:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gross unrealized gains $ 150 $ 538 $ 521
Gross unrealized losses (1,185) (290) (302)
-------- ------ ------
NET UNREALIZED (LOSSES) GAINS (1,035) 248 219
Unrealized losses credited to policyholders 37 0 0
Deferred income tax expense (benefit) (350) 87 75
-------- ------ ------
NET UNREALIZED (LOSSES) GAINS AFTER TAX (648) 161 144
Balance at beginning of year 161 144 297
-------- ------ ------
CHANGE IN NET UNREALIZED (LOSSES)GAINS ON
FIXED MATURITIES $ (809) $ 17 $(153)
-------- ------ ------
-------- ------ ------
</TABLE>
(D) COMPONENTS OF NET REALIZED GAINS:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Fixed maturities $(34) $(12) $20
Equity securities (11) 0 3
Real estate and other 47 43 (3)
Less: (decrease)increase in liability
to policyholders for realized gains (5) 15 15
------ ------ ------
NET REALIZED GAINS $ 7 $ 16 $ 5
------ ------ ------
------ ------ ------
</TABLE>
F-10
<PAGE>
(E) DERIVATIVE INVESTMENTS:
A summary of investments, segregated by major category along with the
types of derivatives and their respective notional amounts, are as
follows as of December 31, 1994 :
<TABLE>
<CAPTION>
SUMMARY OF INVESTMENTS
AS OF DECEMBER 31, 1994
(CARRYING AMOUNTS)
ISSUED CAPS, PURCHASED
TOTAL CARRYING NON- FLOORS & CAPS, FLOORS FUTURES SWAPS
VALUE DERIVATIVE OPTIONS (B) & OPTIONS (C) (D) (F)
-------------- ---------- ------------ ------------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Asset Backed Securities $5,670 $5,690 $(31) $24 $0 $(13)
Inverse Floaters (A) 474 482 (9) 4 0 (3)
Anticipatory (E) (30) 0 0 2 0 (32)
-------- ------- ------ ------ ------ ------
TOTAL ASSET BACKED SECURITIES 6,114 6,172 (40) 30 0 (48)
Other Bonds and Notes 6,533 6,606 0 0 0 (73)
Short-Term Investments 782 782 0 0 0 0
-------- ------- ------ ------ ------ ------
TOTAL FIXED MATURITIES 13,429 13,560 (40) 30 0 (121)
Other Investments 3,105 3,105 0 0 0 0
-------- ------- ------ ------ ------ ------
TOTAL INVESTMENTS $16,534 $16,665 $(40) $30 $0 $(121)
-------- ------- ------ ------ ------ ------
-------- ------- ------ ------ ------ ------
</TABLE>
SUMMARY OF INVESTMENTS IN DERIVATIVES
AS OF DECEMBER 31, 1994
(NOTIONAL AMOUNTS)
<TABLE>
<CAPTION>
ISSUED CAPS, PURCHASED
TOTAL NOTIONAL FLOORS, & CAPS, FLOORS, FUTURES SWAPS
AMOUNT OPTIONS (B) & OPTIONS (C) (D) (F)
-------------- ------------ ------------- -------- ------
<S> <C> <C> <C> <C> <C>
Asset Backed Securities $4,244 $1,311 $2,546 $75 $312
Inverse Floaters (A) 1,129 277 63 3 786
Anticipatory (E) 835 0 209 101 525
------- ------- ------- ------- -------
TOTAL ASSET BACKED 6,208 1,588 2,818 179 1,623
Other Bonds and Notes 670 0 72 74 524
Short-Term Investments 0 0 0 0 0
------- ------- ------- ------- -------
TOTAL FIXED MATURITIES 6,878 1,588 2,890 253 2,147
Other Investments 16 0 3 0 13
------- ------- ------- ------- -------
TOTAL INVESTMENTS $6,894 $1,588 $2,893 $253 $2,160
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
F-11
<PAGE>
A summary of the notional and fair value of derivatives with off Balance Sheet
risk as of December 31, 1993 is as follows:
<TABLE>
<CAPTION>
ISSUED SWAPS, CAPS
FLOORS AND COLLARS FUTURES FORWARDS TOTAL
------------------ ------- -------- -----
<S> <C> <C> <C> <C>
Notional $7,015 $1,792 $91 $8,898
Fair Value $(4) $0 $1 $(3)
</TABLE>
(A) Inverse floaters, which are variations of CMO's for which the coupon
rates move inversely with an index rate (e.g. LIBOR). The risk to
principal is considered negligible as the underlying collateral for
the securities is guaranteed or sponsored by government agencies. To
address the volatility risk created by the coupon variability, the
Company uses a variety of derivative instruments, primarily interest
rate swaps and issued floors.
(B) Comprised primarily of caps ($1,459) with a weighted average strike
rate of 7.7% (ranging from 6.8% to 10.2%). Over 70% mature in 1997
and 1998. Issued floors total $125 with a weighted average strike
rate of 8.3% and mature in 2004.
(C) Comprised of purchased floors ($1,856), purchased options and collars
($633) and purchased caps ($404). The floors have a weighted average
strike price of 5.8% (ranging from 4.8% and 6.6%) and over 85% mature
in 1997 and 1998. The options and collars generally mature in 1995
and 2002. The caps have a weighted average strike price of 7.2%
(ranging from 4.5% and 8.9%) and over 66% mature in 1997 through
1999.
(D) Over 95% of futures contracts expire before December 31, 1995.
(E) Deferred gains and losses on anticipatory transactions are included in
the carrying value of bond investments in the consolidated balance
sheets. At the time of the ultimate purchase, they are reflected as
a basis adjustment to the purchased asset. At December 31, 1994,
these were $(33) million in net deferred losses for futures, interest
rate swaps and purchased options.
(F) The following table summarizes the maturities of interest rate and
foreign currency swaps outstanding at December 31, 1994 and the
related weighted average interest pay rate or receive rate assuming
current market conditions:
MATURITY OF SWAPS ON INVESTMENTS AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
MATURITY
DERIVATIVE TYPE 1995 1996 1997 1998 1999 2000+ TOTAL LAST
--------------- ---- ---- ---- ---- ---- ----- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST RATE SWAPS:
PAY FIXED/RECEIVE VARIABLE:
Notional Value $0 $15 $50 $0 $446 $268 $779 2004
Weighted Average Pay Rate 0.0% 5.0% 7.2% 0.0% 8.2% 7.8% 7.9%
Weighted Average Receive Rate 0.0% 6.4% 5.7% 0.0% 7.5% 6.5% 7.0%
PAY VARIABLE/RECEIVE FIXED:
Notional Value $311 $50 $100 $25 $175 $100 $761 2002
Weighted Average Pay Rate 5.1% 5.3% 5.5% 5.3% 5.4% 6.0% 5.4%
Weighted Average Receive Rate 8.0% 8.0% 7.5% 4.0% 4.5% 7.2% 6.9%
PAY VARIABLE/RECEIVE DIFFERENT VARIABLE:
Notional Value $95 $50 $18 $15 $5 $232 $415 2005
Weighted Average Pay Rate 4.2% 6.4% 6.8% 6.2% 0.0% 6.0% 5.7%
Weighted Average Receive Rate 9.1% 6.3% 9.5% 6.4% 0.0% 6.3% 7.1%
TOTAL INTEREST RATE SWAPS $406 $115 $168 $40 $626 $600 $1,955 2004
Total Weighted Average Pay Rate 4.9% 5.7% 6.1% 5.6% 7.4% 6.8% 6.5%
Total Weighted Average Receive Rate 8.2% 7.1% 7.2% 4.9% 6.7% 6.5% 7.0%
FOREIGN CURRENCY SWAPS $35 $46 $29 $15 $10 $70 $205 2002
TOTAL SWAPS $441 $161 $197 $55 $636 $670 $2,160 2005
</TABLE>
F-12
<PAGE>
In addition to risk management through derivative financial
instruments pertaining to the investment portfolio, interest rate
sensitivity related to certain Company liabilities was altered
primarily through interest rate swap agreements. The notional amount
of the liability agreements in which the Company generally pays one
variable rate in exchange for another, was $1.7 billion and $1.3
billion at December 31, 1994 and 1993 respectively. The weighted
average pay rate is 6.2%; the weighted average receive rate is 6.6% ,
and these agreements mature at various times through 2004.
(F) CONCENTRATION OF CREDIT RISK:
The Company has a reinsurance recoverable of $4.4 billion from
Mutual Benefit Life Assurance Corporation (Mutual Benefit). The risk
of Mutual Benefit becoming insolvent is mitigated by the reinsurance
agreement's requirement that the assets be kept in a security trust
with the Company as sole beneficiary. Excluding investments in U.S.
government and agencies, the Company has no other significant
concentrations of credit risk.
The Company currently owns $39.2 million par value of Orange County,
California Pension Obligation Bonds, $17.1 million of which it
continues to carry as available for sale under FASB 115 and $22.1
million which are included in the Separate Account Assets. While
Orange County is currently operating under Protection of Chapter 9 of
the Federal Bankruptcy Laws, the Company believes it is probable that
it will collect all amounts due under the contractual terms of the
bonds and that the bonds are not permanently or other than temporarily
impaired.
As of December 31, 1994 the Company owned $66.1 million of Mexican
bonds, $52.3 million of which are payable in Mexican pesos but are
fully hedged back to U.S. dollars, and $13.8 million of U.S. Dollar
Denomination Mexican bonds. The primary risks associated with these
securities is a default by the Mexican government or imposition of
currency controls that prevent conversion of Mexican pesos to U.S.
dollars. The Company believes both of these risks are remote.
(G) FIXED MATURITIES:
The schedule below details the amortized cost and fair values of the
Company's fixed maturities by component, along with the gross
unrealized gains and losses:
<TABLE>
<CAPTION>
1994
----
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
--------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Government and government
agencies and authorities:
- guaranteed and sponsored $1,516 $1 $(87) $1,430
- guaranteed and sponsored
- asset backed 4,256 78 (571) 3,763
States, municipalities and
political subdivisions 148 1 (12) 137
International governments 189 1 (14) 176
Public utilities 531 1 (32) 500
All other corporate 3,717 38 (297) 3,458
All other corporate
- asset backed 2,442 30 (121) 2,351
Short-term investments 1,665 0 (51) 1,614
------- ----- -------- -------
TOTAL $14,464 $150 $(1,185) $13,429
------- ----- -------- -------
------- ----- -------- -------
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
1993
----
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
U.S. Government and government
agencies and authorities:
- guaranteed and sponsored $ 1,637 $ 15 $ (12) $ 1,640
- guaranteed and sponsored
- asset backed 4,070 235 (219) 4,086
States, municipalities and
political subdivisions 73 9 0 82
International governments 100 5 (3) 102
Public utilities 423 20 (2) 441
All other corporate 3,598 180 (42) 3,736
All other corporate
- asset backed 1,806 74 (12) 1,868
Short-term investments 890 0 0 890
-------- ------- -------- --------
TOTAL $12,597 $ 538 $ (290) $12,845
-------- ------- -------- --------
-------- ------- -------- --------
</TABLE>
The amortized cost and estimated fair value of fixed maturity
investments at December 31, 1994, by maturity, are shown below. Asset
backed securities are distributed to maturity year based on the
Company's estimate of the rate of future prepayments of principal over
the remaining life of the securities. Expected maturities differ from
contractual maturities reflecting the borrowers' rights to call or
prepay their obligations.
<TABLE>
<CAPTION>
AMORTIZED COST ESTIMATED FAIR VALUE
-------------- --------------------
MATURITY
--------
<S> <C> <C>
Due in one year or less $ 2,214 $ 2,183
Due after one year through five years 7,000 6,647
Due after five years through ten years 3,678 3,334
Due after ten years 1,572 1,265
--------- ---------
$14,464 $13,429
--------- ---------
--------- ---------
</TABLE>
Sales of fixed maturities excluding short-term fixed maturities for
the years ended 1994, 1993, and 1992 resulted in proceeds of $5,708,
$8,813, and $5,728, respectively, resulting in gross realized gains of
$71, $192, and $140, and gross realized losses of $100, $219, and
$135, respectively, not including policyholder gains and losses.
Sales of equity securities and other investments for the years ended
December 31, 1994, 1993, and 1992 resulted in proceeds of $159, $127
and $7, respectively, resulting in gross realized gains of $3, $0, and
$3, and gross realized losses of $14, $0, and $0, respectively, not
including policyholder gains and losses.
F-14
<PAGE>
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS NOT DISCLOSED ELSEWHERE :
BALANCE SHEET ITEMS:
<TABLE>
<CAPTION>
1994 1993
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- ------ -------- ------
<S> <C> <C> <C> <C>
ASSETS
Other invested assets:
Policy loans $2,614 $2,614 $1,397 $1,397
Mortgage loans 316 316 228 228
Investments in partnership
and trusts 36 42 14 34
Miscellaneous 67 67 22 63
LIABILITIES
Other policy claims and
benefits $13,001 $12,374 $11,140 $11,415
</TABLE>
The following methods and assumptions were used to estimate the fair
value of each class of financial instrument:policy and mortgage loan
carrying amounts approximate fair value; investments in partnerships
and trusts are based on external market valuations from partnership
and trust management; and other policy claims and benefits payable are
determined by estimating future cash flows discounted at the current
market rate.
3. INCOME TAX
The Company is included in ITT's consolidated U.S. Federal income tax
return and remits to (receives from) ITT a current income tax
provision (benefit) computed in accordance with the tax sharing
arrangements between ITTand its insurance subsidiaries. The
effective tax rate was 32% in 1994, and approximates the U.S.
statutory tax rates of 35% in 1993 and 34% in 1992. The provision for
income taxes was as follows:
<TABLE>
<CAPTION>
INCOME TAX EXPENSE:
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current $185 $ $ 190 $ $ 124
Deferred (120) (115) (79)
------- -------- --------
$ 65 $ $ 75 $ $ 45
------- -------- --------
------- -------- --------
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
TAX PROVISION AT U.S. STATUTORY RATE $71 $76 $46
Tax-exempt income (3) 0 0
Foreign tax credit (1) 0 0
Other (2) (1) (1)
----- ----- -----
PROVISION FOR INCOME TAX $ 65 $75 $45
----- ----- -----
----- ----- -----
</TABLE>
Income taxes paid were $ 244 , $301 and $36 in 1994, 1993, and 1992
respectively. The current taxes due from or (to) Hartford Fire were $46,
and $19 in 1994 and 1993 respectively.
Deferred tax assets include the following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Tax deferred acquisition cost $284 $158
Book deferred acquisition costs and reserves (134) (30)
Employee benefits 7 7
Unrealized loss on "available for sale"
securities 353 3
Investments and other 80 (24)
------- -------
$590 $114
------- -------
------- -------
</TABLE>
Prior to the Tax Reform Act of 1984, the Life Insurance Company Income Tax
Act of 1959 permitted the deferral from taxation of a portion of statutory
income under certain circumstances. In these situations, the deferred
income was accumulated in a "Policyholders' Surplus Account" and will be
taxable in the future only under conditions which management considers to
be remote; therefore, no Federal income taxes have been provided on this
deferred income. The balance for tax return purposes of the Policyholders'
Surplus Account as of December 31, 1994 was $24.
4. REINSURANCE
The Company cedes insurance to non-affiliated insurers in order to limit
its maximum loss. Such transfer does not relieve the Company of its
primary liability. The Company also assumes insurance from other
insurers. Group life and accident and health insurance business is
substantially reinsured to affiliated companies.
Life insurance net retained premiums were comprised of the following:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gross premiums $1,316 $1,135 $680
Reinsurance assumed 299 93 30
Reinsurance ceded 515 481 451
------- ------- -----
NET RETAINED PREMIUMS $1,100 $747 $259
------- ------- -----
------- ------- -----
</TABLE>
F-16
<PAGE>
Life reinsurance recoveries, which reduced death and other benefits, for
the years ended December 31, 1994, 1993 and 1992 approximated $164, $149,
and $73, respectively.
In December 1994, the Company assumed from a third party approximately
$500 million of corporate owned life insurance reserves on a coinsurance
basis. Also in December 1994, ILA ceded to ITT Lyndon Insurance Company
$1 billion in individual fixed and variable annuities on a modified
coinsurance basis. These transactions did not have a material impact on
consolidated net income.
In October 1994, HLR recaptured approximately $500 million of corporate
owned life insurance from a third party reinsurer. Subsequent to this
transaction, HLIC and HLR restructured their coinsurance agreement from
coinsurance to modified coinsurance, with the assets and policy liabilities
placed in the separate account. In May 1994, HLIC assumed and reinsured
the life insurance policies and the individual annuities of Pacific
Standard with reserves and account values of approximately $400 million.
The Company received cash and investment grade assets to support the life
insurance and individual annuity contract obligations assumed.
In June 1993, the Company assumed and partially reinsured the annuity, life
and accident and sickness insurance policies of Fidelity Bankers Life
Insurance Company in Receivership for Conservation and Rehabilitation, with
account values of $3.2 billion. The Company received cash and investment
grade assets to assume insurance and annuity contract obligations.
Substantially all of these contracts were placed in the Company's separate
accounts.
In November 1993, ILA acquired, through an assumption reinsurance
transaction, substantially all of the individual fixed and variable annuity
business of HLA. As a result of this transaction, the assets and
liabilities of the company increased approximately $1 billion. The excess
of liabilities assumed over assets received, of $2, was recorded as a
decrease to capital surplus. The impact on consolidated net income was not
significant.
On November 4, 1992, the Company entered into a definitive agreement
whereby the Company assumed the contract obligations of Mutual Benefit Life
Assurance Corporation's (Mutual Benefit) individual corporate owned life
insurance (COLI) contracts. The Company received $5.6 billion in cash and
invested assets, $5.3 billion of which were policy loans, from Mutual
Benefit for assuming the contract obligations. Simultaneously, the Company
coinsured approximately 84% of the contract obligations back to Mutual
Benefit, HLR and an unaffiliated reinsurer. In August 1993, the Company
received assets of $300 million for assuming the group COLI contract
obligations of Mutual Benefit, through an assumption reinsurance
transaction. Under the terms of the agreement, the Company coinsured back
75% of the liabilities to Mutual Benefit. All assets supporting Mutual
Benefit's reinsurance liability to HLIC are placed in a "security trust",
with Hartford Life as the sole beneficiary. The impact on 1992
consolidated net income was not significant.
In 1992, all ordinary individual life insurance written and in force in
HLA was assumed by HLIC. As a result of this transaction, the assets of
HLIC increased by approximately $437, liabilities increased approximately
$403. The excess of assets over liabilities of $34 was recorded as an
increase in capital.
5. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The Company's employees are included in Hartford Fire's noncontributory
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 Company'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 and the
maximum amount that can be deducted for Federal income tax purposes.
Generally, pension costs are funded through the purchase of the Company's
group pension contracts. The cost to the Company was approximately $2, $3
and $2 in 1994, 1993 and 1992, respectively.
The Company provides certain health care and life insurance benefits for
eligible retired employees. A substantial portion of the Company's
employees may become eligible for these benefits upon retirement.
Effective January 1, 1992, the Company adopted SFAS No. 106, using the
immediate recognition method for all benefits accumulated to date. As of
June 1992, the Company amended its plans, effective January 1, 1993,
whereby the Company's contribution for health care benefits will depend on
the retiree's date of retirement and years of service. In addition, the
plan amendments increased deductibles and set a defined dollar cap which
F-17
<PAGE>
limits average company contributions. The effect of these changes is not
material. The Company 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 by Hartford Fire, was $1, $1,
and $1, for 1994, 1993, and 1992 respectively.
The assumed rate of future increases in the per capita cost of health care
(the health care trendrate) was 11% for 1994, decreasing ratably to 6 %
in the year 2001. 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. The assumed weighted average
discount rate was 8.5%. To the extent that the actual experience differs
from the inherent assumptions, the effect will be amortized over the
average future service of the covered employees.
6. BUSINESS SEGMENT INFORMATION
The reportable segments and product groups of HLIC and its subsidiaries are:
INDIVIDUAL LIFE AND ANNUITIES (ILAD)
-Individual life
-Fixed and variable retirement annuities
ASSET MANAGEMENT SERVICES (AMS)
-Group Pension Plans products and services
-Deferred Compensation Plans products and services
-Structured Settlements and lottery annuities
SPECIALTY
-Corporate Owned Life Insurance (COLI) and HLR
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
REVENUES:
ILAD $691 $595 $305
AMS 789 794 770
Specialty 919 425 96
------- ------- -------
$2,399 $1,814 $1,171
------- ------- -------
------- ------- -------
INCOME BEFORE INCOME TAX:
ILAD $139 $129 $73
AMS 38 71 56
Specialty 26 18 5
------- ------- -------
$203 $218 $134
------- ------- -------
------- ------- -------
IDENTIFIABLE ASSETS:
ILAD $26,668 $19,147 $9,474
AMS 13,334 12,416 11,198
Specialty 7,847 6,723 5,910
------- ------- -------
$47,849 $ 38,286 $ 26,582
------- ------- -------
------- ------- -------
</TABLE>
7. STATUTORY NET INCOME AND SURPLUS
Substantially all of the statutory surplus is permanently reinvested or is
subject to dividend restrictions relating to various state regulations
which limit the payment of dividends without prior approval.
Statutory net income and surplus as of December 31 were:
F-18
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory net income $58 $63 $65
Statutory surplus $941 $812 $614
</TABLE>
The Company prepares its statutory financial statements in accordance with
accounting practices prescribed by the State of Connecticut Insurance
Department. Prescribed statutory accounting practices include publications
of the National Association of Insurance Commissioners ("NAIC"), as well as
state laws, regulations, and general administrative rules.
8. SEPARATE ACCOUNTS:
The Company maintains separate account assets and liabilities totaling
$22.8 billion and $16.3 billion at December 31, 1994 and 1993, respectively
which are reported at fair value. Separate account assets are segregated
from other investments and are not subject to claims that arise out of any
other business of the Company. Investment income and gains and losses of
separate accounts accrue directly to the policyholder. Separate accounts
reflect two categories of risk assumption: non-guaranteed separate
accounts totaling $14.8 billion and $11.5 billion at December 31, 1994 and
1993, respectively, wherein the policyholder assumes the investment risk,
and guaranteed separate account assets totaling $8.0 billion and $4.8
billion at December 31, 1994 and 1993, respectively, wherein the Company
contractually guarantees either a minimum return or account value to the
policyholder. Investment income (including investment gains and losses) on
separate account assets are not reflected in the Consolidated Statements of
Income. Separate account management fees, net of minimum guarantees, were
$256, $189, and $92, in 1994, 1993, and 1992, respectively.
The guaranteed separate accounts include modified guaranteed individual
annuity, and modified guaranteed life insurance. The average credit
interest rate on these contracts is 6.44%. The assets that support these
liabilities are comprised of $7.5 billion in bonds and $.5 billion in
policy loans. The portfolios are segregated from other investments and
are managed so as to minimize liquidity and interest rate risk. In order
to minimize the risk of disintermediation associated with early
withdrawals, individual annuity and modified guaranteed life insurance
contracts carry a graded surrender charge as well as a market value
adjustment. Additional investment risk is hedged using a variety of
derivatives which total $(16.2) million in carrying value and $3.2 billion
in notional amounts.
9. COMMITMENTS AND CONTINGENCIES
In August 1994, HLIC renewed a two year note purchase facility agreement
which in certain instances obligates the Company to purchase up to $100
million in collateralized notes from a third party. The Company is
receiving fees for this commitment. At December 31, 1994, the Company has
not purchased any notes under this agreement.
In March 1987, HLIC guaranteed the commercial mortgages (principal and
accrued interest) that were sold under a pooling and servicing agreement of
the same date. Mortgages aggregating approximately $53.0million were sold
in this transaction, and the remaining balance on these loans is $21.1
million. There was no impact on operations due to this guarantee.
Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed up to prescribed limits for policyholder losses
incurred by insolvent companies. The amount of any future assessments on
HLIC under these laws cannot be reasonably estimated. Most of these laws
do provide, however, that an assessment may be excused or deferred if it
would threaten an insurer's own financial strength. Additionally, guaranty
fund assessments are used to reduce state premium taxes paid by the Company
in certain states.
The Company is involved in various legal actions, some of which involve
claims for substantial amounts. In the opinion of management the ultimate
liability with respect to such lawsuits, as well as other contingencies, is
not considered material in relation to the consolidated financial position
of the Company.
F-19
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
(b) (1) A copy of the resolution authorizing the Separate Account is
filedwith this Registration Statement.
(2) Not applicable. HL maintains custody of all assets.
(3) Principal Underwriting Agreement is filed herewith.
(4) Form of Sales Agreement is filed herewith.
(5) Form of Group Variable Annuity Contract is filed herewith.
(6) (a) Restated Certificate of Incorporation of Hartford Life
Insurance Company dated February 10, 1982 is filed herewith.
Bylaws of Hartford Life Insurance Company are filed
herewith.
(7) Not applicable.
(8) Not applicable.
(9) Not applicable.
(10) Consent of Arthur Andersen LLP is filed herewith.
(11) Not applicable.
(12) Not applicable.
(13) Schedule of Performance Data is filed herewith.
(14) Fund Participation Agreement is filed herewith.
<PAGE>
-2-
Item 25. Directors and Officers of the Depositor
Louis J. Abdou Vice President
David H. Annis Vice President
Paul J. Boldischar, Jr. Vice President
Wendell J. Bossen Vice President
Peter W. Cummins Vice President
Juliana B. Dalton Vice President
Ann M. deRaismes Vice President
Allen Douma, M.D. Medical Director
Donald R. Frahm Chairman & CEO
Bruce D. Gardner General Counsel & Secretary
Joseph H. Gareau Executive Vice President & Chief Investment
Officer
Richard J. Garrett Vice President & Treasurer
John P. Ginnetti Executive Vice President and Director Asset
Management Services
Lynda Godkin Assistant General Counsel & Secretary
Lois W. Grady Vice President
David A. Hall Senior Vice President & Actuary
Joseph Kanarek Vice President
Kevin J. Kirk Vice President
Andrew W. Kohnke Vice President
<PAGE>
-3-
Stephen M. Maher Vice President & Actuary
William B. Malchodi, Jr. Vice President & Director of Taxes
Thomas M. Marra Senior Vice President & Actuary and Director
Individual Life and Annuity Division
David J. McDonald Senior Vice President
Kevin A. North Vice President
Joseph J. Noto Vice President
Leonard E. Odell, Jr. Senior Vice President
Michael C. O'Halloran Vice President & Senior Associate General
Counsel
Craig R. Raymond Vice President & Chief Actuary
Lowndes A. Smith President & Chief Operating Officer
Edward J. Sweeney Vice President
James E. Trimble Vice President & Actuary
Raymond P. Welnicki Senior Vice President
James T. Westervelt Senior Vice President & Group Comptroller
Lizabeth H. Zlatkus Vice President
Donald J. Znamierowski Vice President
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Exhibit 26 is filed herewith.
Item 27. Number of Contract Owners
<PAGE>
-4-
As of December 31, 1994, there were ____ Contract Owners of qualified
contracts and ____ Contract Owners of non-qualified Contracts.
Item 28. Indemnification
Under Section 33-320a of the Connecticut General Statutes, the
Registrant must indemnify a director or officer against judgments,
fines, penalties, amounts paid in settlement and reasonable expenses,
including attorneys' fees, for actions brought or threatened to be
brought against him in his capacity as a director or officer when it
is determined by certain disinterested parties that he acted in good
faith and in a manner he reasonably believed to be in the best
interests of the Registrant. In any criminal action or proceeding, it
also must be determined that the director or officer had no reason to
believe his conduct was unlawful. The director or officer must also
be indemnified when he is successful on the merits in the defense of a
proceeding or in circumstances where a court determines that he is
fairly and reasonably entitled to be indemnified, and the court
approves the amount. In shareholder derivative suits, the director or
officer must be finally adjudged not to have breached his duty to the
Registrant or a court must determine that he is fairly and reasonably
entitled to be indemnified and must approve the amount. In a claim
based upon the director's or officer's purchase or sale of the
Registrant's securities, the director of officer may obtain
indemnification only if a court determines that, in view of all the
circumstances, he is fairly and reasonably entitled to be indemnified,
and then for such amount as the court shall determine.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-320a.
The directors and officers of HL and HESCO are covered under a
directors and officers liability insurance policy issued to ITT
Corporation and its subsidiaries. Such policy will reimburse the
Registrant for any payments that it shall make to directors and
officers pursuant to law and will, subject to certain exclusions
contained in the policy, further pay any other costs, charges and
expenses and settlements and judgments arising from any proceeding
involving any director or officer of the Registrant in his past or
present capacity as such, and for which he may be liable, except as to
any liabilities arising from acts that are deemed to be uninsurable.
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, 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
<PAGE>
-5-
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 29. Principal Underwriters
(a) HESCO acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - DC Variable Account
Separate Account Two (Variable Account "A")
Separate Account Two (QP Variable Account)
Separate Account Two (NQ Variable Account)
Separate Account One
Separate Account Two (Director II)
STAG VLI Separate Account
Putnam Capital Manager Trust Separate Account
Hartford Money Market Fund, Inc.
Hartford Life and Accident Insurance Company - Separate Account One
Hartford Life and Accident Insurance Company -
Putnam Capital Manager Separate Account One
ITT Hartford Life and Annuity Insurance Company - Separate Account
One
ITT Hartford Life and Annuity Insurance Company -
Putnam Capital Manager Separate Account Two
<PAGE>
-6-
(b) Directors and Officers of HESCO
Name and Principal Positions and Offices
Business Address With Underwriter
------------------ ---------------------
Donald E. Waggaman, Jr. Treasurer
Bruce D. Gardner Secretary
George R. Jay Controller
Lowndes A. Smith President
Item 30. Location of Accounts and Records
Accounts and records are maintained by HL.
Item 31. Management Services
None
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure
that the audited financial statements in the registration statement
are never more than 16 months old so long as payments under the
variable annuity contracts may be accepted.
(b) The Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space
that an applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written communication
affixed to or included in the Prospectus that the applicant can remove
to send for a Statement of Additional Information.
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to be
made available under this Form promptly upon written or oral request.
The Registrant is relying on the no-action letter issued by the Division of
Investment Management to American Council of Life Insurance, Ref. No. IP-6-88,
November 28, 1988. The Registrant has complied with the four provisions of the
no-action letter.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(a) under the
Securities Act of 1933 and duly caused this Registration Statement to be signed
on its behalf, in the City of Hartford, and State of Connecticut on this 10th
day of May, 1995.
HARTFORD LIFE INSURANCE COMPANY -
SEPARATE ACCOUNT TWO (DC VARIABLE ACCOUNT II)
(Registrant)
*By:
----------------------------------------
John P. Ginnetti, Senior Vice President
HARTFORD LIFE INSURANCE COMPANY *By: /s/ Rodney J. Vessels
(Depositor) -------------------------
Rodney J. Vessels
Attorney-in-Fact
*By:
----------------------------------------
John P. Ginnetti, Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons and in the capacities and on
the dates indicated.
Donald R. Frahm, Chairman and
Chief Executive Officer, Director *
Bruce D. Gardner, General Counsel
Corporate Secretary, Director *
Joseph H. Gareau, Executive Vice
President and Chief Investment
Officer, Director *
John P. Ginnetti, Senior Vice
President, Director *
Thomas M. Marra, Senior Vice *By: /s/ Rodney J. Vessels
President, Director * -------------------------
Leonard E. Odell, Jr., Senior Rodney J. Vessels
Vice President, Director * Attorney-In-Fact
Lowndes A. Smith, President,
Chief Operating Officer, Dated: May 10, 1995
Director * -----------------------
Raymond P. Welnicki, Senior Vice
President, Director *
Lizabeth H. Zlatkus, Vice President
Director *
Donald J. Znamierowski, Vice President
Comptroller, Director *
<PAGE>
EXHIBIT 1
CERTIFICATION
I, John P. Ginnetti, Secretary of Hartford Life Insurance Company,
hereby certify that the attached is a true copy of a resolution adopted by
the Board of Directors of said Company on June 2, 1986.
/s/ John P. Ginnetti
-----------------------
June 13, 1986
112M
<PAGE>
EXHIBIT 1
HARTFORD LIFE INSURANCE COMPANY
CONSENT
The undersigned, being all of the Directors of Hartford Life Insurance
Company, hereby consent to the following resolution, such action to have the
same force and effect as if taken at a meeting duly called and held for such
purpose:
RESOLVED, That Hartford Life Insurance Company is hereby authorized to
establish a new separate account to be designated "Separate Account
Two" (the "Account") and to issue variable annuity contracts with
reserves for such contracts being segregated in such Account.
FURTHER RESOLVED, That the officers of Hartford Life Insurance Company
are hereby authorized and directed to take all actions necessary to:
(1) Comply with applicable state and federal laws and regulations
applicable to the establishment and operation of the Account;
(2) Establish, from time to time, the terms and conditions pursuant to
which interests in the Account will be sold to contract owners;
(3) Establish all procedures, standards and arrangements necessary or
appropriate for the operation of the Account including, but not
limited to, the establishment of the investment policies of the
Account; and
(4) Transfer funds to the Account, up to a maximum of $100,000 to
provide for its effecient operation, all on such terms and for such
periods as said officers deem to be necessary or appropriate.
/s/ EDWARD N. BENNETT /s/ R. FRED RICHARDSON
------------------------------------- ------------------------------------
Edward N. Bennett R. Fred Richardson
/s/ JOEL P. BRIGHTMAN /s/ LOWNDES A. SMITH
------------------------------------- ------------------------------------
Joel P. Brightman Lowndes A. Smith
/s/ LARRY K. LANCE /s/ DONALD R. SANDERGELD
------------------------------------- ------------------------------------
Larry K. Lance Donald R. Sandergeld
/s/ DEROY C. THOMAS
------------------------------
DeRoy C. Thomas
Dated: June 2, 1986
lll8r/11Z
<PAGE>
EXHIBIT (b)3
PRINCIPAL UNDERWRITER AGREEMENT
THIS AGREEMENT, dated as of the 1st day of April, 1988, made by and
between HARTFORD LIFE INSURANCE COMPANY ("the Hartford"), a corporation
organized and existing under the laws of the State of Connecticut, and
HARTFORD EQUITY SALES COMPANY, INC. ("HESCO"), a corporation organized and
existing under the laws of the State of Connecticut,
WITNESSETH:
WHEREAS, the Board of Directors of the Hartford has made provision for
the establishment of separate accounts within the Hartford in accordance with
the laws of the State of Connecticut, which separate accounts were organized
and are established and registered as unit investment trust investment
companies with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and which are designated Hartford Life
Insurance Company DC Variable Account-I, Hartford Life Insurance Company
Separate Account Two (DC Variable Account-II), Hartford Life Insurance
company Separate Account Two (Variable Account A), Hartford Life Insurance
Company Separate Account Two (QP Variable Account) and Hartford Life
Insurance Company Separate Account Two (NQ Variable Account), (referred to
collectively as the "Separate Accounts"); and
WHEREAS, HESCO offers to the public certain Individual and Group Annuity
Contracts (the "Contracts") issued by the Hartford with respect to the
Separate Accounts and which are registered under the Securities Act of 1933,
as amended; and
WHEREAS, the Contracts authorize the Contract Owners of such Contracts
to direct that part or all of the net purchase payments to their Contract
shall be invested in shares of one or more of the underlying mutual funds
which are sponsored by the Hartford ("the Fund or Funds"). The Funds are
registered as open-end, diversified, management investment companies under
the Investment Company Act of 1940, as amended; and
WHEREAS, HESCO has previously agreed to act as distributor in connection
with offers and sales of the Contracts under the terms and conditions set forth
in this Distribution Agreement.
NOW THEREFORE, in consideration of the mutual agreements made herein, the
Hartford and HESCO agree as follows:
I.
HESCO'S DUTIES
1. HESCO, as principal underwriter for the Contracts, will use its best
efforts to effect offers and sales of the Contracts through broker-dealers
that are members of the National Association of Securities Dealers, Inc. and
whose registered representatives are duly licensed as insurance agents of the
Hartford. HESCO is responsible for compliance with all applicable
requirements of the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as
<PAGE>
-2-
amended, and the rules and regulations thereunder, and all other applicable
laws, rules and regulations thereunder, and all other applicable laws, rules
and regulations relating to the sales and distribution of the Contracts, the
need for which arises out of its duties as principal underwriter of said
Contracts and relating to the creation of the Separate Accounts.
2. HESCO agrees that it will not use any prospectus, sale literature,
or any other printed matter or material or offer for sale or sell any
Contract if any of the foregoing in any way represent the duties,
obligations, or liabilities of the Hartford as being greater than, or
different from, such duties, obligations and liabilities as are set forth in
this Agreement, as it may be amended from time to time.
3. HESCO agrees that it will utilize the then currently effective
prospectuses relating to the Separate Accounts' variable annuity contracts in
connection with its selling efforts.
As to the other types of sales materials, HESCO agrees that it will use
only sales materials which conform to the requirements of federal and state
insurance laws and regulations which have been filed, where necessary, with
the appropriate regulatory authorities.
4. HESCO agrees that it or its duly designated agent shall maintain
records of the name and address of, and the securities issued by the Separate
Accounts and held by, every holder of any security issued pursuant to this
Agreement, as required by Section 26(a)(4) of the Investment Company Act of
1940, as amended.
5. HESCO's services pursuant to this Agreement shall not be deemed to
be exclusive, and it may render similar services and act as an underwriter,
distributor, or dealer for other investment companies in the offering of
their shares.
6. In the absence of willful misfeasance, bad faith, gross negligence,
or reckless disregard of its obligations and duties hereunder on the part of
HESCO, HESCO shall not be subject to liability to the Separate Accounts or to
any Contract Owner or party in interest under a Contract for any act or
omission in the course, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
II.
1. The Separate Accounts reserve the right at any time to suspend or
limit the public offering of variable annuity contracts upon thirty days'
written notice to HESCO, except where the notice period may be shortened
because of legal action taken by any regulatory agency.
2. The Separate Accounts agree to advise HESCO immediately:
(a) Of any request by the Securities and Exchange Commission for
amendment of its Securities Act registration statements or for additional
information;
<PAGE>
-3-
(b) Of the issuance by the Securities and Exchange Commission of
any stop order suspending the effectiveness of the Securities Act
registration statement relating to the Separate Accounts or of the initiation
of any proceedings for that purpose;
(c) Of the happening of any material event, if known, which makes
untrue any statement in said Securities Act registration statements or which
requires change therein in order to make any statement therein not
misleading.
The Separate Accounts will furnish to HESCO such information with
respect to the Separate Accounts and the variable annuity contracts in such
form and signed by such of its officers and directors of the Separate
Accounts as HESCO may reasonably request and will warrant that the statements
therein contained when so signed will be true and correct. The Separate
Accounts will also furnish, from time to time, such additional information
regarding the Separate Accounts' financial condition as HESCO may reasonably
request.
III.
COMPENSATION
For providing the principal underwriting functions on behalf of the
Separate Accounts, HESCO shall be entitled to receive compensation as agreed
upon from time to time by the Hartford and HESCO.
IV.
RESIGNATION AND REMOVAL OF
PRINCIPAL UNDERWRITER
HESCO may resign as Principal Underwriter hereunder, upon 120 days'
prior written notice to the Hartford. However, such resignation shall not
become effective until either the Separate Accounts have been completely
liquidated and the proceeds of the liquidation distributed through the
Separate Accounts to the Contract Owners or a successor Principal Underwriter
has been designated and has accepted its duties.
V.
MISCELLANEOUS
1. This Agreement may not be assigned by any of the parties hereto
without the written consent of the other party.
2. All notices and other communications provided for hereunder shall be
in writing and shall be delivered by hand or mailed first class, postage
pre-paid, addressed as follows:
(a) If to the Hartford - Hartford Life Insurance Company, P.O. Box
2999, Hartford, Connecticut 06104-2999
(b) If to HESCO - Hartford Equity Sales Company, Inc., Hartford,
Connecticut 06104-2999
or to such other address as HESCO, or the Hartford shall designate by written
notice to the other.
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3. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original and all of which shall be deemed one
instrument, and an executed copy of this Agreement and all amendments hereto
shall be kept on file by the Hartford and shall be open to inspection at any
time during the business hours of the Hartford.
4. This Agreement shall inure to the benefit of and be binding upon the
successor of the parties hereto.
5. This Agreement shall be construed and governed by and according to
the laws of the State of Connecticut.
6. This Agreement may be amended from time to time by the mutual
agreement and consent of the parties hereto.
7. This Amended and Restated Agreement shall supersede all prior
agreements among the parties hereto relating to the same subject matter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
(SEAL) HARTFORD LIFE INSURANCE COMPANY
Attest:
/s/ JOHN P. GIANNETTI By: /s/
-------------------------------- -----------------------------
Vice President
HARTFORD EQUITY SALES COMPANY, INC.
(SEAL)
Attest:
/s/ JOHN P. GIANNETTI By: /s/
------------------------------
Vice President
2538s
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
(A STOCK INSURANCE COMPANY)
HARTFORD PLAZA, HARTFORD, CONNECTICUT 06115
GROUP ANNUITY CONTRACT
INDIVIDUALLY ALLOCATED
CONTRACTHOLDER
CONTRACT EFFECTIVE DATE
PLACE OF DELIVERY
CONTRACT NUMBER
THIS CONTRACT IS ISSUED IN CONSIDERATION OF THE APPLICATION OF THE
CONTRACTHOLDER, A COPY OF WHICH IS ATTACHED TO AND MADE A PART OF THIS
CONTRACT AND THE PAYMENT OF CONTRIBUTIONS IN ACCORDANCE WITH THE TERMS AND
CONDITIONS OF THE CONTRACT.
THIS CONTRACT IS SUBJECT TO THE LAWS OF THE JURISDICTION WHERE IT IS
DELIVERED.
THE CONDITIONS AND PROVISIONS OF THIS AND THE FOLLOWING PAGES ARE PART
OF THE CONTRACT.
THIS CONTRACT MAKES PROVISION FOR THE ACCUMULATION OF CONTRACT VALUES IN THE
GENERAL ACCOUNT OF THE INSURANCE COMPANY TO PROVIDE FIXED ANNUITY
ACCUMULATIONS AND BENEFITS AND IN A SEPARATE ACCOUNT OF THE INSURANCE COMPANY
TO PROVIDE VARIABLE ANNUITY ACCUMULATIONS AND BENEFITS. ACTUAL ANNUITY PAYOUT
COMMENCING ON THE ANNUITY COMMENCEMENT DATE MAY BE ON A VARIABLE BASIS
(SEPARATE ACCOUNT) AND/OR ON A FIXED BASIS (GENERAL ACCOUNT).
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. DETAILS OF THE VARIABLE PROVISIONS ARE DESCRIBED HEREIN.
INDIVIDUAL ALLOCATIONS - NONPARTICIPATING
SIGNED FOR THE HARTFORD
/s/ LON A. SMITH /s/ B. GARDNER
Lon A. Smith, President B. Gardner, Secretary
HL-14848 [LOGO]
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TABLE OF CONTENTS
SECTION STARTING ON PAGE
------- ----------------
1 Definitions 2
2 Contribution Provisions 5
3 Allocation of Contributions 9
4 Investment of Contributions 11
5 Payment of Benefits 14
6 Distribution Value and Limitation
on Transfers and Distributions 19
7 Minimum Required Distributions 20
8 Death Benefits 23
9 Settlement Options 25
10 Charges Against the Contract 31
11 Loans 35
12 General Provisions 38
13 Suspension and Termination Provisions 42
Following Last Section:
Annuity Purchase Rate Table A
Annuity Purchase Rate Table B
HL-14848
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SECTION 1
DEFINITIONS
1.1 ACCUMULATION PERIOD - The period under this Contract prior to the
Annuity Commencement Date.
1.2 ANNUITY COMMENCEMENT DATE - The date on which annuity payments are
scheduled to begin as described under Sections 5 and 9 of this Contract.
1.3 ANNUITY PERIOD - The period in the Contract, following the Accumulation
Period, during which actual annuity payments are made.
1.4 BENEFICIARY - The person(s) designated to receive Participant Individual
Account values in the event of the Participant's death.
1.5 CODE - The Internal Revenue Code of 1986 and any amendments thereto.
1.6 CONTRACT - The Contract is group annuity Contract GA - <
issued by the Insurance Company.
1.7 CONTRACTHOLDER - The Contractholder is < .
1.8 CONTRACT YEAR - A period of 12 months commencing with the effective
date of this contract or with any contract anniversary.
1.9 DATE OF COVERAGE - the date on which the application on behalf of an
Eligible Employee is received in good order by the Insurance Company.
1.10 ELECTIVE DEFERRAL - With respect to any taxable year of a Participant,
the Elective Deferral is the sum of all employer contributions made on
behalf of such Participant pursuant to an election to defer under
(1) any qualified cash or deferred arrangements as described in section
401(k) of the Code, (2) any simplified employee pension cash or deferred
arrangement as described in section 402(h)(1)(B) of the Code, (3) any
eligible deferred compensation plan under section 457 of the Code,
(4) any plan as described under section 501(c)(18) of the Code, and
(5) an annuity contract satisfying section 403(b) of the Code.
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1.11 ELIGIBLE EMPLOYEE - Any employee who is employed by the Employer.
Notwithstanding the foregoing, an Eligible Employee does not include an
employee who is customarily employed on a part-time, temporary, or
irregular basis for less than 20 hours per week. An Eligible Employee
also does not include a person whose employment is incidental to his or
her education program.
1.12 EMPLOYER - The term Employer means < .
1.13 FUND - The Funds described on the Contract Specification page which
are included in the Separate Account and such other Funds as may be
added to the Separate Account as they become available.
1.14 GENERAL ACCOUNT - That portion of the Contract invested in the
general account of the Insurance Company.
1.15 HOME OFFICE - The term Home Office refers to the mailing address of
the Insurance Company which is P.O. Box 2999, Hartford, Connecticut
06104-2999.
1.16 INSURANCE COMPANY - The Insurance Company is Hartford Life Insurance
Company, a legal reserve life insurance company incorporated in
Connecticut.
1.17 PARTICIPANT - Any Eligible Employee or former Eligible Employee who
elects to participate in this contract or formerly participated in
this Contract, and who currently has an Individual Account maintained
on his or her behalf under the Contract.
1.18 PARTICIPANT'S CONTRACT YEAR - A period of twelve (12) months commencing
with the Date of Coverage of a Participant and each successive twelve
(12) month period thereafter.
1.19 PARTICIPANT'S INDIVIDUAL ACCOUNT - An account to which the General
Account values and the Separate Account Accumulation Units held by the
Contract Owner on behalf of a Participant are allocated.
1.20 PREMIUM TAX - The tax or amount of tax, if any, charged by a state or
municipality on premiums, purchase payments or contract value.
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1.21 ROLLOVER CONTRIBUTION - A contribution made to the Contract as
described in Section 2.2 of the Contract.
1.22 SALARY REDUCTION CONTRIBUTION - A contribution made to the Contract
pursuant to a salary reduction agreement as described in Section 2.1
of the Contract.
1.23 SEPARATE ACCOUNT - A separate account of the Insurance Company,
entitled Hartford Life Insurance Company Separate Account Two, under
which income, gains and losses, whether or not realized, from assets
allocated to such account are, in accordance with the contracts issued
with respect thereto, credited to or charged against such separate
account without regard to the other income, gains, or losses of the
Insurance Company.
1.24 SUB-ACCOUNT - An account established and maintained within the
Separate Account with respect to a Fund.
1.25 TRANSFER AMOUNTS - Any amount transferred to this Contract on behalf
of an Eligible Employee pursuant to Section 2.3 of the Contract.
HL-14848
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SECTION 2
CONTRIBUTION PROVISIONS
2.1 SALARY REDUCTION CONTRIBUTIONS. (a) Any Eligible Employee may make
Salary Reduction Contributions to the Contract at any time. To
participate in the contract, an Eligible Employee must complete a written
salary reduction agreement with the Employer specifying the portion of his
compensation that is to be contributed to this Contract as Salary
Reduction Contributions. The salary reduction agreement shall only apply
to amounts earned after the agreement becomes effective and shall be
irrevocable with respect to compensation earned while the salary
reduction agreement is in effect. An Eligible Employee may only enter
into one salary reduction agreement with the Employer during each
taxable year of the Eligible Employee. An Eligible Employee may
terminate a salary reduction agreement for amounts not yet earned at
any time. An Eligible Employee's salary reduction agreement shall remain
in effect until the Eligible Employee either terminates such agreement or
files a new salary reduction agreement with the Employer in a
subsequent taxable year.
(c) The Contractholder agrees to reduce each Participant's
compensation by the amount indicated in the salary reduction agreement
and remit such amount as a Salary Reduction Contribution to the Insurance
Company. Salary Reduction Contributions shall become due and payable to
the Insurance Company within thirty days of deferral. A grace period of
sixty days, or the time required by law for the contribution to be made,
if less, shall be allowed for such payment.
(d) The amount of Elective Deferrals, including Salary Reduction
Contributions, for any Participant's taxable year under this Contract
and all other plans, contracts, or arrangements of the Employer shall
not exceed the dollar limit in effect under Code section 402(g) at the
beginning of such taxable year.
(e) Notwithstanding any other provision of the Contract, excess
deferrals, plus any income and minus any loss allocable thereto, may
be distributed to a Participant who requests such distribution in
accordance with this subsection (e):
(1) Not later than the March 1 following the close of the
the Participant's taxable year, the Participant may notify the
Insurance Company of the amount of excess deferrals received by
the Contract during the taxable year. The notification shall be
in writing, shall specify the amount of the Participant's excess
deferrals, and shall be accompanied by the
5
<PAGE>
Participant's written statement that if such amounts are not
distributed, these amounts, when added to all other Elective
Deferrals made on behalf of the Participant during the taxable
year, shall exceed the dollar limitation specified in
section 402 (g) of the Code.
(2) If the Participant provides the Insurance Company with
satisfactory evidence and written notice to demonstrate that all
Elective Deferrals by the Participant to this Contract and any
other qualified plan exceed the applicable limit under
section 402(g) of the Code for such individual's taxable year, then
the Insurance Company may (but is not required to) distribute a
sufficient amount attributable to the Participant's Salary
Reduction Contributions (not to exceed the amount of Salary
Reduction Contributions actually contributed to the Contract on
behalf of the Participant during the taxable year) from the Contract
to allow the Participant to comply with the applicable limit. The
evidence provided by the Participant must establish clearly the
amount of the excess deferral.
(3) The term "excess deferral" means those Elective Deferrals
that are includible in a Participant's gross income under
section 402(g) of the Code because they exceed the applicable
dollar limit under section 402(g) of the Code.
(4) The excess deferral distributed to a Participant with respect
to a taxable year shall be adjusted to reflect income or loss in
the Participant's Individual Account for the taxable year allocable
thereto. The income or loss allocable to such excess deferral shall
be determined by the method generally used under the Contract to
allocate income or loss to a Participant's Individual Account.
2.2 ROLLOVER CONTRIBUTIONS. (a) The Insurance Company will accept
Rollover Contributions on behalf of any Participant who is making
Salary Reduction Contributions to the Contract. The Rollover
Contribution must consist entirely of amount attributable to an eligible
rollover distribution from an annuity, custodial account, or retirement
income account described in section 403(b) of the Code (referred to
herein as a "403(b) annuity"). For purposes of this section, the term
"eligible rollover distribution" has the same meaning as provided in
Section 5.4(b) of the Contract.
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<PAGE>
(b) The Rollover Contribution may be remitted to the Contract by
either one of the following methods:
(1) A cash amount representing the Rollover Contribution may
be transferred directly from the 403(b) annuity from which such
amount is distributable to the Insurance Company; or
(2) the Participant may remit a cash amount to the Insurance
Company that constitutes the Rollover Contribution from a 403(b)
annuity or an individual retirement arrangement (as described in
Section 5.4(b) of the Contract) within sixty (60) days of receipt
of such amount from the 403(b) program or individual retirement
arrangement.
(c) The Insurance Company may require a Participant to provide such
information as it deems necessary to demonstrate that the Participant
is entitled to rollover an amount to this Contract.
2.3 TRANSFER AMOUNTS. The Insurance Company may accept directly from
another 403(b) annuity all or part of an Eligible Employee's interest
in such 403(b) annuity. Any transfer of an Eligible Employee's interest
from another 403(b) annuity into this Contract must comply with the
requirements of Revenue Ruling 90-24 and any other applicable guidance
issued by the Internal Revenue Service. The Insurance Company may
request any documents or other information from the Eligible Employee or
opinions of counsel which the Insurance Company deems necessary to
establish that such interest may be properly transferred to this
Contract. The Insurance Company shall not accept any Transfer Amount to
the extent that acceptance of such Transfer Amount would necessitate
the Insurance Company to take actions inconsistent with the other
provisions of this Contract.
2.4 LIMITATION ON ANNUAL ADDITIONS. (a) Notwithstanding anything in this
Section 2 to the contrary, the total annual additions made to the
Contract on behalf of a Participant for any year may not exceed the
limits imposed by section 415 of the Code, as they may be adjusted from
time to time. The limits of section 415 of the Code applicable to 403(b)
annuity contracts are herein incorporated by reference.
7
<PAGE>
(b) If, as a result of a reasonable error in estimating a
Participant's annual compensation (as defined in section 415 of the
Code), a reasonable error in determining the amount of Salary
Reduction Contributions that may be made with respect to any
individual under the limits of section 415, or such other
circumstances that the Commissioner of Internal Revenue may find,
there is an amount allocated to a Participant's Individual Account in
excess of the section 415 limits, such excess may be disposed of as
follows at the request of the Participant:
(1) Any Salary Reduction Contributions (including any gains
thereon) to the extent they would reduce the excess amount,
may be returned to the Participant.
(c) For purposes of this Section 2.4, the term "annual additions"
means the amount of Salary Reduction Contributions credited to
a Participant's Individual Account for a taxable year.
2.5 LIMITATION OF AMOUNTS BY INSURANCE COMPANY. The Insurance Company
reserves the right to limit any increase in the amount of Salary
Reduction Contributions, Rollover Contributions, or Transfer Amounts
made to a Participant's Individual Account to no more than three (3)
times the total amount of such contributions or transfers made on
behalf of such Participant during the initial twelve (12) consecutive
months following the Date of Coverage. Increases in excess of those
described will be accepted only with the consent of the Insurance
Company and subject to the then current deductions being made under
the Contract.
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SECTION 3
ALLOCATION OF CONTRIBUTIONS
3.1 ALLOCATION TO PARTICIPANT'S INDIVIDUAL ACCOUNT. (a) An account shall
be established and maintained under this Contract for each Participant.
Such account shall be referred to herein as the Participant's Individual
Account. All Salary Reduction Contributions, Rollover Contributions,
and Transfer Amounts made to the Contract on behalf of a Participant
shall be deposited to such Participant's Individual Account and
allocated to the General Account and Sub-Accounts in accordance with
the Participant's currently effective investment election.
(b) With respect to an initial Salary Reduction Contribution, Rollover
Contribution, or Transfer Amount, the initial contribution shall be
credited to the Participant's Individual Account by the Insurance
Company within two business days of receipt of a properly completed
application and such initial contribution. If an application or any
other information is complete when received, the contribution shall be
credited to the Participant's Individual Account within five (5)
business days. If an application is not received in good order, as
determined by the Insurance Company, within five (5) business days of
the receipt of the initial contribution, it will be returned to the
Participant, unless the Insurance Company informs the Participant of
the delay and the Participant requests that the contribution not be
returned.
3.2 INVESTMENT ELECTION. A Participant shall make an investment election in
the manner and form prescribed by the Insurance Company. The investment
election shall specify the percentage that Salary Reduction
Contributions and Rollover Contributions, as applicable, shall be
allocated between the General Account and the Sub-Accounts of the
Separate Account. The percentages specified in any investment election
must be in multiples of ten percent (10%) and the sum of such
percentages must equal one hundred percent (100%). A Participant's
investment election shall remain in effect until the Participant changes
the investment election, in the manner prescribed by the Insurance
Company.
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3.3 CHANGE OF INVESTMENT ELECTION. A Participant may change the investment
election applicable to the allocation of contributions at any time during
the Accumulation Period. The percentages specified in any changed
investment election must be in multiples of ten percent (10%) and the
sum of such percentages under the
resulting investment election must equal one hundred percent (100%). Any
change in investment election must be requested in the form and manner
required by the Insurance Company.
3.4 TRANSFER OF AMOUNTS WITHIN CONTRACT. A Participant may, at any time, elect
to transfer, in multiples of ten percent (10%), the value of such
Participant's Individual Account among the various investment alternative
provided under the Contract, subject to the following requirements:
(a) Amounts invested in a Sub-Account may be transferred to any other
Sub-Account offered under the Contract, to the General Account, or to
any combination thereof.
(b) Amounts invested in the General Account may be transferred to one or
any combination of any Sub-Accounts offered under the Contract.
(c) Notwithstanding (b) above, amounts invested in the General Account,
or amounts previously invested in the General Account during the
three month period immediately preceding the date such transfer is
requested, may not be transferred to any Sub-Account which the
Insurance Company considers to be a competing fixed income account.
(d) A transfer may be elected by a Participant under this Section 3.4
only during the Accumulation Period that applies to such Participant.
(e) A transfer shall only be made in the form and manner prescribed by
the Insurance Company.
(f) The amount transferred from the General Account to a Sub-Account may
be limited by the Insurance Company in accordance with the terms of
Section 6.2 of the Contract.
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SECTION 4
INVESTMENT OF CONTRIBUTIONS
4.1 VALUE OF GENERAL ACCOUNT (a) The value of the portion of a Participant's
Individual Account invested in the General Account on any date is an amount
equal to the product of the number of General Account Accumulation Units
credited to such Participant's Individual Account multiplied by the
dollar value of a General Account Accumulation Unit for that date.
(b) When an amount is allocated to the Contract on behalf of a
Participant for investment in the General Account, the portion of
the Participant's Individual Account invested in the General
Account shall be credited with a number of General Account
Accumulation Units equal to the amount so allocated divided by the
General Account Accumulation Unit Value as of that date.
(c) When an amount is transferred or distributed from that portion of a
Participant's Individual Account invested in the General Account,
the Participant's Individual Account shall be debited by the number
of General Accumulation Units equal to the amount transferred or
distributed divided by the General Account Accumulation Unit Value
as of the date of the transfer or distribution.
(d) The General Account Accumulation Unit Value as of any date shall be
calculated in accordance with the following formula:
1/N
UV + PV x (1 + i)
Where:
UV is the General Account Accumulation Unit Value as of the
current date.
PV is the General Account Accumulation Unit Value on the
immediately preceding date.
i is the Declared Interest Rate (as described in Section 4.1(f)
below) on such date.
N is the number of days in the applicable calendar year.
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(e) The number of General Account Accumulation Units credited to a
Participant's Individual Account is determined by dividing the
amount allocated to that portion of the Participant's Individual
Account invested in the General Account by the General Account
Accumulation Unit Value for that date.
(f) For purposes of this Contract, the "Declared Interest Rate" is the
rate of interest credited to the General Account for any period of
time as shall be determined by the Insurance Company. As of the
Effective Date of this Contract the Declared Interest Rate is >
percent. The Declared Interst Rate may be changed by the Insurance
Company from time to time. Any such change shall be declared in
advance and shall become effective as of the first day of the month
immediately following the date the Contractholder is notified of such
change. The Declared Interest Rate shall not be less than > percent.
The Declared Interest Rate shall be compounded annually.
4.2 VALUE OF SEPARATE ACCOUNT. (a) The value of a Participant's Individual
Account under the Separate Account shall be determined by multiplying the
total number of Sub-Account Accumulation Units credited to the
Participant's Individual Account by the current Accumulation Unit value
for the respective Sub-Account.
(b) A "Sub-Account Accumulation Unit" is an accounting unit of measure
used to calculate the Separate Account value of a Participant's
Individual Account during the Accumulation Period. The Sub-Account
Accumulation Unit Value shall be determined on each Valuation Day
by a Net Investment Factor for that Sub-Account for the Valuation
Period then ended.
(c) The value of the Sub-Account Accumulation Units in the Separate
Account representing an interest in the appropriate Fund shares
that are held under the Contract were initially established on the
date that contributions were first contributed to the appropriate
Sub-Account of the Separate Account. The Accumulation Unit value
for each Sub-Account will vary to reflect the investment experience
of the applicable Fund and shall be determined on each Valuation Day
by multiplying the Accumulation Unit value of the particular
Sub-Account on the preceding day by the "Net Investment Factor" for
that Sub-Account for the Valuation Period then ended.
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(d) 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 dividends
or capital gains by that Fund if the ex-dividend date occurs in the
Valuation Period ended, divided by the net asset value per share of
the corresponding Fund at the beginning of the Valuation Period then
ending.
(e) The shares of the Fund are valued at net asset value on a daily
basis.
(f) For purposes of this Section 4, the Valuation Date is each day the
New York Stock Exchange is open for unrestricted trading and the
Insurance Company is open to transact normal business.
(g) For purposes of this Section 4, the Valuation Period is the period
between Valuation Days.
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SECTION 5
PAYMENT OF BENEFITS
5.1 COMMENCEMENT OF PAYMENTS. (a) Payments will begin to be paid to a
Participant from the Contract as of the Participant's Annuity Commencement
Date. The Insurance Company reserves the right to begin payments on the
first day of the month coincident with or next following the Participant's
65th birthday under Option 2, as described in Section 9.2 of the Contract,
with 120 Monthly Payments Certain, unless the Participant elects otherwise
in accordance with the remaining provisions of this Section 5.1
(b) A Participant may elect as an Annuity Commencement Date the first
day of any month. Notwithstanding the foregoing, in no event may a
Participant elect an Annuity Commencement Date earlier than the date
the Participant attains age 59 1/2, unless such Participant has
separated from service (within the meaning of Section 5.2(c) of the
Contract) or has become disabled (within the meaning of Section 5.2(d)
of the Contract).
(c) A Participant may elect to have the benefit paid from the Contract
pursuant to any of the annuity options described in Section 9.2 of
the Contract.
(d) Election of any of the options provided in (b) and (c) above must
be made by notice in writing to the Home Office of the Insurance
Company at least thirty (30) days prior to the date such election is
to become effective.
5.2 OTHER DISTRIBUTIONS. (a) A Participant may request, in form and manner
prescribed by the Insurance Company, a distribution of all or a portion
of the value of his Participant's Individual Account provided that the
Participant demonstrates that the distribution is a result of one
of the events described in (b), (c), (d), or (e) below.
Distributions pursuant to this Section 5.2 shall be paid be paid
pursuant to the single sum payment option, as described in
Section 9.3 of the Contract, except that a Participant may request
that a distribution made on account of the Participant's separation
from service, as described in (c) below, be paid in accordance with
either the single sum payment option or the systematic withdrawal
option described in Section 9.4 of the Contract. Any distribution
requested under this Section 5.2 must also satisfy the requirements
of (f) and (g) below.
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(b) A Participant may request a distribution on or after the date such
Participant attains age 59-1/2.
(c) A Participant may request a distribution if such Participant
separates from service. For purposes of this subsection, the term
"separates from service" means the actual severance of the
employment relationship between the Participant and the Employer of
a presumably permanent nature for reasons other than temporary
absence, any change in position or other occurrence qualifying as a
temporary break in service, the transfer or other change of position
resulting in employment by an entity controlling, controlled by, or
under common control by the Employer, or the cessation of an
employment relationship resulting from a reorganization, merger, or
the sale or discontinuance of all or any part of the Employer's
business.
(d) A Participant may request a distribution on or after the date such
Participant becomes disabled within the meaning of Code
section 72(m)(7), provided that such disability would entitle the
Participant to receive social security disability benefits.
(e) A Participant may request a distribution if such Participant incurs
a hardship. The amount distributed on account of a hardship may not
include any income attributable to contributions made pursuant to a
salary reduction agreement. For purposes of this Contract, the term
"hardship" means an immediate and heavy financial need of the
Participant. In addition, a distribution may be made on account of
a hardship only if the distribution is necessary to satisfy the
immediate and heavy financial need.
(1) For purposes of this Contract, a distribution is made on
account of an immediate and heavy financial need only if the
distribution is on account of:
(A) Expenses for medical care described in Code section 213(d)
previously incurred by the Participant, the Participant's
spouse, or any dependents of the Participant (as described
in Code section 152) or necessary for these persons to
obtain medical care described in Code section 213(d);
(B) Costs directly related to the purchase of a principal
residence for the Participant (excluding mortgage
payments);
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(C) Payment of tuition, related educational fees, and room and
board expenses, for the next 12 months of post-secondary
education for the Participant, or the Participant's
spouse, children, or dependents (as defined in Code
section 152); or
(D) Payments necessary to prevent the eviction of the
Participant from the Participant's principal residence or
foreclosure on the mortgage on that residence.
(2) A distribution will be considered as necessary to satisfy an
immediate an heavy financial need of the Participant only if:
(A) the Participant has obtained all distributions, other
than hardship distributions, and all nontaxable loans
(to the extent that the loan would not increase the amount
of the need) under all plans maintained by the Employer;
and
(B) the distribution is not in excess of the amount of the
immediate and heavy financial need (including amounts
necessary to pay any federal, state or local income taxes
or penalties reasonably anticipated to result from the
distribution).
(3) If a Participant receives a hardship distribution in accordance
with this subsection (e), such Participant shall be suspended
from making additional Salary Reduction Contributions to the
Contract for a period of twelve months beginning on the first
day of the month immediately following the month such
distribution is paid to the Participant.
(4) The Insurance Company may rely on the Participant's
representations that the hardship is on account of an immediate
and heavy financial need and that the amount requested is
necessary to satisfy such immediate and heavy financial need.
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(f) If the amount requested to be distributed is less than the full value
of the Participant's Individual Account, such amount shall either be taken
out of the General Account and Sub-Account(s) in which the Participant
Individual Account is invested, as specified in the request for
distribution, or, if no specification is made, the requested distribution
shall be taken out of the Participant's Individual Account from the General
Account and Sub-Account(s) in which such Individual Account is invested on
the same basis as the Participant's investment election applicable to the
allocation of contributions then in effect.
(g) The amount actually distributed to a Participant pursuant to this
Section 5.2 shall be equal to the Distribution Value as determined under
Section 6 of the Contract.
(h) Any distribution made in accordance with this Section 5.2, other than
distributions made pursuant to Section 5.2(c) or 5.2(d), may be limited by
the Insurance Company in accordance with the terms of Section 6.2 of the
Contract.
5.3 TRANSFER TO ANOTHER PLAN. (a) Notwithstanding anything in this Section 5
to the contrary, a Participant may request in writing, that the Insurance
Company transfer all or a portion of the Participant's Individual Account
to:
(1) another annuity contract that qualifies under Code
section 403(b); or
(2) a custodial account for regulated investment company stock
that qualifies under Code section 403(b).
(b) The amount actually transferred pursuant to this Section 5.3 shall
be equal to the Distribution Value of the Participant's Individual
Account as determined under Section 6 of the Contract.
(c) Any transfer to another plan may be limited by the Insurance Company
in accordance with the terms of Section 6.2 of the Contract.
5.4 DIRECT ROLLOVERS. (a) This section applies to distributions made on or
after January 1, 1993. Notwithstanding any provision in this Contract to
the contrary that would otherwise limit a distributee's election under this
section, a distributee may elect, at the time and in the manner
prescribed by the Insurance Company, to have any portion of an
eligible rollover distribution paid directly to an eligible rollover
plan specified by the distributee in a direct rollover.
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(b) Definitions.
(1) Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or a portion of the
balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal
period payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee and the
distributee's or the joint lives (or joint life expectancies)
of the distributees and the distributee's designated
beneficiary, or for a specified period of ten years or more;
any distribution to the extent such distribution is required
under section 401(a)(9) of the Code; the portion of any
distribution that is not includible in gross income (determined
without regard to the exclusion for net unrealized appreciation
with respect to employer securities); and any other
distribution that the Internal Revenue Service provides by rule
or regulation is not an eligible rollover distribution.
(2) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in section 408(a) of
the Code, and individual retirement annuity described in
section 408(b) of the Code, or an annuity, custodial account,
or retirement income account described in section 403(b) of the
Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement
plan is an individual retirement account or an individual
retirement annuity.
(3) Distributee: A distributee includes an employee or former
employee. In addition, the employee's or former employee's
surviving spouse and the employee's or former employee's spouse
or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in section 414(p) of the
Code, are distributees with regard to the interest of the spouse
or former spouse.
(4) Direct rollover: A direct rollover is a payment by the
Contract to the eligible retirement plan specified by the
distributee.
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SECTION 6
DISTRIBUTION VALUE AND
LIMITATION ON TRANSFERS AND DISTRIBUTIONS
6.1 DISTRIBUTION VALUE. (a) The Distribution Value of a Participant's
Individual Account for any day during the Accumulation Period is
equal to the value of the Participant's Individual Account on that
day, less:
(1) any applicable premium taxes not previously deducted; and
(2) the Annual Contract Fee described in Section 10, if
applicable; and
(3) any applicable Contingent Deferred Sales Charge described
in Section 10; and
(4) the amount of any outstanding loan made from this Contract.
(b) The value of a Participant's Individual Account shall be
determined in accordance with the provisions of Section 4 of this
Contract.
6.2 LIMITATION ON TRANSFERS AND DISTRIBUTIONS. The Insurance Company
reserves the right to limit a transfer or distribution (as described
in Section 3.4(f), Section 5.2(h), and Section 5.3(e) of the Contract)
from that portion of a Participant's Individual Account invested in the
General Account, if the amount of such transfer or distribution, when
added to the aggregate of all transfers or distributions from the
General Account made by all Participants during the current Contract
Year would exceed one-sixth (1/6) of the balance of the General Account
as of the first day of such Contract Year.
(b) If this Section 6.2 applies to a transfer or distribution, the
amount of such transfer or distribution shall be disbursed in level
monthly installments over a period not to exceed five (5) years, in
which event interest will continue to be credited to the unpaid balance
remaining in the General Account in accordance to the terms of
Section 4.1 of the Contract. Notwithstanding the foregoing, the
Insurance Company reserves the right to disburse at any time the
remaining unpaid balance in a single sum payment.
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SECTION 7
MINIMUM REQUIRED DISTRIBUTIONS
7.1 APPLICABILITY. (a) The requirements of this Section shall apply to
any distributions of a Participant's interest from this Contract and
will take precedence over any inconsistent provisions of the Contract.
(b) All distributions hereunder shall be made in accordance with the
requirements of section 401(a)(9) of the Code, including the
incidental death benefit requirements of section 401(a)(9)(G) of the
Code, and the regulations thereunder, including the minimum distribution
incidental benefit requirement of section 1.401(a)(9)-2 of the
Proposed Income Tax Regulations.
7.2 REQUIRED DISTRIBUTIONS BEFORE DEATH. (a) The entire interest of a
Participant will be distributed or commence to be distributed no later
than the first of April following the calendar year in which such
Participant attains age 70 1/2 (required beginning date), over (a) the
life of such Participant, or the lives of such Participant and his or
her designated beneficiary, or (b) a period certain not extending beyond
the life expectancy of such individual, or the joint and last survivor
expectancy of such participant and his or her designated beneficiary.
Payments must be made in periodic payments at intervals no longer than one
year. In addition, payments must be either nonincreasing or they may
increase only as provided in Q&A F-3 of section 1.401(a)(9)-1 of the
Proposed Income Tax Regulations.
(b) Life Expectancy is computed by use of the expected return multiples
in Tables V and VI of section 1.72-9 of the Income Tax Regulations.
Unless otherwise elected by the individual by the time distributions are
required to begin, life expectancies shall be recalculated annually.
Such election shall be irrevocable by the Participant and shall apply to
all subsequent years. The life expectancy of a non-spouse beneficiary
may not be recalculated. Instead, life expectancy will be calculated
assuming the attained age of such beneficiary during the calendar year
in which the beneficiary attains age 70 1/2, and payments for subsequent
years shall be calculated based on such life expectancy reduced by one for
each calendar year which has elapsed since the calendar year life
expectancy was first calculated.
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<PAGE>
7.3 REQUIRED DISTRIBUTIONS UPON DEATH. (a) If the individual dies after
distribution of his or her interest has begun, the remaining portion of
such interest will continue to be distributed at least as rapidly as under
the method of distribution being used prior to the individual's death.
(b) If the Participant dies before distribution of his or her interest
begins, distributions of the Participant's entire interest shall be
completed by December 31 of the calendar year containing the fifth
anniversary of the Participant's death except to the extent that an
election is made to receive distributions in accordance with (1) or (2)
below:
(1) If the Participant's interest is payable to a designated
beneficiary, then the entire interest of the Participant may be
distributed over a period not greater than the life expectancy of
the designated beneficiary commencing on or before December 31 of
the calendar year immediately following the calendar year in which
the individual died.
(2) If the designated beneficiary is the Participant's surviving
spouse, the date distributions are required to begin in accordance
with (1) above shall not be earlier than the later of (A)
December 31 of the calendar year immediately following the calendar
year in which the Participant died, or (B) December 31 of the
calendar year in which the Participant would have attained age
70-1/2.
(c) Life expectancy is computed by use of the expected return multiples
in Tables V and VI of section 1.72-9 of the Income Tax Regulations. For
purposes of distributions beginning after the Participant's death,
unless otherwise elected by the surviving spouse by the time
distributions are required to begin, life expectancies shall be
recalculated annually. Such election shall be irrevocable by the
surviving spouse and shall apply to all subsequent years. In the case of
any other designated beneficiary, life expectancies shall be calculated
using the attained age of such beneficiary using the calendar year in
which distributions are required to begin pursuant to this section, and
payments for any subsequent calendar year shall be calculated based on
such life expectancy reduced by one for such calendar year which has
elapsed since the calendar year life expectancy was first calculated.
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(d) Distributions under this section are considered to have begun if
distributions are made on account of the individual reaching his or her
required beginning date or if prior to the required beginning date
distributions irrevocably commence to a Participant over a period
permitted and in an annuity form acceptable under section 1.401(a)(9)
of the Regulations.
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SECTION 8
DEATH BENEFITS
8.1 DEATH BENEFIT PRIOR TO ANNUITY COMMENCEMENT DATE. (a) If a
Participant dies prior to the earlier of the Annuity Commencement Date
or the Participant's 65th birthday, the Insurance Company will pay the
Participant's Beneficiary the greater of (a) the value in the
Participant's Individual Account as of the day written proof of death
of such person is received by the Insurance Company, or (b) 100% of
the total contributions made to the contract, reduced by any prior
distributions.
(b) If a Participant dies prior to his Annuity Commencement Date but
on or after his 65th birth date, the Beneficiary shall receive the
value of the Participant's Individual Account as of the date of
receipt of due proof of the death at the Home Office of the Insurance
Company.
(c) Notwithstanding anything in this Section 8.1 to the contrary, in
no event shall the amount of any death benefit exceed the Distribution
Value of the Participant's Individual Account determined in accordance
with Section 6 of the Contract.
8.2 DEATH BENEFIT ON OR AFTER ANNUITY COMMENCEMENT DATE. (a) If the
Participant dies on or after the Annuity Commencement Date, the death
benefit, if any, will be paid in accordance with the terms of the
applicable annuity certificate.
8.3 FORM OF DEATH BENEFIT. (a) The death benefit shall be paid to the
Beneficiary in a single sum, in which case payment will be made within
seven days of receipt of proof of death by the Insurance Company,
unless otherwise provided. In lieu of payment in a single sum, a
Beneficiary may elect that the amount be applied any settlement option
described in Section 9 of the Contract.
(b) An election to receive death benefits under a form of Annuity
must be made (1) prior to the payment of a single sum settlement and
(2) prior to the December 31 of the calendar year immediately
following the calendar year in which the employee died. No election
to provide Annuity Payments will become operative unless the initial
Annuity payment is at least $20.00 on either a fixed or variable
basis, or $20.00 on each basis when a combination benefit is selected.
8.4 BENEFICIARY DESIGNATION. (a) The designation of a Beneficiary will
remain in effect until changed by the Participant.
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<PAGE>
(b) Changes in designation of the Beneficiary may be made during the
lifetime of the Participant by written notice to the Insurance Company
provided, however, that when a Beneficiary has been designated
irrevocably, such designation cannot be changed or revoked without
such Beneficiary's written consent.
(c) Upon receipt of such notice and written consent, if required, at
the Home Office of the Insurance Company, the new designation shall
take effect as of the date the notice is signed, whether or not the
Participant is alive at the time of receipt of such notice subject to
any payment made or other action taken by the Insurance Company before
such receipt.
(d) At the Participant's death the Beneficiary will be as provided in
the beneficiary designation then in effect. If no Beneficiary is then
in effect or if there is no designated Beneficiary living, the
Participant's estate will be the Beneficiary.
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<PAGE>
SECTION 9
SETTLEMENT OPTIONS
9.1 SETTLEMENT OPTIONS. This section describes the various options by
which benefits may be paid from this Contract to a Participant or a
Beneficiary. Such options may only be elected by a Participant or
Beneficiary as otherwise permitted under the terms of this Contract.
9.2 ANNUITY OPTIONS. The following annuity options are available under
the contract and may be elected by a Participant as otherwise provided
under the terms of this contract:
Option 1: Life Annuity. This is an annuity payable during the
lifetime of the Annuitant and terminating with the last monthly
payment preceding the death of the Annuitant.
Option 2: Life Annuity with 120, 180 or 240 Monthly Payments
Certain. This is an annuity payable monthly during the lifetime
of the annuitant with the provision that if, at the death of the
Annuitant, payments have been made for less than 120, 180, or 240
months, as elected, the remaining guaranteed monthly payments
will be made to the Participant's Beneficiary.
Option 3: Unit Refund Annuity. This is an annuity payable
monthly for the lifetime of the annuitant terminating with the
last payment due prior to the death of the Annuitant, except that
an additional payment will be made to the Beneficiary if (1)
exceeds (2) below:
(1) equals the total amount applied under the option at the
Annuity Commencement Date divided by the Annuity Unit value
(as described in Section 9.4 below) at the Annuity
Commencement Date; and
2) equals the number of Annuity Units represented by each
monthly Annuity payment made multiplied by the number of
monthly annuity payments made.
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<PAGE>
The amount of the additional payments will be determined by
multiplying such excess by the Annuity Unit Value as of the date
the proof of death is received by the Insurance Company.
Option 4: Joint and Last Survivor Annuity. This is an annuity
payable monthly for the lifetime of the annuitant. At the
annuitant's death, payments will continue to the contingent
annuitant, if living, for the remainder of the contingent
annuitant's life. When the annuity is purchased, the annuitant
elects what percentage (50%, 66 2/3%, or 100%) of the monthly
payment will be continued to be paid to the contingent annuitant.
The following also applies to this annuity option:
Option 5: Designated (Fixed) Period Annuity. This is an
annuity payable monthly for the number of years selected, but not
less than three. In the event of the payee's death prior to the
end of the designated period, any then remaining proceeds will be
paid in to the Beneficiary unless other provisions are made and
approved by the Insurance Company. Option 5 does not involve
life contingencies and thus no mortality guarantee.
In addition to the annuity options described above, a Participant may
select any type of annuity which the Insurance Company agrees in
writing to issue.
(b) Under any of the annuity options above, except Option 5 when paid
on a variable basis, no surrenders are permitted once payments
commence. Surrenders out of Option 5 will be subject to any
applicable contingent deferred sales charge.
(c) The amount the Insurance Company will apply toward the purchase
of an annuity will be the Distribution Value of the Individual Account
as of the Annuity Commencement Date.
(d) Any annuity option provided in Section 9.1 above may be paid as
(1) a fixed annuity, (2) a variable annuity, or (3) a combination of
both a fixed annuity and a variable annuity.
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(e) Fixed Annuity Payments. To determine the amount of each fixed
annuity payment, the amount available to purchase an annuity is
multiplied by the annuity purchase rate then in effect for all
contracts in this class of business. In no event shall the annuity
purchase rates used for the purchase of a fixed annuity be greater
than those provided in Annuity Purchase Rate Table A which is attached
to and made a part of this Contract.
(e) Variable Annuity Payments.
(1) To determine the amount of the first monthly variable
annuity payment, the amount available to purchase the variable
annuity is multiplied by the appropriate annuity purchase rate
based on the 1983 IAM Mortality Table, set back one year, with an
assumed interest rate of four percent (4%), as represented by
Annuity Purchase Rate Table B.
(2) On or before the fifth business day immediately preceding
the annuitant's Annuity Commencement Date, the annuitant must
elect the Sub-Accounts into which the amount used to provide the
variable annuity will be invested, and the percentages that such
amounts will be allocated to such Sub-Accounts. Failure to make
an election in accordance with the preceding sentence shall be
deemed to be an election to invest the amount used to provide the
variable annuity in the same Sub-Accounts and at the same
percentages as the Participant's Individual Account is invested
on such date and to transfer any amounts held in the General
Account on such date proportionately to such Sub-Accounts. In no
event may any election made in accordance with this paragraph (2)
be changed on or after the Annuity Commencement Date.
(3) The amount of the first monthly annuity payment is divided
by the value of an Annuity Unit for the appropriate Sub-Account
as of the close of business on the fifth business day preceding
the day on which payment is due in order to determine the number
of Annuity Units represented by the first payment. The number of
Annuity Units remains fixed during the Annuity Period, and in
each subsequent month the dollar amount of the Annuity payment is
determined by multiplying the fixed number of Annuity Units by
the then current Annuity Unit value.
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(4) An "Annuity Unit" is an accounting unit of measure in the
Separate Account used to calculate the amount of variable annuity
payments. The value of the Annuity Unit for each Sub-Account in
the Separate Account for any day is determined by multiplying the
value for the preceding day by the product of (1) the Net
Investment Factor (as described in Section 4.2 of the Contract)
for the day for which the Annuity Unit value is being
calculated, and (2) a factor to neutralize the assumed interest
rate.
(5) When annuity payments are to commence, the value of the
contract is determined as the product of the value of the Sub-
Account Accumulation Unit (as described in Section 4.2 of the
Contract) credited to each Sub-Account as of the close of
business on the fifth business day preceding the date the first
annuity payment is due and the number of Sub-Account Accumulation
Units credited to each Sub-Account as of the date the annuity is
to commence.
(6) Annuity payments will be made on the first day of each month
following selection. The Annuity Unit value used in calculating
the amount of annuity payments will be based on an Annuity Unit
value determined as of the close of business on a day not more
than the fifth business day preceding the date of the annuity
payment.
9.3 SINGLE SUM PAYMENT OPTION. Under this option payments are made in the
form of a single sum cash payment.
9.4 SYSTEMATIC WITHDRAWAL OPTION. (a) Under this option payments are
made in a series of monthly, quarterly, semiannual, or annual
installments, as elected by the Participant, over a period not
extending beyond the Participant's life expectancy, or the
joint and last survivor life expectancy of the Participant and the
Participant's Beneficiary, as of the start date. Any election of the
systematic withdrawal option is subject to the following requirements:
(1) To be eligible to elect payments under the systematic
withdrawal option, the value of a Participant's Individual
Account must equal or exceed ten thousand dollars ($10,000.00) at
the time payments begin under this option. A Participant may not
elect the systematic withdrawal option if they have a loan
outstanding from the Contract.
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(2) Each installment payment shall be equal in amount, except
for the last payment in the series, which may be less, to the
extent that the value of the Participant's Individual Account is
insufficient to make a full installment payment.
(3) The minimum periodic payment amount that may be elected is
one hundred dollars ($100).
(4) The maximum amount that may be paid as a periodic
installment payment may not exceed, on an annual basis, eighteen
percent (18%) of the value of the Participant's Individual
Account balance calculated at the time the Systematic Withdrawal
Option is implemented.
(5) A Participant may elect to have the installment payments (A)
equal a certain number of payments, or (B) paid as a specified
dollar amount until the Participant's Individual Account is
depleted. Under either election, the number of installment
payments made shall be limited to the amount that can be provided
from the value of the Participant's Individual Account. In no
event may installment payments be made over a period of time
extending beyond the Participant's life expectancy as of the
start date, or the joint and last survivor life expectancy of the
Participant and the Participant's Beneficiary as of the start
date.
(6) A Participant may change an election previously made with
regard to the systematic withdrawal option four times during a
calendar year, provided the Participant notifies the Insurance
Company of such change at least thirty (30) days before such
change is to become effective.
(8) A Participant may cancel the systematic withdrawal option at
anytime.
(b) If a Participant dies while the systematic withdrawal option is
in effect, payments under the systematic withdrawal option shall cease
and any remaining value in the Participant's Individual Account shall
be paid to the Participant's Beneficiary in accordance with the
provisions of Section 8 of the Contract.
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(c) Payments under the systematic withdrawal option shall be made pro
rata from each Sub-Account and the General Account in which the
Participant's Individual Account is invested.
(d) Definitions. For purposes of this Section 9.4, the following
definitions shall apply:
(1) The "start date" is the day for which the first payment
under the systematic withdrawal option is scheduled to be paid.
(2) The term "life expectancy" means the determination of life
expectancies made on the basis of the expected return multiples
in Tables V and VI of Section 1.72-9 of the federal Treasury
Regulations and shall be calculated annually for the Participant
and/or his Beneficiary, if the Beneficiary is his spouse, as
determined by the Participant at the time installment payments
begin.
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SECTION 10
CHARGES AGAINST THE CONTRACT
10.1 ANNUAL CONTRACT FEE. (a) The Annual Contract Fee is thirty dollars
($30.00). The Annual Contract Fee shall be deducted from the value of
each Participant's Individual Account on the last business day of each
Participant's Contract Year. However, if the value of the
Participant's Individual Account is distributed in full at any time
before the last business day of the Participant's Contract Year, the
Annual Contract Fee charge shall be deducted from the proceeds of such
distribution.
(b) No deduction for the Annual Contract Fee shall be made from a
Participant's Individual Account during the Annuity Period under the
Contract. The Annual Contract Fee shall also not be applied to any
distribution which is on account of a Participant's:
(1) death,
(2) disability within the meaning of Code section 72(m)(7),
provided such disability would entitle the Participant to receive
social security disability benefits,
(3) long term confinement in an officially recognized nursing
home or hospital, provided the Participant's confinement in the
hospital or nursing home is prescribed by a physician and such
confinement is for at least ninety (90) days,
(4) separation from service on or after the fifth Participant's
Contract Year, provided the Participant has attained age 59 1/2,
or
(5) hardship, as described in Section 5.2(e) of the Contract,
other than hardship resulting from the purchase of a principal
residence, as described in Section 5.2(e)(1)(B) of the Contract
and a hardship resulting from the payment of tuition, related
educational fees, and room and board expenses as described in
Section 5.2(e)(1)(C) of the Contract.
Paragraphs (1) through (5) above are further subject to the
requirements of Section 5 or 8 of the Contract, whichever is
applicable.
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10.2 DEDUCTION FOR MORTALITY, EXPENSE, AND ADMINISTRATIVE UNDERTAKINGS.
(a) For assuming the mortality, expense and administrative
undertakings under this Contract, the Insurance Company shall take a
deduction from the average daily net assets of the Separate Account.
The deduction for such risks has initially been set at 1.25% per year
of the average net assets of the Separate Account. The rate or amount
may be increased by the Insurance Company in its sole discretion,
subject to a maximum charge of 2.00% per year.
10.3 TRANSFER FEE. Transfers among the available investment alternatives
provided under this Contract, as described in Section 3.4 herein,
shall be subject to a fee of five dollars ($5.00). Such transfer fee
shall be deducted from the Sub-Account or the General Account in which
the Participant's Individual Account is invested and from which the
transfer is being made. Notwithstanding the preceding, the transfer
fee shall be waived for the first twelve (12) transfers during a
Participant's Contract Year.
10.4 CONTINGENT DEFERRED SALES CHARGE. (a) Except as otherwise provided
in this Section 10.4, distributions from the Contract (including
transfers made pursuant to Section 5.3 of the Contract) shall be
subject to a Contingent Deferred Sales Charge. The Contingent
Deferred Sales Charge is a percentage, determined in accordance with
the table in subsection (b) below, of the amount distributed. The
number of Participant's Contract Years completed prior to the
distribution will determine the amount of the Contingent Deferred
Sales Charge.
(b) The Contingent Deferred Sales Charge shall be determined from the
following table:
<TABLE>
<CAPTION>
TABLE OF CONTINGENT DEFERRED
SALES CHARGE
Participant's Contract Contingent Deferred
Year of Withdrawal Sales Charge
------------------ -------------------
<S> <C>
1 5%
2 5%
3 5%
4 5%
5 5%
6 4%
7 3%
8 2%
9 1%
10 and later None
</TABLE>
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(c) A Participant may request a distribution, in accordance with the
provisions of Section 5 of the Contract, of up to ten percent (10%) of
his Individual Account value on a non-cumulative basis each
Participant Contract Year, after the first participant Contract
Year, without application of the Contingent Deferred Sales Charge.
For any portion of a distribution to be eligible for a waiver
of the Contingent Deferred Sales Charge, the amount distributed may
not be less than two hundred and fifty dollars ($250.00).
(d) The Contingent Deferred Sales Charge shall also be waived for any
distribution which is on account of a Participant's:
(1) death,
(2) disability within the meaning of Code section 72(m)(7),
provided such disability would entitle the Participant to receive
social security disability benefits,
(3) long term confinement in an officially recognized nursing
home or hospital, provided the Participant's confinement in the
hospital or nursing home is prescribed by a physician and such
confinement is for at least ninety (90) days.
(4) separation from service on or after the fifth Participant's
Contract Year, provided the Participant has attained age 59 1/2,
or
(5) hardship, as described in Section 5.2(e) of the Contract,
other than hardship resulting from the purchase of a principal
residence, as described in Section 5.2(e)(1)(B) of the Contract
and a hardship resulting from the payment of tuition, related
educational fees, and room and board expenses as described in
Section 5.2(e)(1)(C) of the Contract.
Paragraphs (1) through (5) above are further subject to the
requirements of Section 5 or 8 of the Contract, whichever is
applicable.
(e) Amounts applied to effect an annuity payment involving life
contingencies or non-life contingencies for a period of three (3)
years or more shall not be subject to a Contingent Deferred Sales
Charge.
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10.5 ADDITIONAL SERVICES. If the Contractholder requests that the
Insurance Company perform an additional service not specifically
provided under the terms of this Contract that is related to the
Contractholder's 403(b) annuity program, and the Insurance Company
agrees to perform such service, the Insurance Company reserves the
right to charge the Contractholder an additional fee for the
performance of such service calculated on an hourly rate. The hourly
charge shall be determined by agreement between the Contractholder and
the Insurance Company.
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SECTION 11
LOANS
11.1 AVAILABILITY OF LOANS. A Participant may request a cash loan from the
Contract during the Participant's Accumulation Period.
11.2 ELIGIBILITY FOR LOANS. Only one loan may be outstanding at any time
for any Participant. Once a loan has been made, it may not be
refinanced. Once a loan has been repaid, a Participant may not obtain
a subsequent loan until after the period of six months from the date
the previous loan has been repaid in full.
11.3 AVAILABILITY OF LOANS. (a) Application for a loan must be made to
the Insurance Company in writing and on a form prescribed by the
Insurance Company. The decisions by the Insurance Company on loan
applications shall be made on a reasonably equivalent, uniform and
nondiscriminatory basis. The Insurance Company may change the terms
of any outstanding loan to the extent required by applicable law.
(b) Loan proceeds shall be distributed from the Contract as soon as
practicable after the end of any month to Participants whose
applications are received by the Insurance Company on or before the
20th day of such month and approved by the Insurance Company by the
end of such month.
11.4 AMOUNT OF LOAN. A loan shall be derived from, and the amount
available for a loan shall be based on, the value of the Participant's
Individual Account based on the most recent account valuation
available to the Insurance Company on the date the loan is approved.
The minimum loan amount is $2,000. The maximum loan available is the
lesser of (1) 50% of the value of the Participant's Individual
Account, or (2) $50,000, reduced by the highest outstanding
balance of any loan to such Participant during the twelve-month period
ending on the day before the loan is made. In no event shall the
amount of any loan made from this Contract to a Participant exceed the
Distribution Value of the Participant's Individual Account, determined
in accordance with Section 6, as of the date of such loan.
35
<PAGE>
11.5 TERMS OF LOAN. (a) A loan shall be secured by a lien on the
Participant's Individual Account, to the maximum extent permitted by
the relevant provisions of the Internal Revenue Code and any
regulations or other guidance issued thereunder.
(b) At the beginning of each calendar quarter the Insurance Company
shall determine the rate of interest to be charged to all loans issued
during such quarter. Such rate shall reflect current investment
market conditions and prevailing loan interest levels under this
Contract. The maximum rate charged shall not exceed the current
guaranteed interest rate as provided under Section 4.1(c) of the
Contract plus 2%.
(c) The principal amount and interest on a loan shall be repaid no
less frequently than monthly. Such loan repayment shall be due and
payable to the Insurance Company on the last business day of each
month such loan is outstanding. A Participant may prepay the full
amount of the outstanding loan upon the Participant's separation from
service (as described in Section 5.2(c) of the Contract) or after the
first twelve months following distribution of the loan proceeds to
the Participant. The Participant may elect a repayment term from
one(1) to five (5) years, in twelve (12) month increments, starting
from the last business day of the first month in which the loan amount
is distributed from the contract, except that the Participant may
elect a repayment term of up to ten (10) years, in twelve (12) month
increments, if the loan is for the acquisition of a dwelling unit to
be used as the principal residence of the Participant (determined at
the time the loan is made). The Insurance Company may request any
documents or other information from the Participant the Insurance
Company deems necessary to establish the suitability of a loan
repayment period greater than five (5) years.
(d) Repayment of both principal and interest, less a monthly charge
of .166% of the outstanding loan balance at the beginning of the month
(to be retained by the Insurance Company), shall be credited to the
General Account.
(e) Each loan shall be evidenced by a promissory note, evidencing the
Participant's obligation to repay the borrowed amount to the Contract,
in such form and with such provisions consistent with this Section 11
as are acceptable to the Insurance Company.
36
<PAGE>
(f) Under the terms of the loan agreement, an Insurance Company
representative may determine a loan to be in default, and may take
such actions upon default in accordance with Section 11.7 below.
11.6 DISTRIBUTION AND REPAYMENT OF LOAN. (a) The loan proceeds shall be
derived from the Participant's Individual Account attributable to the
General Account. The Participant's Individual Account remaining after
the loan proceeds are distributed to the Participant shall be reduced
by a $100.00 loan processing fee which shall be retained by the
Insurance Company.
(b) Repayments of loans shall be made to the Participant's General
Account.
11.7 EVENTS OF DEFAULT AND ACTIONS UPON DEFAULT. (a) If a Participant
does not repay the principal and account interest with respect to a
loan at the time required by the terms of the loan, the loan shall be
in default and the unpaid balance of the loan, together with interest
thereon, shall become immediately due and payable. In addition to the
foregoing, the loan agreement may include such other events of default
as the Insurance Company shall determine are necessary or desirable.
(b) Upon the default of a loan by any Participant, the Insurance
Company may take such action as it reasonably determines to be
necessary in order to preclude the loss of principal and interest,
including:
(1) demanding repayment of the outstanding amount on the loan
(including principal and accrued interest); or
(2) if the loan is not repaid within 31 days of a request for
repayment, causing a foreclosure of the loan to occur by
distributing the promissory note to the Participant or otherwise
reducing the Participant's Individual Account by the value of the
loan. For these purposes, such loan shall be deemed to have a
fair market value equal to its face value (including accrued but
unpaid interest) reduced by any payments thereon by the
Participant. In all events, however, no foreclosure shall be
made until the earliest time contributions made pursuant to a
salary reduction agreement may be distributed without violating
any provisions of Section 403(b) of the Code and the regulations
issued thereunder.
37
<PAGE>
SECTION 12
GENERAL PROVISIONS
12.1 ENTIRE CONTRACT. This Contract and the application for the Contract
together with any tables, schedules, or endorsements which are
attached hereto when issued to the Contractholder, constitute the
entire contract. All statements in the application shall, in the
absence of fraud, be deemed representations and not warranties. No
statement shall avoid this contract or be used in defense of a claim
under it unless contained in the written application for this
contract.
12.2 MODIFICATION OF CONTRACT. (a) This Contract may be modified at any
time by written agreement between the Contractholder and the Insurance
Company. No modification will affect the amount or terms of any
annuities begun prior to the effective date of the modification,
unless it is required to conform this Contract to, or give the
Contractholder the benefit of, any federal or state statutes or any
rule or regulation of the United States Treasury Department.
(b) The Insurance Company reserves the right to modify the Contract,
but only if such modification: (1) is necessary to make the contract
or the Separate Account comply with any law or regulation issued by a
governmental agency to which the Company is subject; (2) is necessary
to assure continued qualification of the contract under section 403(b)
of the Code or other federal or state laws relating to retirement
annuities or annuity contracts; (3) is necessary to reflect a change
in the operation of the Separate Account; (4) provides additional
Separate Account options; or (5) withdraws Separate Account options.
In the event of any such modification, the Insurance Company will
provide notice to the Contractholder, or to the payee(s) during the
annuity period. The Insurance Company may also make appropriate
endorsement in the Contract to reflect such modification.
38
<PAGE>
(c) On and after the fifth anniversary of the Contract Effective
Date, the Insurance Company may change from time to time any or all of
the terms of this contract by giving 90 days' advance written notice
of such change to the Contractholder except that the annuity tables,
guaranteed interest rates and Contingent Deferred Sales Charges which
are applicable on the Date of Coverage of a Participant's Individual
Account under this contract will continue to be applicable to all
contributions made to such Individual Account which in any year do not
exceed three times the total contributions made to such Individual
Account during the initial Participant's Contract Year. In addition,
the limitations on the deductions for the mortality, expense risks,
administrative undertakings and the Annual Contract Fee will continue
to apply in all Contract Years.
(d) No modification of this Contract shall be made except over the
signature of the President, a Vice President, an Assistant Vice
President, a Secretary, or an Assistant Secretary.
12.3 NON-PARTICIPATING. This contract does not share in the surplus
earnings of the Company.
12.4 MISSTATEMENT OF AGE. (a) If the age of an annuitant has been
misstated, the amount of the annuity payable by the Insurance Company
shall be that provided by the values under this Contract allocated to
effect such annuity on the basis of the corrected information, without
changing the date of the first payment of such annuity.
(b) Any underpayments by the Insurance Company shall be made up
immediately and any overpayment shall be charged against future
amounts becoming payable.
12.5 REPORTS TO THE CONTRACTHOLDER. The Insurance Company will at the end
of each calendar year quarter, transmit to each Participant a written
statement of account showing the total value of General Account and
Separate Account interests held in each Participant's Individual
Accounts under this Contract.
12.6 REPORTS FROM THE CONTRACTHOLDER. The Contractholder will furnish any
information which the Insurance Company may reasonably require in
order to administer this Contract. If the Contract Owner cannot
furnish any required item of information, the Company may request the
person concerned to furnish the information. The Insurance Company
will not be liable for the fulfillment of any obligations dependent
upon that information until it receives such information.
39
<PAGE>
12.7 PROOF OF SURVIVAL. The payment of any annuity benefit will be subject
to evidence that the annuitant is alive on the date such payment is
otherwise due.
12.8 INDIVIDUAL CERTIFICATES. The Insurance Company will issue to each
Participant an individual certificate which evidences that
contributions are to be made on behalf of that Participant under this
Contract. The Insurance Company will also issue an individual annuity
certificate to each individual for whom an annuity is purchased from
the Contract.
12.9 NONFORFEITURE. A Participant shall have a nonforfeitable right to his
Participant's Individual Account at all times.
12.10 DUE PROOF OF DEATH. A certified copy of the death certificate, an
order of a court of competent jurisdiction, a statement from a
physician who attended the deceased or any other proof acceptable to
the Company.
12.11 DEFERRAL OF PAYMENTS FROM GENERAL ACCOUNT. (a) The Insurance Company
has the right to defer payment of a surrender of General Account
values under this contract for a period not to exceed six (6) months
from the date the Participant's request is received in the Home Office
of the Company. If the Insurance Company defers payment as specified
above, the deferred amount will be credited with interest at the rate
of four percent (4%) from the date such request is deferred to the
date the requested amount of the surrender is paid.
(b) A deferral of any payment by the Insurance Company of General
Account values may be made only to the extent such deferral will not
cause a surrender of a Participant's Individual Account to fail to
satisfy section 401(a)(9) of the Code.
12.12 PREMIUM TAXES. For any Contract subject to a Premium Tax, the
Insurance Company will pay the taxes when imposed by the applicable
taxing authority. The Insurance Company, in its sole discretion, will
deduct the taxes from Contributions when received, from the proceeds
at surrender, or from the amount applied to effect an Annuity at the
time annuity payments commence.
40
<PAGE>
12.13 PARTICIPATION AND BENEFICIARY RIGHTS. The rights enforceable under
the Contract with respect to a Participant's Individual Account
shall be exercised solely by the Participant or the Participant's
designated Beneficiary. Where the Contract provides that these rights
are enforceable by the Contractholder, they shall be exercised by the
Contractholder solely in its capacity as the authorized representative
of the Participant or the Participant's Beneficiary, and with such
Participant's or Beneficiary's direction and approval.
12.14 NON-TRANSFERABILITY. Amounts held in a Participant's Individual
Account are nontransferable and cannot be sold, assigned, or pledged
as security, except as otherwise permitted under the Code and the
terms of this Contract.
41
<PAGE>
SECTION 13
SUSPENSION AND TERMINATION PROVISIONS
13.1 SUSPENSION OF CONTRACT. This contract may be suspended by the
Contractholder by written notice to the Insurance Company at its Home
Office least 90 days prior to the effective date of such suspension
The Contract will be suspended automatically on a Contract Year
anniversary if the Contractholder fails to assent to any
modifications, as described under Modification of the Contract in
Section 12 which would have been effective on or before that contract
anniversary. On suspension, contributions will be accepted by the
Insurance Company on behalf of Participants covered under the Contract
prior to the date of suspension, but no contributions will be accepted
on behalf of new Participants. Suspension of the Contract will not
affect payments to be made by the Insurance Company under an annuity
which commenced prior to the date of suspension.
13.2 CHANGE TO PAID-UP CONTRACT. The Contract will be deemed paid-up
within 30 days after the end of the Contract Year if the
Contractholder has not remitted a contribution to the Insurance
Company during the preceding twelve-month period. Effective with a
change to paid-up status, no further contributions will be accepted by
the Insurance Company and each Participant will be considered an
inactive Participant until the commencement of annuity payments on his
behalf or until the value of a Participant's Individual Account is
disbursed or applied in accordance with the Termination Provisions.
13.3 An annuity effected under this contract may not be surrendered for its
termination value after the commencement of annuity payments.
13.4 TIMING OF CASH DISTRIBUTIONS FROM SEPARATE ACCOUNT. When all or any
part of the Separate Account value of a Participant's Individual
Account is taken by the Participant in the form of a cash settlement,
payment will be made within seven (7) days following the day the
request is received, except as the Company may be permitted to defer
payment under the Investment Company Act of 1940.
13.5 TERMINATION PROVISIONS. (a) On termination of contributions to the
Contract by the Contractholder on behalf of a Participant prior to the
selected Annuity Commencement Date for such Participant, the
Participant shall have the following options:
(1) To continue the Participant's Individual Account under the
Contract. When the selected Annuity Commencement Date arrives,
the Participant shall begin
42
<PAGE>
to receive payments pursuant to the selected Annuity Option under
Section 9.2 of the Contract. Prior to the Annuity Commencement
Date, the Participant may request a distribution in accordance
with Section 5.2 of the Contract.
(2) To request an immediate distribution pursuant to one of the
settlement options described in Section 9 of the Contract,
provided such distribution otherwise satisfies the terms of
Section 5 of this Contract.
(3) To transfer an amount to another plan as provided in Section
5.3 of the Contract.
(b) This Contract shall be considered terminated when the last
payment due a Participant or Beneficiary has been paid and not assets
remain invested hereunder.
43
<PAGE>
ANNUITY PURCHASE RATE
TABLE A
Fixed Annuity
Amount Required To Purchase $1.00 of Yearly Retirement Annuity
<TABLE>
<CAPTION>
ANNUITANT'S LIFE LIFE ANNUITY WITH 50% CONTINGENT ANNUITY
AGE* ANNUITY 120 PAYMENTS CERTAIN AGE OF CONTINGENT ANNUITANT
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 60 65 70
-----------------------------
55 18.97 19.18 20.35 19.96 19.65 19.41
60 17.06 17.37 19.00 18.50 18.06 17.72
65 14.98 15.47 17.65 17.03 16.46 15.99
70 12.81 13.59 16.33 15.60 14.90 14.28
<FN>
*Age nearest birthday on date premium is determined.
</TABLE>
Amounts required for ages and forms of annuity not shown will be furnished by
The Hartford upon request. The rates applied to purchase other forms of
annuities will be the actuarial equivalent of the rates in this Annuity Purchase
Rate Table A, as determined by The Hartford.
Annuity Purchase Rate Table A is based on the 1983 IAM Mortality Table, set back
one year, and a net investment rate of 3% per annum.
<PAGE>
VARIABLE ANNUITY PURCHASE RATE
TABLE B
Amount of First Monthly Payment For Each $1000 Applied
FIRST, SECOND AND THIRD OPTIONS:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
LIFE ANNUITY LIFE ANNUITY LIFE ANNUITY
PAYEE'S LIFE WITH WITH WITH UNIT
AGE* ANNUITY 120 PAYMENTS 180 PAYMENTS 240 PAYMENTS REFUND
CERTAIN CERTAIN CERTAIN ANNUITY
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
50 4.62 4.58 4.54 4.48 4.48
55 4.98 4.92 4.85 4.75 4.77
60 5.46 5.36 5.24 5.06 5.15
65 6.14 5.94 5.70 5.38 5.64
70 7.08 6.67 6.20 5.66 6.28
--------------------------------------------------------------------------------
<FN>
* Age nearest birthday on date premium applied.
</TABLE>
Amounts required for ages and forms of annuity not shown will be furnished by
The Hartford upon request. The rates applied to purchase other forms of
annuities will be the actuarial equivalent of the rates in this Annuity Purchase
Rate Table B, as determined by The Hartford.
Annuity Purchase Rate Table B is based on the 1983 IAM Mortality Table, set back
one year, and an assumed interest rate (AIR) of 4%.
SECOND AND SUBSEQUENT ANNUITY PAYMENTS ARE BASED ON THE INVESTMENT EXPERIENCE OF
A SEPARATE ACCOUNT AND ARE VARIABLE AND NOT GUARANTEED AS TO A FIXED DOLLAR
AMOUNT.
<PAGE>
APPLICATION FOR
INDIVIDUALLY ALLOCATED [LOGO]
GROUP ANNUITY CONTRACT ITT HARTFORD
Hartford Life Insurance Company
P.O. Box 2999
Hartford, CT 06104-2999
Application is hereby made for an Individually Allocated Group Annuity Contract:
1. Applicant-Contractholder:
___________________________________________________________________________
___________________________________________________________________________
Street or P.O. Box
___________________________________________________________________________
City State Zip Code
2. Nature of Applicant's Business: __________________________________________
3. Requested Effective Date of Contract: _____________________________________
4. Special Requests: ________________________________________________________
___________________________________________________________________________
IT IS UNDERSTOOD THAT ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT WHEN
BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT.
Dated at: ________________________________ this____day of_______________,19___
For________________________________
(Contractholder)
__________________________________________
Registered Representative (Licensed Agent) By_________________________________
_________________________________
(Title)
<PAGE>
EXHIBIT 6(a)
RESTATED CERTIFICATE OF INCORPORATION
HARTFORD LIFE INSURANCE COMPANY
This Restated Certificate of Incorporation gives effect to the amendment
of the Certificate of Incorporation of the corporation and otherwise purports
merely to restate all those provisions already in effect. This Restated
Certificate of Incorporation has been adopted by the Board of Directors and
by the sole shareholder.
Section 1. The name of the corporation is Hartford Life Insurance
Company and it shall have all the powers granted by the general
statutes, as now enacted or hereinafter amended to corporations formed
under the Stock Corporation Act.
Section 2. The corporation shall have the purposes and powers to write
any and all forms of insurance which any other corporation now or
hereafter chartered by Connecticut and empowered to do an insurance
business may now or hereafter may lawfully do; to accept and to cede
reinsurance; to issue policies and contracts for any kind or
combinations of kinds of insurance; to issue policies or contracts
either with or without participation in profits; to acquire and hold any
or all of the shares or other securities of any insurance corporation;
and to engage in any lawful act or activity for which corporations may
be formed under the Stock Corporation Act. The corporation is authorized
to exercise the powers herein granted in any state, territory or
jurisdiction of the United States or in any foreign country.
Section 3. The capital with which the corporation shall commence
business shall be an amount not less than one thousand dollars. The
authorized capital shall be two million five hundred thousand dollars
divided into one thousand shares of common capital stock with a par
value of twenty-five hundred dollars each.
We hereby declare, under the penalties of false statement that the
statements made in the foregoing Certificate are true.
Dated: February 10, 1982 HARTFORD LIFE INSURANCE COMPANY
By /s/
------------------------------
Attest:
/s/ Wm. A. McMahon
------------------------------
<PAGE>
EXHIBIT 6(b)
By-Laws
of the
HARTFORD LIFE INSURANCE COMPANY
As passed and effective
February 13, 1978
and amended on
July 13, 1978
January 5, 1979
and
February 29, 1984
<PAGE>
ARTICLE I
Name - Home Office
Section 1. This corporation shall be named HARTFORD LIFE INSURANCE
COMPANY.
Section 2. The principal place of business and Home Office shall be in
the City of Hartford, Connecticut.
ARTICLE II
Stockholders' Meetings - Notice - Quorum - Right to Vote
Section 1. All meetings of the Stockholders shall be held at the
principal business office of the Company unless the Directors shall otherwise
provide and direct.
Section 2. The annual meeting of the stockholders shall be held on such
day and at such hour as the Board of Directors may decide. For cause the
Board of Directors may postpone or adjourn such annual meeting to any other
time during the year.
Section 3. Special meetings of the Stockholders may be called by the
Board of Directors, the Executive Committee, the Chairman of the Board, the
President or any Vice President.
Section 4. Notice of Stockholders' meetings shall be mailed to each
Stockholder, at his address as it appears on the records of the Company, at
least seven days prior to the meeting. The notice shall state the place, date
and time of the meeting and shall specify all matters proposed to be acted
upon at the meeting.
Section 5. At each annual meeting the Stockholders shall choose
Directors as hereinafter provided.
Section 6. Each Stockholder shall be entitled to one vote for each
share of stock held by him at all meetings of the Company. Proxies may be
authorized by written power of attorney.
Section 7. Holders of one-half of the whole amount of the stock issued
and outstanding shall constitute a quorum.
<PAGE>
-2-
Section 8. Each Stockholder shall be entitled to a certificate of stock
which shall be signed by the President or a Vice President, and either the
Treasurer or an Assistant Treasurer of the Company, and shall bear the seal
of the Company, but such signatures and seal may be facsimile if permitted by
the laws of the State of Connecticut.
ARTICLE III
Directors - Meetings - Quorum
Section 1. The property, business and affairs of the Company shall be
managed by a board of not less than three nor more than twenty Directors, who
shall be chosen by ballot at each annual meeting. Vacancies occurring between
annual meetings may be filled by the Board of Directors by election. Each
Director shall hold office until the next annual meeting of Stockholders and
until his successor is chosen and qualified.
Section 2. Meetings of the Board of Directors may be called by the
direction of the Chairman of the Board, the President, or any three Directors.
Section 3. Three days' notice of meetings of the Board of Directors
shall be given to each Director, either personally or by mail or telegraph,
at his residence or usual place of business, but notice may be waived, at any
time, in writing.
Section 4. One third of the number of existing directorships, but not
less than two Directors, shall constitute a quorum.
ARTICLE IV
Election of Officers - Duties of Board of
Directors and Executive Committee
Section 1. The President shall be elected by the Board of Directors.
The Board of Directors may also elect one of its members to serve as Chairman
of the Board of Directors. The Chairman of the Board, or an individual
appointed by him, shall have authority to appoint all other officers, except
as stated herein, including one or more Vice Presidents and Assistant Vice
Presidents, the Treasurer
<PAGE>
-3-
and one or more Associate or Assistant Treasurers, one or more Secretaries
and Assistant Secretaries and such other Officers as the Chairman of the
Board may from time to time designate. All Officers of the Company shall hold
office during the pleasure of the Board of Directors. The Directors may
require any Officer of the Company to give security for the faithful
performance of his duties.
Section 2. The Directors may fill any vacancy among the officers by
election for the unexpired term.
Section 3. The Board of Directors may appoint from its own number an
Executive Committee of not less than five Directors. The Executive Committee
may exercise all powers vested in and conferred upon the Board of Directors at
any time when the Board is not in session. A majority of the members of said
Committee shall constitute a quorum.
Section 4. Meetings of the Executive Committee shall be called whenever
the Chairman of the Board, the President or a majority of its members shall
request. Forty-eight hours' notice shall be given of meetings but notice may
be waived, at any time, in writing.
Section 5. The Board of Directors shall annually appoint from its own
number a Finance Committee of not less than three Directors, whose duties
shall be as hereinafter provided.
Section 6. The Board of Directors may, at any time, appoint such other
Committees, not necessarily from its own number, as it may deem necessary for
the proper conduct of the business of the Company, which Committees shall
have only such powers and duties as are specifically assigned to them by the
Board of Directors or the Executive Committee.
Section 7. The Board of Directors may make contributions, in such
amounts as it determines to be reasonable, for public welfare or for
charitable, scientific or educational purposes, subject to the limits and
restrictions imposed by law and to such rules and regulations consistent with
law as it makes.
ARTICLE V
Officers
Chairman of the Board
Section 1. The Chairman of the Board shall preside at the meetings of
the Board of Directors and the Executive Committee and, in the absence of the
Chairman of the Finance Committee, at the meetings of the Finance Committee.
In the absence or inability of the Chairman of the Board to so preside, the
President shall preside in his place.
<PAGE>
-4-
Section 2. The President, under the supervision and control of the
Chairman of the Board, shall have general charge and oversight of the
business and affairs of the Company. The President shall preside at the
meetings of the Stockholders. He shall be a member of and shall preside at
all meetings of all Committees not referred to in Section 1 of this ARTICLE
except that he may designate a Chairman for each such other Committee.
Section 3. In the absence or inability of the President to perform his
duties, the Chairman of the Board may designate a Vice President to exercise
the powers and perform the duties of the President during such absence or
inability.
Secretary
Section 4. The Secretary of the Corporation shall keep a record of all
the meetings of the Company, of the Board of Directors and of the Executive
Committee, and he shall discharge all other duties specifically required of
the Secretary by law. The other Secretaries and Assistant Secretaries shall
perform such duties as may be assigned to them by the Board of Directors or
by their senior officers and any Secretary or Assistant Secretary may affix
the seal of the Company and attest it and the signature of any officer to any
and all instruments.
Treasurer
Section 5. The Treasurer shall keep, or cause to be kept, full and
accurate accounts of the Company. He shall see that the funds of the Company
are disbursed as may be ordered by the Board of Directors of the Finance
Committee. He shall have charge of all moneys paid to the Company and on
deposit to the credit of the Company or in any other properly authorized name,
in such banks or depositories as may be designated in a manner provided by
these by-laws. He shall also discharge all other duties that may be required
of him by law.
Other Officers
Section 6. The other officers shall perform such duties as may be
assigned to them by the President or the Board of Directors.
<PAGE>
-5-
ARTICLE VI
Finance Committee
Section 1. If a Finance Committee is established it shall be the duty
of that committee to supervise the investment of the funds of the Company in
securities in which insurance companies are permitted by law to invest, and
all other matters connected with the management of investments. If no Finance
Committee is established this duty shall be performed by the Board of
Directors.
Section 2. All loans or purchases for the investment and reinvestment
of the funds of the Company shall be submitted for approval to the Finance
Committee, if not specifically approved by the Board of Directors.
Section 3. Sale or transfer of any stocks or bonds shall be made upon
authorization of the Finance Committee unless specifically authorized by the
Board of Directors.
Section 4. Transfers of stock and registered bonds, deeds, leases,
releases, sales, mortgages chattle or real, assignments or partial releases
of mortgages chattel or real, and in general all instruments of defeasance of
property and all agreements or contracts affecting the same, except
discharges of mortgages and entries to foreclose the same as hereinafter
provided, shall be authorized by the Finance Committee or the Board of
Directors, and be executed jointly for the Company by two persons, to wit:
The Chairman of the Board, the President or a Vice President, and a
Secretary, the Treasurer or an Assistant Treasurer, but may be acknowledged
and delivered by either one of those executing the instrument; provided,
however, that either a Secretary, the Treasurer, or an Assistant Treasurer
alone, when authorized as aforesaid, or any person specially authorized by
the Finance Committee as attorney for the Company, may make entry to
foreclose any mortgage, and a Secretary, the Treasurer or an Assistant
Treasurer alone is authorized, without the necessity of further authority, to
discharge by deed or otherwise any mortgage on payment to the Company of the
principal, interest and all charges due.
Section 5. The Finance Committee may fix times and places for regular
meetings. No notice of regular meetings shall be necessary. Reasonable notice
shall be given of special meetings but the action of a majority of the
Finance Committee at any meeting shall be valid notwithstanding any defect
in the notice of such meeting.
<PAGE>
-6-
Section 6. In the absence of specific authorization from the Board of
Directors or the Finance Committee, the Chairman of the Board, the President,
a Vice President or the Treasurer shall have the power to vote or execute
proxies for voting any shares held by the Company.
ARTICLE VII
Funds
Section 1. All monies belonging to the Company shall be deposited to
the credit of the Company, or in such other name as the Finance Committee,
the Chairman of the Finance Committee or such executive officers as are
designated by the Board of Directors shall direct, in such bank or banks as
may be designated from time to time by the Finance Committee, the Chairman of
the Finance Committee, or by such executive officers as are designated by the
Board of Directors. Such monies shall be drawn only on checks or drafts
signed by any two executive officers of the Company, provided that the Board
of Directors may authorize the withdrawal of such monies by check or draft
signed with the facsimile signature of any one or more executive officers,
and provided further, that the Finance Committee may authorize such
alternative methods of withdrawals as it deems proper.
The Board of Directors, the President, the Chairman of the Finance
Committee, a Vice President, or such executive officers as are designated by
the Board of Directors may authorize withdrawal of funds by checks or drafts
drawn at offices of the Company to be signed by Managers, General Agents or
employees of the Company, provided that all such checks or drafts shall be
signed by two such authorized persons, except checks or drafts used for the
payment of claims or losses which need be signed by only one such authorized
person, and provided further that the Board of Directors of the Company or
executive officers designated by the Board of Directors may impose such
limitations or restrictions upon the withdrawal of such funds as it deems
proper.
<PAGE>
-7-
ARTICLE VIII
Indemnity of Directors and Officers
Section 1. The Company shall indemnify and hold harmless each Director
and officer now or hereafter servicing the Company, whether or not then in
office, from and against any and all claims and liabilities to which he may
be or become subject by reason of his being or having been a Director or
officer of the Company, or of any other company which he serves as a Director
or officer at the request of the Company, to the extent such is consistent
with the statutory provisions pertaining to indemnification, and shall
provide such further indemnification for legal and/or all other expenses
reasonably incurred in connection with defending against such claims and
liabilities as is consistent with statutory requirements.
ARTICLE IX
Amendment of ByLaws
Section 1. The Directors shall have power to adopt, amend and repeal
such bylaws as may be deemed necessary or appropriate for the management of
the property and affairs of the Company.
Section 2. The Stockholders at any annual or special meeting may amend
or repeal these bylaws or adopt new ones if the notice of such meeting
contains a statement of the proposed alteration, amendment, repeal or
adoption, or the substance thereof.
<PAGE>
2
ARTICLE I
Name - Home Office
Section 1. This corporation shall be named Hartford Life Insurance
Company.
Section 2. The principal place of business and Home Office shall be
in the City of Hartford, Connecticut.
ARTICLE II
Stockholders' Meetings - Notice - Quorum - Right to Vote
Section 1. All meetings of the Stockholders shall be held at the
principal business office of the Company unless the Directors shall
otherwise provide and direct.
Section 2. The annual meeting of the Stockholders shall be held on
such day and at such hour as the Board of Directors may decide. For
cause the Board of Directors may postpone or adjourn such annual
meeting to any other time during the year.
Section 3. Special meetings of the Stockholders may be called by
the Board of Directors, the Executive Committee, the Chairman of the
Board, the President or any Vice President.
Section 4. Notice of Stockholders' meetings shall be mailed to each
Stockholder, at his address as it appears on the records of the
Company, at least seven days prior to the meeting. The notice shall
state the place, date and time of the meeting and shall specify all
matters proposed to be acted upon at the meeting.
Section 5. At each annual meeting the Stockholders shall choose
Directors as hereinafter provided.
Section 6. Each Stockholder shall be entitled to one vote for each
share of stock held by him at all meetings of the Company. Proxies
may be authorized by written power of attorney.
Section 7. Holders of one-half of the whole amount of the stock
issued and outstanding shall constitute a quorum.
<PAGE>
3
Section 8. Each Stockholder shall be entitled to a certificate of
stock which shall be signed by the President or a Vice President,
and either the Treasurer or an Assistant Treasurer of the Company,
and shall bear the seal of the Company, but such signatures and seal
may be facsimile if permitted by the laws of the State of
Connecticut.
ARTICLE III
Directors - Meetings - Quorum
Section 1. The property, business and affairs of the Company shall
be managed by a board of not less than three nor more than twenty
Directors, who shall be chosen by ballot at each annual meeting.
Vacancies occurring between annual meetings may be filled by the
Board of Directors by election. Each Director shall hold office
until the next annual meeting of Stockholders and until his
successor is chosen and qualified.
Section 2. Meetings of the Board of Directors may be called by the
direction of the Chairman of the Board, the President, or any three
Directors.
Section 3. Three days' notice of meetings of the Board of Directors
shall be given to each Director, either personally or by mail or
telegraph, at his residence or usual place of business, but notice
may be waived, at any time, in writing.
Section 4. One third of the number of existing directorships, but
not less than two Directors, shall constitute a quorum.
ARTICLE IV
Elections of Officers - Duties of Board of
Directors and Executive Committee
Section 1. The Board of Directors shall annually elect a Chairman
of the Board, a President, a Secretary of the Corporation and a
Treasurer. It may elect such Vice Presidents, other Secretaries,
Assistant Secretaries, Assistant Treasurers and such other officers
as it may determine. All officers of the Company shall hold office
during the pleasure of the Board of Directors.
<PAGE>
4
Section 2. The Directors may fill any vacancy among the officers by
election for the unexpired term.
Section 3. The Board of Directors may appoint from its own number
an Executive Committee of not less than five Directors. The
Executive Committee may exercise all powers vested in and conferred
upon the Board of Directors at any time when the Board is not in
session. A majority of the members of said Committee shall
constitute a quorum.
Section 4. Meetings of the Executive Committee shall be called
whenever the Chairman of the Board, the President or a majority of
its members shall request. Forty-eight hours' notice shall be given
of meetings but notice may be waived, at any time, in writing.
Section 5. The Board of Directors may annually appoint from its own
number a Finance Committee of not less than three Directors, whose
duties shall be as hereinafter provided.
Section 6. The Board of Directors may, at any time, appoint such
other Committees, not necessarily from its own number, as it may
deem necessary for the proper conduct of the business of the
Company, which Committees shall have only such powers and duties as
are specifically assigned to them by the Board of Directors or the
Executive Committee.
Section 7. The Board of Directors may make contributions, in such
amounts as it determines to be reasonable, for public welfare or for
charitable, scientific or educational purposes, subject to the
limits and restrictions imposed by law and to such rules and
regulations consistent with law as it makes.
ARTICLE V
Officers
Chairman of the Board
Section 1. The Chairman of the Board shall preside at the meetings
of the Board of Directors and the Executive Committee and, in the
<PAGE>
5
absence of the Chairman of the Finance Committee, at the meetings of
the Finance Committee. In the absence or inability of the Chairman
of the Board to so preside, the President shall preside in his place.
President
Section 2. The President, under the supervision and control of the
Chairman of the Board, shall have general charge and oversight of
the business and affairs of the Company. The President shall
preside at the meetings of the Stockholders. He shall be a member
of and shall preside at all meetings of all Committees not referred
to in Section 2 of this ARTICLE except that he may designate a
Chairman for each such other Committee.
Section 3. In the absence or inability of the President to perform
his duties, the Chairman of the Board may designate a Vice President
to exercise the powers and perform the duties of the President
during such absence or inability.
Secretary
Section 4. The Secretary of the Corporation shall keep a record of
all the meetings of the Company, of the Board of Directors and of
the Executive Committee, and he shall discharge all other duties
specifically required of the Secretary by law. The other
Secretaries and the Assistant Secretaries shall perform such duties
as may be assigned to them by the Board of Directors or by their
senior officers and any Secretary or Assistant Secretary may affix
the seal of the Company and attest it and the signature of any
officer to any and all instruments.
Treasurer
Section 5. The Treasurer shall keep, or cause to be kept, full and
accurate accounts of the Company. He shall see that the funds of
the Company are disbursed as may be ordered by the Board of
Directors or the Finance Committee. He shall have charge of all
moneys paid to the Company and on deposit to the credit of the
Company or in any other properly authorized name, in such banks or
depositories as may be designated in a manner provided by these
bylaws. He shall also discharge all other duties that may be
required of him by law.
<PAGE>
6
Other Officers
Section 6. The other officers shall perform such duties as may be
assigned to them by the President or the Board of Directors.
ARTICLE VI
Finance Committee
Section 1. If a Finance Committee is established it shall be the
duty of that committee to supervise the investment of the funds of
the Company in securities in which insurance companies are permitted
by law to invest, and all other matters connected with the
management of investments. If no Finance Committee is established,
this duty shall be performed by the Board of Directors.
Section 2. All loans or purchases for the investment and
reinvestment of the funds of the Company shall be submitted for
approval to the Finance Committee, if not specifically approved by
the Board of Directors.
Section 3. Sale or transfer of any stocks or bonds shall be made
upon authorization of the Finance Committee unless specifically
authorized by the Board of Directors.
Section 4. Transfers of stock and registered bonds, deeds, leases,
releases, sales, mortgages chattel or real, assignments or partial
releases of mortgages chattel or real, and in general all
instruments of defeasance of property and all agreements or
contracts affecting the same, except discharges of mortgages and
entries to foreclose the same as hereinafter provided, shall be
authorized by the Finance Committee or the Board of Directors, and
be executed jointly for the Company by two persons, to wit: the
Chairman of the Board, the President or a Vice President, and a
Secretary, the Treasurer or an Assistant Treasurer, but may be
acknowledged and delivered by either one of those executing the
instrument; provided, however, that either a Secretary, the
Treasurer, or an Assistant Treasurer alone, when authorized as
aforesaid, or any person specially authorized by the Finance
Committee as attorney for the Company, may make entry to foreclose
any mortgage, and a Secretary, the Treasurer or an Assistant
Treasurer alone is authorized, without the necessity of further
authority, to discharge by deed or otherwise any mortgage on payment
to the Company of the principal, interest and all charges due.
<PAGE>
7
Section 5. The Finance Committee may fix times and places for
regular meetings. No notice of regular meetings shall be
necessary. Reasonable notice shall be given of special meetings but
the action of a majority of the Finance Committee at any meeting
shall be valid notwithstanding any defect in the notice of such
meeting.
Section 6. In the absence of specific authorization from the Board
of Directors or the Finance Committee, the Chairman of the Board,
the President, a Vice President or the Treasurer shall have the
power to vote or execute proxies for voting any shares held by the
Company.
ARTICLE VII
Funds
Section 1. All monies belonging to the Company shall be deposited
to the credit of the Company, or in such other name as the Finance
Committee, the Chairman of the Finance Committee or such executive
officers as are designated by the Board of Directors shall direct,
in such bank or banks as may be designated from time to time by the
Finance Committee, the Chairman of the Finance Committee or by such
executive officers as are designated by the Board of Directors.
Such monies shall be drawn only on checks or drafts signed by any
two executive officers of the Company, provided that the Board of
Directors may authorize the withdrawal of such monies by check or
draft signed with the facsimile signature of any one or more
executive officers, and provided further, that the Finance Committee
may authorize such alternative methods of withdrawal as it deems
proper.
The Board of Directors, the President, the Chairman of the Finance
Committee, a Vice President, or such executive officers as are
designated by the Board of Directors may authorize withdrawal of
funds by checks or drafts drawn at offices of the Company to be
signed by Managers, General Agents or employees of the Company,
provided that all such checks or drafts shall be signed by two such
authorized persons, except checks or drafts used for the payment of
claims or losses which need to be signed by only one such authorized
person, and provided further that the Board of Directors of the
Company or executive officers designated by the Board of Directors
may impose such limitations or restrictions upon the withdrawal of
such funds as it deems proper.
<PAGE>
8
ARTICLE VIII
Indemnity of Directors and Officers
Section 1. The Company shall indemnify and hold harmless each
Director and officer now or hereafter serving the Company, whether
or not then in office, from and against any and all claims and
liabilities to which he may be or become subject by reason of his
being or having been a director or officer of the Company, or of any
other company which he serves as a director or officer at the
request of the Company, to the extent such is consistent with
statutory provisions pertaining to indemnification, and shall
provide such further indemnification for legal and/or all other
expenses reasonably incurred in connection with defending against
such claims and liabilities as is consistent with statutory
requirements.
ARTICLE IX
Amendment of Bylaws
Section 1. The Directors shall have power to adopt, amend and
repeal such bylaws as may be deemed necessary or appropriate for
the management of the property and affairs of the Company.
Section 2. The Stockholders at any annual or special meeting may
amend or repeal these bylaws or adopt new ones if the notice of such
meeting contains a statement of the proposed alteration, amendment,
repeal or adoption, or the substance thereof.
<PAGE>
1.0 FUND PARTICIPATION AGREEMENT
1.1 This Agreement, effective January 1, 1989, by and
among Hartford Life Insurance Company, a Connecticut
stock life insurance corporation with principal
offices at 200 Hopmeadow Street, Simsbury,
Connecticut 06089 ("Hartford"), Acacia Capital
Corporation, a registered investment company with
principal offices at 51 Louisiana Avenue, N.W.,
Washington, D.C. 20001, (the "Fund"), and Calvert
Asset Management Company, Inc., registered
investment advisor to the Fund, with principal
offices at 4550 Montgomery Avenue, Bethesda,
Maryland 20814 ("Calvert").
1.2 In consideration of the promises, representations,
warranties, covenants, agreements and conditions
contained herein, and in order to set forth the
terms and conditions of the transactions
contemplated hereby and the mode of carrying the
same into effect, and intending to be legally bound,
the parties hereto agree to the provisions set forth
below.
2.0 THE VARIABLE ANNUITY CONTRACT AND THE SEPARATE ACCOUNT
2.1 Hartford shall maintain a variable annuity contract
(the "Contract") designed to provide, under current
law, the benefits of a tax-deferred accumulation of
income for retirement and other purposes.
2.2 Purchase payments for the Contracts shall be
invested by Hartford in a separate account or
accounts. Such payments will constitute the assets
of the separate account and shall be invested, as
directed by purchasers, in certain open-end
diversified management companies registered under
the Investment Company Act of 1940 ("1940 Act").
2.3 One of the open-end diversified management companies
is the Fund, an open-end diversified management
investment company with eight separate series,
registered under the 1940 Act. Each series is a
separate investment portfolio with distinct
investment objectives.
2.4 Hartford will offer one or more of the series of
the Fund, including the Calvert Socially Responsible
Series (the "Series"), through the separate account
<PAGE>
to its Contract Owners, except that Hartford agrees
not to offer any series of the Fund until the
exemptive order referenced in Section 3.2.3 of this
Agreement has been granted by the Securities and
Exchange Commission ("SEC"). Hartford will
determine in its discretion what separate account or
accounts will offer the Series.
2.5 Hartford will use the name "Hartford Socially
Responsive Fund" in its marketing and sales
literature when referring to the Series, and agrees
to indicate in such literature that "the investment
adviser of the Fund is Calvert Asset Management
Company, Inc."
2.5.1 Hartford will use its best efforts to market
and promote the Series for its Contracts, and
will market and promote the Series in all of
its markets, if the plan permits this type of
fund.
2.5.2 In marketing its Contracts, Hartford will
comply with all applicable State and Federal
laws. Hartford and its agents shall make no
representations or warranties concerning the
Fund or Series shares except those contained
in the then current prospectuses of the Fund
and in the Fund's current printed sales
literature. Copies of all advertising and
sales literature describing or concerning the
Fund which is prepared by Hartford or its
agents for use in marketing its Contracts
(except those for internal or broker/dealer
use only) will be sent to Calvert when such
material is released to the public, agents or
brokers or is submitted to the Securities and
Exchange Commission ("SEC"), National
Association of Securities Dealer, Inc.
("NASD"), or other regulatory body for review.
Hartford shall be responsible for compliance
with any state or federal filing or review
requirements concerning advertising and sales
literature.
2.5.3 Hartford and its agents will no oppose voting
recommendations from Calvert or the Fund's
Board of Directors or interfere with the
solicitation of proxies for the Fund shares
held for Hartford Contract Owners, unless
Hartford deems such recommendations
detrimental to it or to its Contract Owners.
Hartford agrees to provide pass-through voting
privileges to all Hartford Contract Owners and
to assure that each of its separate accounts
<PAGE>
participating in the Fund calculates voting
privileges in a manner consistent with all
other separate accounts of any insurance
company investing in the Fund, as required by
the exemptive order referenced in Section
3.2.3 of this Agreement.
2.5.4 Hartford will be responsible for reporting to
the Fund's Board of Directors any potential or
existing conflicts among the interests of the
contract owners of all separate accounts
investing in the Fund, and to assist the Board
by providing it will all information
reasonably necessary for the Board to consider
any issues raised. The Fund's Board of
Directors is responsible for monitoring any
conflict of interest situation. Hartford and
the other relevant insurance companies will be
responsible for taking remedial action in the
event of a Board determination of an
irreconcilable material conflict and to bear
the cost of such remedial action and these
responsibilities will be carried out with a
view only to the interests of contract owners.
For purposes of this Section 2.5.4, a majority
of the disinterested members of the Fund's
Board shall determine whether or not any
proposed action adequately remedies any
irreconcilable material conflict, but in no
event will the Fund or Calvert be required to
establish a new fund medium for any
variable contract. Hartford shall not be
required by this section to establish a new
funding medium for any variable contract if an
offer to do so has been declined by vote of a
majority of contract owners materially
adversely affected by the irreconcilable
material conflict.
2.6 Hartford will bear the costs of, and have the
primary responsibility for:
2.6.1 Registering the Contracts and the
separate account with the SEC, including any
Application for Exemptive Relief necessary for
the separate account to buy Fund shares;
2.6.2 Developing all policy forms, application
forms, confirmations and other administrative
forms or documents and filing such of these as
are necessary to comply with the requirements
of all insurance laws and regulations in each
state in which the contracts are offered;
<PAGE>
2.6.3 Administration of the Contracts and the
separate account, including all policyholder
service and communication activities;
2.6.4 Preparing and approving all marketing and
sales literature involving the sale of Fund
shares to the Hartford's separate account;
2.6.5 Printing and distributing to Hartford Contract
Owners copies of the current prospectuses,
statements of additional information (as
requested by Contract Owners) and periodic
reports for the separate account and the Fund;
2.6.6 Preparing and filing any reports or other
filings as may be required under state
insurance laws or regulations with respect to
the contracts or the separate account; and
2.6.7 Reimbursing the Fund up to $1500 for the cost
of obtaining a separate audit opinion for the
1988 fiscal year for the Series, distinct from
the other seven series; and further, Hartford
agrees that for every year thereafter, it will
engage in good faith negotiations with Calvert
and the Fund regarding such reimbursement by
Hartford.
3.0 THE SERIES
3.1 The Fund and Calvert shall make available shares of
the Series as the underlying investment media for
Hartford Contract Owners.
3.2 Calvert shall bear the costs of, and subject to
review by Hartford, shall have, or shall cause the
Fund and the Series to assume, the primary
responsibility for:
3.2.1 Registering the Fund with SEC including a
separate prospectus for the Series which does
not reference the other seven series of the
Fund. The costs of printing and distributing
such prospectus to Hartford Contract Owners
shall be borne by Hartford as provided in
Section 2.6.5 above.
3.2.2 Preparing, producing and maintaining the
effectiveness of such registration statements
for the Fund as are required under federal and
state securities laws, and clearing such
registration statements through the SEC and
pursuant to the securities laws and
regulations in each state in which the
contracts are offered;
<PAGE>
3.2.3 Preparing and filing an Application for
Exemptive Relief requesting appropriate
exemptive relief from the relevant provisions
of the 1940 Act ("Application") and clearing
such Application through the SEC, thereby
permitting Hartford contracts to use the Fund
as an underlying investment alternative for
its variable annuity contracts.
3.2.4 Operating and maintaining the Fund in
accordance with applicable law, including the
diversification standards of the Internal
Revenue Code of 1986 applicable to variable
annuity contracts;
3.2.5 Preparing and filing any reports or other
filings as may be required with respect to the
Fund under federal or state securities laws;
3.2.6 Providing Hartford with the daily net asset
values of the Fund by 6:00 p.m. E.S.T. on each
day the New York Stock Exchange is open.
3.2.7 Providing Hartford with camera-ready copy
necessary for the printing of the periodic
shareholder reports for the Fund.
3.3 The Fund or Calvert shall maintain records in
accordance with the Investment Company Act of 1940
or other statutes, rules and regulations applicable
to the Fund's operation in connection with the
performance of its duties. Hartford shall have the
right to access such records, upon reasonable notice
and during business hours, in order to respond to
regulatory requirements, inquiries, complaints or
judicial proceedings. Records of all transactions
with respect to the Contracts shall be retained for
a period of not less than six (6) years from each
transaction.
3.4 The parties or their duly authorized independent
auditors have the right under this Agreement to
perform on-site audits of records pertaining to the
Contracts and the Fund, at such frequencies as each
shall determine, upon reasonable notice and during
normal business hours. At the request of the other,
each will make available to the other's auditors
and/or representatives of the appropriate regulatory
agencies, all requested records, data, and access to
operating procedures.
4.0 INDEMNIFICATION
4.1 Hartford shall indemnify and hold the Fund and
Calvert and each of their respective directors,
<PAGE>
officers, employees and agents harmless from any
liability or expense (including reasonable
attorneys' fees) arising from any failure of
Hartford or the separate account to fulfill its
respective obligations under this Agreement.
4.2 The Fund and Calvert shall indemnify and hold
Hartford and its directors, officers, employees and
agents harmless from all liabilities or expenses
(including reasonable attorneys' fees) arising from
any failure of the Fund or Calvert to fulfill its
respective obligations under this Agreement and
Calvert shall indemnify and hold such parties
harmless from a failure of the Fund's investment
adviser to manage the Fund in compliance with the
diversification requirements of the Internal Revenue
Code of 1986, as amended, or any regulations
thereunder.
5.0 COST AND EXPENSES
5.1 Except for costs and expenses for which
indemnification is required pursuant to section 4.0
or as otherwise agreed by the parties in specific
instances or, as set forth herein, the parties shall
each pay their respective costs and expenses
incurred by them in connection with this Agreement.
6.0 TERM OF AGREEMENT
6.1 The term of this Agreement shall be indefinite
unless terminated pursuant to Section 7 of this
Agreement.
7.0 TERMINATION
7.1 This Agreement will terminate:
7.1.1 At the option of any party upon six months'
prior written notice to the other parties, but
no party may terminate this Agreement prior to
January 1, 1990. If a party notifies the
other parties that it intends to terminate
this Agreement, the affected parties shall
immediately file with the SEC such documents,
if any, as are necessary to permit the
offering of shares of the Series to Hartford
Contract Owners to be discontinued; or
7.1.2 Upon assignment of this Agreement unless the
assignment is made with the written consent of
the other party.
<PAGE>
7.1.3 In the event of termination of this Agreement
pursuant to this Section 7.0, the provisions
of Sections 4.0, 5.0, and 8.0 shall survive
such termination.
8.0 GENERAL PROVISIONS
8.1 This Agreement is the complete and exclusive
statement of the agreement between the parties as to
the subject matter hereof which supersedes all
proposals or agreements, oral or written, and all
other communications between the parties related to
the subject matter of this Agreement.
8.2 This Agreement can only be modified by a written
agreement duly signed by the persons authorized to
sign agreements on behalf of the respective party.
8.3 If any provision or provisions of this Agreement
shall be held to be invalid, illegal or
unenforceable, the validity, legality and
enforceability of the remaining provisions shall not
in any way be affected or be impaired thereby.
8.4 This Agreement and the rights, duties and
obligations of the parties hereto shall not be
assignable by either party hereto without the prior
written consent of the other.
8.5 Any controversy relating to this Agreement shall be
determined by arbitration in Washington, D.C. in
accordance with the Commercial Arbitration rules of
the American Arbitration Association using
arbitrators who will follow substantive rules of
law. The dispute shall be determined by an
arbitrator acceptable to both parties who shall be
selected within seven (7) days of filing of notices
of intention to arbitrate. Otherwise, the dispute
shall be determined by a panel of three arbitrators
selected as follows: Within seven (7) days of
filing notice of intention to arbitrate, each party
will appoint one arbitrator. These two arbitrators
will then name a third arbitrator, who shall be an
attorney admitted before the bar of any state of the
United States, to preside over the panel. If either
party fails to appoint an arbitrator, or if the two
arbitrators do not name a third arbitrator within
seven (7) days, either party may request the
American Arbitration Association to appoint the
necessary arbitrator(s) pursuant to Rule 13 of the
Commercial Arbitration Rules. Each party will pay
its own cost and expenses. All testimony shall be
transcribed. The award of the panel shall be
accompanied by findings of fact and a statement of
<PAGE>
reasons for the decision. All parties agree to be
bound by the results of this arbitration; judgment
upon the award so rendered may be entered and
enforced in any court of competent jurisdiction. To
the extent reasonably practicable, both parties
agree to continue performing their respective
obligations under this Agreement while the dispute
is being resolved. Nothing contained in this
subsection shall prohibit either party from seeking
equitable relief without resorting to arbitration
under such circumstances as said party reasonably
believes that its interests hereunder and in its
property may be compromised. All matters relating
to such arbitration shall be maintained in
confidence.
8.6 No waiver by either party of any default by the
other in the performance of any promise, term or
condition of this Agreement shall be construed to be
a waiver by such party of any other or subsequent
default in performance of the same or any other
covenant, promise, term or condition of this
Agreement. No prior transactions or dealings
between the parties shall be deemed to establish any
custom or usage waiving or modifying any provision
hereof.
8.7 No liability shall result to any party, nor shall
any party be deemed to be in default hereunder, as
the result of delay in its performance or from its
non-performance hereunder caused by circumstances
beyond its control, including but not limited to:
act of God, act of war, riot, epidemic; fire; flood
or other disaster; or act of government.
Nevertheless, the party shall be required to be
diligent in attempting to remove such cause or
causes.
8.8 Each of the parties will act as an independent
contractor under the terms of this Agreement and
neither is now, or in the future, an agent or a
legal representative of the other for any purpose.
Neither party has any right or authority to
supervise or control the activities of the other
party's employees in connection with the performance
of this Agreement or to assign or create any
application of any kind, express or implied, on
behalf of the other party or to bind it in any way,
to accept any service of process upon it or to
receive any notice of any nature whatsoever on its
behalf.
8.9 This Agreement shall be governed by and interpreted
in accordance with the laws of the State of
Connecticut.
<PAGE>
8.10 Nothing herein shall prevent either party from
participating in any proceeding before any
regulatory authority having jurisdiction over any
matter relating to this Agreement, the Contracts,
the separate account or the Fund which may affect
the parties to it. The parties shall each give the
others prompt notice of any such proceeding.
8.11 In all matters relating to the preparation, review,
prior approval and filing of documents, the parties
shall cooperate in good faith. Neither party shall
unreasonably withhold its consent with respect to
the filing of any document with any federal or state
regulatory authority having jurisdiction over the
Contracts, the separate account or the Fund.
8.12 Captions contained in this Agreement are for
reference purposes only and do not constitute part
of this Agreement.
8.13 All notices which are required to be given or
submitted pursuant to this Agreement shall be in
writing and shall be sent be registered or certified
mail, return receipt requested, to the addresses set
forth below:
President Secretary
Hartford Life Acacia Capital Corporation
Insurance Company 4550 Montgomery Avenue
200 Hopmeadow Street Suite 1000 N
Simsbury, CT 06089 Bethesda, MD 20814
or to such other address as the parties may from
time to time designate. Any notice of one party
refused by the other shall be deemed received as of
the date of said refusal.
8.14 Each party hereto shall promptly notify the other in
writing of any claims, demands or actions having any
bearing on this Agreement.
8.15 Each party agrees to perform its obligations
hereunder in accordance with all applicable laws,
rules and regulations now or hereafter in effect.
8.16 In the event of a material breach by either party of
any of the provisions of this Agreement, the injured
party, in addition to any other remedies available
to it under law, shall be entitled to seek an
injunction restraining the other party from the
performance of acts which constitute a breach of
this Agreement, and such other party agrees not to
raise adequacy of legal remedies as a defense
thereof.
<PAGE>
8.17 If this Agreement is terminated for other than
default, it is specifically agreed that neither
party shall be entitled to compensation of any kind
except as specifically set forth herein.
8.18 In any litigation or arbitration between the
parties, the prevailing party shall be entitled to
reasonable attorneys' fees and all costs of
proceedings incurred in enforcing this Agreement.
8.19 This Agreement shall be binding upon and inure to
the benefit of the parties hereto, their successors
and permitted assigns.
8.20 Each party represents that it has full power and
authority to enter into and perform this Agreement,
and the person signing this Agreement on behalf of
it has been properly authorized and empowered to
enter into this Agreement. Each party further
acknowledges that it has read this Agreement,
understands it, and agrees to be bound by it.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement.
ACACIA CAPITAL CORPORATION HARTFORD LIFE INSURANCE
COMPANY
BY: /s/ Clifton S. Sorrell, Jr. BY: /s/ Charles A. Clinton
___________________________ _______________________
Clifton S. Sorrell, Jr. Charles A. Clinton
President Vice President
CALVERT ASSET MANAGEMENT
COMPANY, INC.
BY: /s/ Reno J. Martini
_____________________
Reno J. Martini
Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 4,094,415,226
<INVESTMENTS-AT-VALUE> 4,122,471,405
<RECEIVABLES> 2,789,873
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,125,261,278
<PAYABLE-FOR-SECURITIES> 2,748,831
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 2,748,831
<SENIOR-EQUITY> 0
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<NET-ASSETS> 4,122,512,447
<DIVIDEND-INCOME> 114,504,391
<INTEREST-INCOME> 0
<OTHER-INCOME> 128,467,414
<EXPENSES-NET> (47,783,701)
<NET-INVESTMENT-INCOME> 195,188,104
<REALIZED-GAINS-CURRENT> (1,871,767)
<APPREC-INCREASE-CURRENT> (293,133,636)
<NET-CHANGE-FROM-OPS> (99,817,299)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 699,965,436
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
ARTHUR ANDERSEN LLP
[LETTERHEAD]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company and Subsidiaries:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Hartford Life Insurance Company
and subsidiaries included in this registration statement and have issued our
report thereon dated January 30, 1995. Our audits were made for the purpose
of forming an opinion on the basic consolidated financial statements taken as
a whole. The accompanying schedules are the responsibility of the Company's
management and are presented for purposes of complying with the Securities
and Exchange Commission's rules and are not part of the basic consolidated
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
/s/ Arthur Andersen LLP
Hartford, Connecticut
January 30, 1995
<PAGE>
ARTHUR ANDERSEN LLP
[LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this Registration Statement on Form N-4 for Hartford Life Insurance Company.
/s/ Arthur Andersen LLP
Hartford, Connecticut
May 12, 1995
