<PAGE>
HARTFORD
LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO (DC-II)
Tax Sheltered Annuity/Individual Retirement Annuity
[LOGO]
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
may contain a General Account option which allows participants to allocate
contributions to the General Account of Hartford Life. The General Account
option, if applicable, is not described in this Prospectus.
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 -- shares of Hartford Advisers Fund, Inc.
Sub-Account ("Advisers Fund")
Bond Fund Sub-Account -- shares of Hartford Bond Fund, Inc. ("Bond Fund")
Capital Appreciation -- shares of Hartford Capital Appreciation Fund,
Fund Sub-Account Inc. (formerly "Hartford Aggressive Growth Fund,
Inc.") ("Capital Appreciation Fund")
Dividend and Growth Fund -- shares of Hartford Dividend and Growth Fund,
Sub-Account Inc. ("Dividend and Growth Fund")
Index Fund Sub-Account -- shares of Hartford Index Fund, Inc. ("Index
Fund")
International -- shares of Hartford International Opportunities
Opportunities Fund Fund, Inc. ("International Opportunities Fund")
Sub-Account
Money Market Fund Sub- -- shares of HVA Money Market Fund, Inc. ("Money
Account Market Fund")
Mortgage Securities Fund -- shares of Hartford Mortgage Securities Fund,
Sub-Account Inc. ("Mortgage Securities Fund")
Responsibly Invested -- shares of Calvert Responsibly Invested Balanced
Balanced Fund Fund Series of Acacia Capital Corporation.
Sub-Account (formerly Calvert Socially Responsive Fund)
("Responsibly Invested Balanced Fund")
Stock Fund Sub-Account -- shares of Hartford Stock Fund, Inc. ("Stock
Fund")
AMS/TCI Advantage Fund -- shares of TCI Portfolios, Inc. TCI Advantage
Sub-Account ("AMS/TCI Advantage Fund")
AMS/TCI Growth Fund Sub- -- shares of TCI Portfolios, Inc. TCI Growth
Account ("AMS/TCI Growth Fund")
AMS/Fidelity VIP II -- shares of Fidelity Investments Variable
Asset Manager Fund Insurance Products II Asset Manager
Sub-Account ("AMS/Fidelity VIP II Asset Manager Fund")
AMS/Fidelity VIP II -- shares of Fidelity Investments Variable
Contrafund Fund Insurance Products II Contrafund Fund
Sub-Account ("AMS/Fidelity VIP II Contrafund Fund")
AMS/Fidelity VIP Growth -- shares of Fidelity Investments Variable
Fund Sub-Account Insurance Products Growth Fund ("AMS/Fidelity
VIP Growth Fund")
AMS/Fidelity VIP -- shares of Fidelity Investments Variable
Overseas Fund Insurance Products Overseas Fund ("AMS/Fidelity
Sub-Account 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 29 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: December 29, 1995
Statement of Additional Information Dated: December 29, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C>
GLOSSARY OF SPECIAL TERMS............................................... 3
FEE TABLES.............................................................. 4
SUMMARY................................................................. 5
PERFORMANCE RELATED INFORMATION......................................... 7
INTRODUCTION............................................................ 7
THE CONTRACTS AND THE SEPARATE ACCOUNT.................................. 8
What are the Contracts?............................................... 8
Who can buy these Contracts?.......................................... 8
What is the Separate Account and how does it operate?................. 8
OPERATION OF THE CONTRACT............................................... 9
How are Contributions credited?....................................... 9
May I change the amount of my Contributions?.......................... 9
May I make changes in my Sub-Account allocations?..................... 9
May I transfer assets between Sub-Accounts?........................... 9
How do I transfer assets between Sub-Accounts or change my Sub-Account
allocations?......................................................... 10
What happens if the Contractholder fails to make Contributions?....... 10
May I assign or transfer the Contract?................................ 10
May I request a loan from my Individual Account?...................... 10
How do I know what my account is worth?............................... 11
How is the Accumulation Unit value determined?........................ 11
How are the underlying Fund shares valued?............................ 11
PAYMENT OF BENEFITS..................................................... 12
What would my Beneficiary receive as death proceeds?.................. 12
How can a Contract be redeemed or surrendered?........................ 12
Can payment of the redemption or surrender value ever be postponed
beyond the seven day period?......................................... 13
May I surrender once Annuity payments have started?................... 13
Can a Contract be suspended by a Contractholder?...................... 13
How do I elect an Annuity Commencement Date and Form of Annuity?...... 14
What is the minimum amount that I may select as an Annuity Payment?... 14
How are Contributions made to establish my Annuity account?........... 14
What are the available Annuity Options under the Contracts?........... 14
Systematic Withdrawal Option.......................................... 15
How are Variable Annuity payments determined?......................... 16
Can a Contract be modified?........................................... 17
CHARGES UNDER THE CONTRACT.............................................. 17
How are the charges under these Contracts made?....................... 17
What do the sales charges cover?...................................... 18
What is the mortality, expense and administrative risk charge?........ 18
Are there any other administrative charges?........................... 19
Is there ever a time where the sales charges or Annual Contract Fee
does not apply?...................................................... 19
Experience Rating of Contracts........................................ 19
How much are the deductions for Premium Taxes on these Contracts?..... 19
What charges are made by the Funds?................................... 20
Are there any other deductions?....................................... 20
HARTFORD LIFE INSURANCE COMPANY AND THE FUNDS........................... 20
What is Hartford Life?................................................ 20
What are the Funds?................................................... 20
Does Hartford Life have any interest in the Funds?.................... 23
FEDERAL TAX CONSIDERATIONS.............................................. 23
What are some of the federal tax consequences which affect these
Contracts?........................................................... 23
MISCELLANEOUS........................................................... 26
What are my voting rights?............................................ 26
Will other Contracts be participating in the Separate Account?........ 27
How are the Contracts sold?........................................... 27
Who is the custodian of the Separate Account's assets?................ 27
Are there any material legal proceedings affecting the Separate
Account?............................................................. 27
Are you relying on any experts as to any portion of this
Prospectus?.......................................................... 27
How may I get additional information?................................. 28
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION............... 29
</TABLE>
2
<PAGE>
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.
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 20 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.
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.
3
<PAGE>
FEE TABLE
Contract Owner Transaction Expense
(All Sub-Accounts)
<TABLE>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of premium
payments)....................................................... None
Transfer fee...................................................... $0
Contingent Deferred Sales Charge (as a percentage of amounts
withdrawn)
First through Fifth Year...................................... 5%
Sixth Year.................................................... 4%
Seventh Year.................................................. 3%
Eighth Year................................................... 2%
Ninth Year.................................................... 1%
Tenth Year or later........................................... 0%
Annual Contract Fee............................................... $ 30(1)
Annual Expenses--Separate Account (as a percentage of average
account value)
Mortality and Expense Risk.................................... 1.250%
</TABLE>
The Transfer Fee, Contingent Deferred Sales Charge, Annual Contract Fee and
Mortality and Expense Risk charge may be reduced or eliminated. See "Experience
of Rating Contracts" on page 19.
Annual Fund Operating Expense
(as a percentage of net assets for the year ended 1994)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
---------- -------- ----------
<S> <C> <C> <C>
Hartford Bond Fund.............................. 0.500% 0.047% 0.547%
Hartford Stock Fund............................. 0.462% 0.039% 0.501%
HVA Money Market Fund........................... 0.425% 0.049% 0.474%
Hartford Advisers Fund.......................... 0.615% 0.040% 0.655%
Hartford Capital Appreciation................... 0.675% 0.045% 0.720%
Hartford Mortgage Securities Fund............... 0.425% 0.052% 0.477%
Hartford Index Fund............................. 0.375% 0.079% 0.454%
Hartford International Opportunities Fund....... 0.725% 0.126% 0.851%
Responsibly Invested Balanced Fund.............. 0.700% 0.100% 0.800%
Hartford Dividend & Growth Fund (2)............. 0.668% 0.166% 0.834%
TCI Growth...................................... 1.000% 0.000% 1.000%
TCI Advantage................................... 1.000% 0.000% 1.000%
Fidelity VIP Growth............................. 0.620% 0.070% 0.690%
Fidelity VIP Overseas........................... 0.770% 0.150% 0.920%
Fidelity VIP II Asset Manager................... 0.720% 0.080% 0.800%
Fidelity VIP II Contrafund...................... 0.620% 0.270% 0.890%
</TABLE>
(1) The annual contract fee is a single $30 charge on a Contract. It is deducted
proportionally from the investment options in use at the time of the charge.
In the Example, the annual contract fee is approximated as a 0.07% annual
asset charge based on the experience of the Contracts.
(2) A portion of the management fees were waived in 1994. Without this waiver,
the management fee would have been 0.750% and the total operating expense
would have been 0.916%.
EXAMPLE
<TABLE>
<CAPTION>
If you surrender your contract If you annuitize at the end of If you do not surrender your
at the end of the applicable the applicable time period: You contract: You would pay the
time period: You would pay the would pay the following following expenses on a $1,000
following expenses on a $1,000 expenses on a $1,000 investment, assuming a 5%
investment, assuming a 5% investment, assuming a 5% annual return on assets:
annual return on assets: annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hartford Bond Fund............ $ 90 $ 132 $ 176 $ 273 $ 17 $ 54 $ 93 $ 203 $ 18 $ 55 $ 94 $ 204
Hartford Stock Fund........... 89 130 174 268 16 52 91 198 17 53 91 199
HVA Money Market Fund......... 89 129 172 265 16 51 89 195 17 52 90 196
Hartford Advisers Fund........ 91 135 181 284 18 57 99 215 19 58 100 216
Hartford Capital Appreciation
Fund........................ 92 137 184 290 19 59 102 222 19 60 103 223
Hartford Mortgage Securities
Fund........................ 89 130 173 266 16 52 89 195 17 52 90 196
Hartford Index Fund........... 86 120 156 231 13 41 72 159 14 42 73 160
Hartford International
Opportunities Fund.......... 93 140 191 303 20 63 109 236 21 64 110 237
Responsibly Invested Balanced
Fund........................ 92 139 188 296 19 62 106 230 20 62 107 231
Hartford Dividend & Growth
Fund........................ 93 140 190 302 20 53 108 234 21 63 109 235
AMS/TCI Growth................ 94 145 198 318 22 68 117 251 22 69 118 252
AMS/TCI Advantage............. 94 145 198 318 22 68 117 251 22 69 118 252
AMS/Fidelity VIP Growth....... 91 136 183 287 18 68 117 251 19 69 101 220
AMS/Fidelity VIP Overseas..... 93 142 194 310 21 65 113 243 21 66 113 244
AMS/Fidelity VIP II Asset
Manager..................... 92 139 139 298 19 62 106 230 20 62 107 231
AMS/Fidelity VIP II
Contrafund.................. 93 141 193 307 20 64 111 240 21 65 112 241
</TABLE>
The purpose of this table is to assist the contract owner in understanding
various costs and expenses that a contract owner will bear directly or
indirectly. The table reflects expenses of the Separate Account and underlying
Funds. Premium taxes may also be applicable.
This EXAMPLE should not be considered a representation of passed or future
expenses and actual expenses may be greater or less than those shown.
4
<PAGE>
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 account interests may, after the
deductions described hereafter, be invested in selected Sub-Accounts of DC-II.
The Contract may contain a General Account option which allows participants to
allocate contributions to the General Account of Hartford Life. The General
Account option, if applicable, is not described in this Prospectus.
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 19). 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:
<TABLE>
<CAPTION>
CONTRACT YEAR
OF WITHDRAWAL MAXIMUM CHARGE
- ---------------------------------------------------------- --------------
<S> <C>
1-5................................................... 5%
6..................................................... 4%
7..................................................... 3%
8..................................................... 2%
9..................................................... 1%
10 or more............................................ 0%
</TABLE>
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 19.)
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 9.)
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
14.) However, Hartford Life will not assume responsibility in determining or
monitoring minimum distributions beginning at age 70 1/2 .
5
<PAGE>
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 12).
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 14).
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 17). Currently, the range is 0% to 3.5%.
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 19) 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 17.)
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 17.)
The Annual Contract Fee may be reduced or waived (see "Experience Rating of
Contracts, page 19).
K. MINIMUM PAYMENT
There is no minimum amount for initial Contributions or subsequent
Contributions that may be made on behalf of a participant's Individual Account
under a Contract.
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 $1,000 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 10.) Individual Account loans may not be
available in all states or may be subject to restrictions.
M. FUND FEES AND CHARGES
The Funds are subject to certain fees, charges and expenses. See the
accompanying Prospectuses for the Funds.
N. 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.
6
<PAGE>
O. 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 26).
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, Money Market Fund, Mortgage
Securities Fund, Responsibly 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 a Sub-Account advertises its standardized total return, it will usually
be calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period (assuming the deduction of any contingent
deferred sales charge which would be payable if the investment were redeemed at
the end of the period). Total return figures are net of all Fund level
management fees and charges, the mortality and expense risk charge and the
Annual Contract Fee.
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 and the mortality and expense risk charge.
The Money Market Fund may advertise yield and effective yield. The yield of
the Sub-Account is based upon the income earned by the Sub-Account over a
seven-day period and then annualized, I.E. the income earned in the period is
assumed to be earned every seven days over a 52-week period and stated as a
percentage of the investment. Effective yield is calculated similarly but when
annualized, the income earned by the investment is assumed to be reinvested in
Sub-Account units and thus compounded in the course of a 52-week period. Yield
and effective yield reflect the recurring charges on the Separate Account level
including the Annual Contract Fee and the mortality and expense risk charge.
Total return at the Separate Account level includes all Contract charges:
contingent deferred 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
includes all recurring charges (except sales charges), and is therefore lower
than yield at the Fund level, with no comparable charges.
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 3 prior to reading this Prospectus to familiarize yourself
with the terms being used.
7
<PAGE>
THE CONTRACTS AND
THE SEPARATE ACCOUNT
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 Section 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 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 a 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.
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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.
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. 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 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
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.
There is no minimum amount for initial Contributions or subsequent
Contributions that may be made on behalf of a Participant's Individual Account
under a Contract.
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.
MAY I MAKE CHANGES IN MY SUB-ACCOUNT ALLOCATIONS?
The Contract permits the allocation of Contributions, in multiples of 10%,
among the sixteen (16) 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.
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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 transfer 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 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 12).
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. Individual Account loans may not be available in all
states or may be subject to restrictions. 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
$1,000.
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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%.
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) 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. See "Federal Tax Considerations" commencing on page 23 for a
discussion of the tax implications of a distribution.
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).
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.
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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 fixed 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 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. If
a Beneficiary elects to receive variable payments, the amount of each Annuity
payment will vary to reflect fluctuations in the returns of the underlying
investments. 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 14).
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 "What are the available Annuity
options under the Contracts?" commencing on page 14.) 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.
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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 14).
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 17). 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 17).
If the contingent deferred sales charge has been experience rated (see
"Experience Rating of Contracts", page 19), 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 15 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 (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?" (commencing on page 17) 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.
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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.
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.
*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
(a) = at the Annuity Commencement Date
--------------------------------------------------------------------
Annuity Unit value at the Annuity Commencement Date
number of Annuity Units represented number of monthly
(b) = 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.
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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 contingent deferred sales charges (see "How are the charges under
these Contracts made?" page 17).
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, 9.0% semi-annually or 18.0% annually of Participant's
Individual Account at the time they elect the SWO. Payments are limited to
18.0% 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 23 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 11) 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 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.
16
<PAGE>
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>
<C> <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 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 19). 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.
17
<PAGE>
The charge is a percentage of the amount surrendered and equals:
<TABLE>
<CAPTION>
CONTRACT YEAR
OF WITHDRAWAL MAXIMUM CHARGE
- ---------------------------------------------------------- --------------
<S> <C>
1-5................................................... 5%
6..................................................... 4%
7..................................................... 3%
8..................................................... 2%
9..................................................... 1%
10 or more............................................ 0%
</TABLE>
In the case of a withdrawal in which you request a certain dollar amount be
withdrawn, the 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.
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.
18
<PAGE>
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 19) 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 19).
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 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 Participants' 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.
19
<PAGE>
WHAT CHARGES ARE MADE BY THE FUNDS?
Deductions are made from the assets of the Funds to pay for management fees
and the operating expenses of the Funds. A full description of the Funds,
their investment policies and restrictions, risks charges and expenses and all
other aspects of their operation is contained in the accompanying Prospectuses
for the Funds.
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.
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. Effective December 20, 1995, Hartford Fire Insurance Company became an
independent, publicly traded corporation and is no longer 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 both Standard and Poor's and Duff and Phelps' 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 Responsibly
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., Hartford Bond Fund, Inc. and HVA Money Market
Fund 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."
TCI Advantage and TCI Growth Funds ("TCI Funds") are separate series of
shares issued by TCI Portfolios, Inc. ("TCIP"), a corporation organized under
the laws of the state of Maryland. TCIP is a registered, diversified,
open-ended investment management company under the Investment Company Act of
1940.
The Fidelity Funds involve two diversified open-end management investment
companies, each with multiple portfolios and organized as a Massachusetts
business trust. The Growth Portfolio and Overseas Portfolio are portfolios of
the Variable Insurance Products Fund. The Asset Manager Portfolio and
Contrafund Portfolio is a portfolio of the Variable Insurance Products Fund
II. Each Fund continually issues an unlimited number of full and fractional
shares of beneficial interest in the Fund.
The investment objectives of each of the Funds are as follows:
20
<PAGE>
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 equity 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 by investing primarily in equity securities and
securities convertible into equity securities.
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 liquidity by investing primarily in mortgage-related
securities, including securities issued by the Government National Mortgage
Association ("GNMA").
RESPONSIBLY 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. The Fund invests in a portfolio of stocks, bonds and
money market instruments selected with a concern for the social impact of each
investment.
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.
HVA MONEY MARKET FUND, INC.
To achieve maximum current income consistent with liquidity and preservation
of capital by investing in money market securities.
TCI FUNDS
TCI PORTFOLIOS, INC., TCI ADVANTAGE
To seek current income and capital growth by investing in short-term
securities of the U.S. Government or by its agencies or instrumentalities, as
well as fixed income government securities and equity securities.
21
<PAGE>
TCI PORTFOLIOS, INC., 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.
FIDELITY FUNDS
FIDELITY INVESTMENTS VIP II ASSET MANAGER PORTFOLIO
To seek high total return with reduced risk over the long term by allocating
its assets among stocks, bonds, and short-term instruments.
FIDELITY INVESTMENTS VIP II CONTRAFUND PORTFOLIO
To seek long term capital appreciation through purchase of equity securities
of domestic or foreign companies that are undervalued due to an overly
pessimistic appraisal by the public.
FIDELITY INVESTMENTS VIP GROWTH PORTFOLIO
To seek capital appreciation primarily through purchase of common stocks,
although its investments are not restricted to any one type of security, and
may pursue capital appreciation through the purchase of bonds and preferred
stocks.
FIDELITY INVESTMENTS VIP OVERSEAS PORTFOLIO
To seek long term capital appreciation by investing primarily in equity
securities of issuers 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 TCI 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 Responsibly 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 TCI 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.
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 Hartford 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
22
<PAGE>
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,
Hartford Mortgage Securities and HVA Money Market 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
Responsibly Invested Balanced Fund.
TCI FUNDS
The TCI Funds are managed by Investors Research Corporation ("Investors
Research"), whose principal business address is 4500 Main Street, Kansas City,
Missouri. Investors Research has been providing investment advisory and
management services to investment companies within the Twentieth Century
family of mutual funds and to institutional clients since 1958.
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.
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.
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:
<TABLE>
<CAPTION>
PERCENT OF
SHARES TOTAL SHARES
---------- ------------
<S> <C> <C>
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%
</TABLE>
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
23
<PAGE>
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.
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.
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
24
<PAGE>
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 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.
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.
25
<PAGE>
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 the
contract 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, generally require that no more than 55% of the value of the total
assets of the segregated asset account (such as the Funds) underlying a
variable annuity contract is represented by any one investment, no more than
70% is represented by any two investments, no more than 80% is represented by
any three investments and no more than 90% is represented by any four
investments. In determining whether the diversification standards are met, all
securities of the same issuer, all interests in the same real property
project, and all interests in the same commodity are each treated as a single
investment. In addition, in the case of government securities, each government
agency or instrumentality shall be treated as a separate issuer. If the
diversification standards are not met, non-pension policy owners will be
subject to current tax on the increase in cash value in the policy.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to need the diversification
standards, the company may comply within a reasonable period and avoid the
taxation of policy income on an ongoing basis. However, either the company or
contract holder must agree to pay the tax due for the period during which the
diversification standards were not met.
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.
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
26
<PAGE>
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.
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, 200
Hopmeadow Street, Simsbury, Connecticut.
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 statement of
additional information 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
upon the authority of said firm as experts in accounting and auditing in
giving said reports. Reference is made to said report of Hartford Life
Insurance Company (the depositor), which includes an explanatory paragraph
with respect to
27
<PAGE>
the adoption of new accounting standards changing the methods of accounting
for debt and equity securities and for postretirement benefits other than
pensions and postemployment benefits. The principal business address of Arthur
Andersen LLP is One Financial Plaza, Hartford, Connecticut 06103.
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
28
<PAGE>
TABLE OF CONTENTS
FOR
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION PAGE
- ----------------------------------------------------------------------------------------------------------------- -----
<S> <C>
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.............................................................................................
</TABLE>
29
<PAGE>
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>
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>
HARTFORD MUTUAL FUNDS
P.O. BOX 2999
HARTFORD, CT 06104-2999
PROSPECTUS -- MAY 1, 1995
This Prospectus contains information relating to eleven mutual funds offered
hereby (individually, a "Fund," collectively, the "Funds" or "Hartford Mutual
Funds"), each registered as a diversified open-end management investment company
with the Securities and Exchange Commission, that are made available to serve as
the underlying investment vehicles for certain variable annuity and variable
life insurance separate accounts of Hartford Life Insurance Company and ITT
Hartford Life and Annuity Insurance Company (collectively, the "ITT Hartford
Life Insurance Companies"). Each Fund is registered as a diversified open-end
management investment company with the Securities and Exchange Commission. The
Funds, which have different investment objectives and policies, are: Hartford
Capital Appreciation Fund, Inc., Hartford Dividend and Growth Fund, Inc.,
Hartford Index Fund, Inc., Hartford International Opportunities Fund, Inc.,
Hartford Stock Fund, Inc., Hartford Advisers Fund, Inc., Hartford International
Advisers Fund, Inc., Hartford Bond Fund, Inc., Hartford Mortgage Securities
Fund, Inc., HVA Money Market Fund, Inc. and Hartford U.S. Government Money
Market Fund, Inc. The investment objective of each Fund is the first sentence of
each of the following:
STOCK FUNDS
HARTFORD CAPITAL APPRECIATION FUND, INC. (formerly HARTFORD AGGRESSIVE
GROWTH FUND, INC.) seeks 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. The Capital Appreciation Fund invests
primarily in equity securities and securities convertible into equity
securities.
HARTFORD DIVIDEND AND GROWTH FUND, INC. seeks to achieve a high level of
current income consistent with growth of capital and reasonable investment risk.
The Dividend and Growth Fund invests primarily in equity securities and
securities convertible into equity securities that typically have above average
income yield and favorable prospects for capital appreciation.
HARTFORD INDEX FUND, INC. seeks to provide investment results which
approximate the price and yield performance of publicly-traded common stocks in
the aggregate. The Index Fund attempts to approximate the capital performance
and the dividend income of the Standard & Poor's 500 Composite Stock Price
Index.
HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC. seeks to achieve long-term
total rate of return consistent with prudent investment risk through investment
primarily in equity securities issued by non-U.S. companies.
HARTFORD STOCK FUND, INC. seeks to achieve long-term capital growth
primarily through capital appreciation, with income a secondary consideration,
by investing in primarily equity securities. Its portfolio emphasizes
high-quality growth companies.
ASSET ALLOCATION FUNDS
HARTFORD ADVISERS FUND, INC. seeks 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 Advisers Fund actively allocates its assets among these asset
categories based on fundamental analysis, not on short-term market timing.
HARTFORD INTERNATIONAL ADVISERS FUND, INC. seeks to achieve maximum
long-term total rate of return consistent with prudent investment risk. The
International Advisers Fund's assets will be diversified among at least five
countries, and will be allocated among equity and debt securities and money
market instruments based on fundamental analysis, not on short-term market
timing.
1
<PAGE>
BOND FUNDS
HARTFORD BOND FUND, INC. seeks to achieve maximum current income consistent
with preservation of capital by investing primarily in fixed-income securities.
HARTFORD MORTGAGE SECURITIES FUND, INC. seeks to achieve maximum current
income consistent with safety of principal and maintenance of liquidity by
investing primarily in mortgage-related securities, including securities issued
by the Government National Mortgage Association.
MONEY MARKET FUNDS
HVA MONEY MARKET FUND, INC. seeks to achieve maximum current income
consistent with liquidity and preservation of capital. This Fund invests in
short-term money market instruments.
HARTFORD U.S. GOVERNMENT MONEY MARKET FUND, INC. seeks to achieve maximum
current income consistent with preservation of capital. This Fund invests in
short-term money market instruments.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT A FUND THAT A
PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING. PLEASE READ AND RETAIN THIS
PROSPECTUS FOR FUTURE REFERENCE. ADDITIONAL INFORMATION ABOUT THE FUNDS HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN A STATEMENT OF ADDITIONAL
INFORMATION DATED MAY 1, 1995, WHICH HAS BEEN INCORPORATED BY REFERENCE INTO
THIS PROSPECTUS AND WILL BE PROVIDED ON REQUEST AND WITHOUT CHARGE. WRITE
"HARTFORD FAMILY OF FUNDS, C/O INDIVIDUAL ANNUITY OPERATIONS," P.O. BOX 2999,
HARTFORD, CT 06104-2999.
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUNDS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER BY THE FUNDS TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL FOR THE FUNDS TO MAKE SUCH OFFER.
- --------------------------------------------------------------------------------
AN INVESTMENT IN EITHER OF THE MONEY MARKET FUNDS IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT EITHER OF THE
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
- --------------------------------------------------------------------------------
HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC. AND HARTFORD INTERNATIONAL
ADVISERS FUND, INC. MAY EACH INVEST UP TO 15% OF ITS ASSETS IN HIGH YIELD DEBT
SECURITIES. INVESTMENTS OF THIS TYPE INVOLVE COMPARATIVELY HIGHER RISKS,
INCLUDING PRICE VOLATILITY AND RISK OF DEFAULT IN THE PAYMENT OF INTEREST AND
PRINCIPAL, THAN HIGHER-QUALITY DEBT SECURITIES. SEE "COMMON INVESTMENT POLICIES
AND RISK FACTORS."
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
GLOSSARY.................................................................. 4
FINANCIAL HIGHLIGHTS...................................................... 5
THE FUNDS................................................................. 15
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS........................... 15
COMMON INVESTMENT POLICIES AND RISK FACTORS............................... 23
Repurchase Agreements................................................... 23
Illiquid Securities..................................................... 23
When-Issued and Delayed-Delivery Securities............................. 24
Other Investment Companies.............................................. 24
Currency Transactions................................................... 24
Options and Futures Contracts........................................... 25
Non-U.S. Securities, Including ADRs and GDRs............................ 27
Mortgage-Related Securities............................................. 27
Asset-Backed Securities................................................. 29
Swap Agreements......................................................... 29
Investment Grade Securities............................................. 29
Money Market Instruments................................................ 29
High Yield Securities................................................... 29
Other Risk Factors...................................................... 30
MANAGEMENT OF THE FUNDS................................................... 30
Investment Advisory and Management Services............................. 30
Investment Sub-Advisory Services........................................ 32
Portfolio Managers...................................................... 33
ADMINISTRATIVE SERVICES FOR THE FUNDS..................................... 34
EXPENSES OF THE FUNDS..................................................... 34
PERFORMANCE RELATED INFORMATION........................................... 35
DIVIDENDS................................................................. 35
NET ASSET VALUE........................................................... 35
PURCHASE OF FUND SHARES................................................... 36
SALE AND REDEMPTION OF SHARES............................................. 36
FEDERAL INCOME TAXES...................................................... 36
OWNERSHIP AND CAPITALIZATION OF THE FUNDS................................. 37
Capital Stock........................................................... 37
Voting.................................................................. 37
Other Rights............................................................ 37
GENERAL INFORMATION....................................................... 38
Reports to Shareholders................................................. 38
Custodian, Transfer and Dividend Disbursing Agents...................... 38
"Majority" Defined...................................................... 38
Pending Legal Proceedings............................................... 38
Requests for Information................................................ 38
APPENDIX -- RATINGS OF BONDS AND COMMERCIAL PAPER......................... 39
</TABLE>
There is the possibility that an individual Fund may be held liable for a
misstatement, inaccuracy or incomplete disclosure in this Prospectus concerning
the other Fund(s).
Additional information about the performance of each Fund, including
Management's Discussion and Analysis of results, is contained in the Funds'
annual report to shareholders, which may be obtained without charge by calling
1-800-862-6668.
3
<PAGE>
GLOSSARY
<TABLE>
<S> <C>
ADRS: American Depository Receipts
CFTC: Commodity Futures Trading Commission
CMOS: Collateralized Mortgage Obligations
CODE: Internal Revenue Code of 1986, as amended
FHLMC: Federal Home Loan Mortage Corporation
FNMA: Federal National Mortgage Association
GDRS: Global Depository Receipts
GNMA: Government National Mortgage Association
IMF: International Monetary Fund
MOODY'S: Moody's Investors Service, Inc.
NYSE: New York Stock Exchange
1940 ACT: Investment Company Act of 1940, as amended
SEC: Securities and Exchange Commission
S&P: Standard & Poor's Corporation
WORLD BANK: International Bank for Reconstruction and Development
</TABLE>
4
<PAGE>
HARTFORD CAPITAL APPRECIATION FUND, INC.
FINANCIAL HIGHLIGHTS (FORMERLY HARTFORD AGGRESSIVE GROWTH FUND, INC.)
THE FOLLOWING INFORMATION, INSOFAR AS IT RELATES TO EACH OF THE FIVE YEARS IN
THE PERIOD ENDED DECEMBER 31, 1994, HAS BEEN EXAMINED BY ARTHUR ANDERSEN LLP,
INDEPENDENT PUBLIC ACCOUNTANTS, WHOSE REPORT THEREON IS INCLUDED IN THE
STATEMENT OF ADDITIONAL INFORMATION, WHICH IS INCORPORATED BY REFERENCE TO THIS
PROSPECTUS.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
- ------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87 12/31/86 12/31/85
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period.... $ 3.052 $ 2.634 $ 2.807 $ 1.709 $ 2.020 $ 1.678 $ 1.341 $ 1.482 $ 1.423 $ 1.080
Net investment income... 0.011 0.003 0.008 0.021 0.029 0.023 0.015 0.025 0.019 0.016
Net realized and
unrealized gains
(losses) on
investments............ 0.070 0.626 0.388 0.898 (0.248) 0.376 0.337 (0.075) 0.105 0.366
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. 0.081 0.529 0.396 0.919 (0.217) 0.399 0.352 (0.050) 0.125 0.382
Dividends from net
investment income...... (0.011) (0.003) (0.008) (0.021) (0.029) (0.023) (0.015) (0.025) (0.019) (0.016)
Distribution from net
realized gains on
securities............. (0.262) (0.108) (0.361) 0.000 (0.085) (0.034) 0.000 (0.086) (0.047) (0.023)
Return of capital....... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
distributions.......... (0.273) (0.111) (0.369) (0.021) (0.094) (0.057) (0.015) (0.001) (0.056) (0.039)
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in net assets.......... (0.192) 0.418 0.027 0.898 (0.311) 0.342 0.337 (0.141) 0.059 0.343
Net asset value at end
of period.............. $ 2.860 $ 3.052 $ 2.634 $ 2.807 $ 1.709 $ 2.020 $ 1.678 $ 1.341 $ 1.482 $ 1.423
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
- ------------------------------------------------------------------------------------------------------------------------------
Total Return............ 2.50% 20.80% 16.98% 53.99% -10.90% 24.11% 28.37% -4.31% 9.03% 38.18%
Net Assets (in
thousands)............. $1,158,644 $778,904 $300,373 $158,048 $56,032 $59,922 $34,228 $26,123 $22,558 $7,988
Ratio of operating
expenses in average net
assets................. 0.72% 0.76% 0.87% 0.92% 0.98% 0.94% 0.97% 1.01% 1.12% 1.48%
Ratio of net investment
income to average net
assets................. 0.40% 0.12% 0.36% 0.92% 1.58% 1.25% 0.91% 1.27% 1.23% 1.40%
Portfolio turnover
rate................... 73.3% 91.4% 100.3% 107.2% 51.8% 35.0% 48.9% 88.7% 53.9% 71.7%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
HARTFORD DIVIDEND AND GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
THE FOLLOWING INFORMATION HAS BEEN EXAMINED BY ARTHUR ANDERSEN LLP, INDEPENDENT
PUBLIC ACCOUNTANTS, WHOSE REPORT THEREON IS INCLUDED IN THE STATEMENT OF
ADDITIONAL INFORMATION, WHICH IS INCORPORATED BY REFERENCE TO THIS PROSPECTUS.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
- ---------------------------------------------------------------
03/06/94-
12/31/94(a)
- ---------------------------------------------------------------
<S> <C>
Net asset value at beginning of period............ $ 1.000
Net investment income............................. 0.024
Net realized and unrealized gains (losses) on
investments...................................... (0.005)
-----------
Total from investment operations.................. 0.019
Dividends from net investment income.............. (0.024)
Distribution from net realized gains on
securities....................................... (0.001)
Return of capital................................. 0.000
-----------
Total from distributions.......................... (0.025)
-----------
Net increase (decrease) in net assets............. (0.006)
Net asset value at end of period.................. $ 0.994
-----------
-----------
- ---------------------------------------------------------------
Total Return...................................... 1.96%
Net Assets (in thousands)......................... $55,066
Ratio of operating expenses to average net
assets........................................... 0.83%*
Ratio of net investment income to average net
assets........................................... 3.52%*
Portfolio turnover rate........................... 27.8%
- ---------------------------------------------------------------
</TABLE>
(a) The Fund was declared effective by the Securities and Exchange Commission on
March 6, 1994.
* Annualized
6
<PAGE>
HARTFORD INDEX FUND, INC.
FINANCIAL HIGHLIGHTS
THE FOLLOWING INFORMATION, INSOFAR AS IT RELATES TO EACH OF THE FIVE YEARS IN
THE PERIOD ENDED DECEMBER 31, 1994, HAS BEEN EXAMINED BY ARTHUR ANDERSEN LLP,
INDEPENDENT PUBLIC ACCOUNTANTS, WHOSE REPORT THEREON IS INCLUDED IN THE
STATEMENT OF ADDITIONAL INFORMATION, WHICH IS INCORPORATED BY REFERENCE TO THIS
PROSPECTUS.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
- ---------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED 05/01/87-
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period.... $ 1.546 $ 1.450 $ 1.380 $ 1.134 $ 1.220 $ 0.960 $ 0.854 $ 1.000
Net investment income... 0.038 0.035 0.033 0.036 0.037 0.029 0.030 0.018
Net realized and
unrealized gains
(losses) on
investments............ (0.024) 0.098 0.080 0.294 (0.088) 0.280 0.106 (0.144)
-------- -------- -------- -------- -------- -------- -------- ---------
Total from investment
operations............. 0.014 0.131 0.093 0.330 (0.049) 0.289 0.136 (0.128)
Dividends from net
investment income...... (0.038) (0.035) (0.033) (0.036) (0.037) (0.029) (0.030) (0.018)
Distribution from net
realized gains on
securities............. 0.000 0.000 0.000 (0.038) 0.000 0.000 0.000 0.000
Return of capital....... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- ---------
Total from
distributions.......... (0.038) (0.035) (0.033) (0.074) (0.037) (0.029) (0.030) (0.018)
-------- -------- -------- -------- -------- -------- -------- ---------
Net increase (decrease)
in net assets.......... (0.024) 0.096 0.060 0.256 (0.088) 0.260 0.108 (0.146)
Net asset value at end
of period.............. $ 1.522 $ 1.546 $ 1.450 $ 1.390 $ 1.134 $ 1.220 $ 0.960 $ 0.854
-------- -------- -------- -------- -------- -------- -------- ---------
-------- -------- -------- -------- -------- -------- -------- ---------
- ---------------------------------------------------------------------------------------------------------
Total Return............ 0.94% 9.12% 6.82% 29.53% -3.99% 30.47% 18.35% -12.91%
Net Assets (in
thousands)............. $157,680 $140,398 $82,335 $47,770 $26,541 $19,456 $10,050 $7,212
Ratio of operating
expenses to average net
assets................. 0.45% 0.49% 0.80% 0.87% 0.91% 1.10% 1.23% 1.35%*
Ratio of net investment
income to average net
assets................. 2.50% 2.38% 2.48% 2.89% 3.27% 2.60% 3.29% 2.39%*
Portfolio turnover
rate................... 1.8% 0.8% 1.2% 8.7% 25.5% 12.9% 20.9% 1.9%
- ---------------------------------------------------------------------------------------------------------
* Annualized
</TABLE>
7
<PAGE>
HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC.
FINANCIAL HIGHLIGHTS
THE FOLLOWING INFORMATION HAS BEEN EXAMINED BY ARTHUR ANDERSEN LLP, INDEPENDENT
PUBLIC ACCOUNTANTS, WHOSE REPORT THEREON IS INCLUDED IN THE STATEMENT OF
ADDITIONAL INFORMATION, WHICH IS INCORPORATED BY REFERENCE TO THIS PROSPECTUS.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
- ---------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED 07/02/90-
1994 1993 1992 1991 12/31/90(A)
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period.... $ 1.215 $ 0.017 $ 0.973 $ 0.871 $ 1.000
Net investment income... 0.016 0.008 0.013 0.011 0.015
Net realized and
unrealized gains
(losses) on
investments............ (0.040) 0.298 (0.058) 0.102 (0.129)
-------- -------- -------- -------- ---------
Total from investment
operations............. (0.024) 0.307 (0.043) 0.113 (0.114)
Dividends from net
investment income...... (0.016) (0.009) (0.013) (0.011) (0.015)
Distribution from net
realized gains on
securities............. 0.000 0.000 0.000 0.000 0.000
Return of capital....... 0.000 0.000 0.000 0.000 0.000
-------- -------- -------- -------- ---------
Total from
distributions.......... (0.016) (0.009) (0.013) (0.011) (0.015)
-------- -------- -------- -------- ---------
Net increase (decrease)
in net assets.......... (0.040) 0.298 (0.056) 0.102 (0.129)
Net asset value at end
of period.............. $ 1.176 $ 1.215 $ 0.917 $ 0.973 $ 0.871
-------- -------- -------- -------- ---------
-------- -------- -------- -------- ---------
- ---------------------------------------------------------------------------
Total Return............ -1.94% 33.73% -4.43% 13.00% -11.78%
Net Assets (in
thousands)............. $563,765 $281,608 $47,580 $22,854 $9,352
Ratio of operating
expenses to average net
assets................. 0.65% 1.00% 1.23% 1.24% 1.04%*
Ratio of net investment
income to average net
assets................. 1.42% 0.84% 1.40% 1.17% 2.85%*
Portfolio turnover
rate................... 46.4% 31.8% 25.1% 24.7% 3.0%
- ---------------------------------------------------------------------------
</TABLE>
(a) The Fund was declared effective by the Securities and Exchange Commission on
July 2, 1990.
* Annualized
8
<PAGE>
HARTFORD STOCK FUND, INC.
FINANCIAL HIGHLIGHTS
THE FOLLOWING INFORMATION, INSOFAR AS IT RELATES TO EACH OF THE FIVE YEARS IN
THE PERIOD ENDED DECEMBER 31, 1994, HAS BEEN EXAMINED BY ARTHUR ANDERSEN LLP,
INDEPENDENT PUBLIC ACCOUNTANTS, WHOSE REPORT THEREON IS INCLUDED IN THE
STATEMENT OF ADDITIONAL INFORMATION, WHICH IS INCORPORATED BY REFERENCE TO THIS
PROSPECTUS.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
- ------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87 12/31/86 12/31/85
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period.... $ 3.099 $ 2.985 $ 2.927 $ 2.452 $ 2.775 $ 2.304 $ 1.977 $ 2.177 $ 2.107 $ 1.711
Net investment income... 0.061 0.053 0.051 0.059 0.070 0.065 0.045 0.045 0.049 0.052
Net realized and
unrealized gains
(losses) on
investments............ (0.111) 0.339 0.219 0.532 (0.179) 0.522 0.327 0.084 0.198 0.461
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. (0.050) 0.382 0.270 0.591 (0.109) 0.587 0.372 0.129 0.245 0.513
Dividends from net
investment income...... (0.061) (0.053) (0.051) (0.058) (0.070) (0.065) (0.045) (0.045) (0.049) (0.052)
Distribution from net
realized gains on
securities............. (0.187) (0.205) (0.181) (0.057) (0.144) (0.051) 0.000 (0.284) (0.126) (0.085)
Return of capital....... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
distributions.......... (0.248) (0.258) (0.232) (0.118) (0.214) (0.118) (0.045) (0.329) (0.175) (0.117)
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in net assets.......... (0.298) 0.134 0.038 0.475 (0.323) 0.471 0.327 (0.200) 0.070 0.396
Net asset value at end
of period.............. $ 2.801 $ 3.089 $ 2.965 $ 2.927 $ 2.452 $ 2.775 $ 2.304 $ 1.977 $ 2.177 $ 2.107
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
- ------------------------------------------------------------------------------------------------------------------------------
Total Return............ -1.89% 14.34% 10.04% 24.58% -3.87% 26.02% 19.00% 5.41% 12.33% 31.49%
Net Assets (in
thousands)............. $1,163,158 $968,425 $569,903 $408,489 $257,553 $266,756 $187,511 $170,319 $148,126 $126,344
Ratio of operating
expenses to average net
assets................. 0.50% 0.53% 0.57% 0.60% 0.66% 0.64% 0.85% 0.65% 0.86% 0.84%
Ratio of net investment
income to average net
assets................. 2.17% 1.88% 1.90% 2.14% 2.76% 2.31% 2.08% 1.83% 2.24% 2.86%
Portfolio turnover
rate................... 63.8% 59.0% 59.8% 24.3% 20.2% 24.4% 22.8% 27.0% 25.7% 32.1%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
HARTFORD ADVISERS FUND, INC.
FINANCIAL HIGHLIGHTS
THE FOLLOWING INFORMATION, INSOFAR AS IT RELATES TO EACH OF THE FIVE YEARS IN
THE PERIOD ENDED DECEMBER 31, 1994, HAS BEEN EXAMINED BY ARTHUR ANDERSEN LLP,
INDEPENDENT PUBLIC ACCOUNTANTS, WHOSE REPORT THEREON IS INCLUDED IN THE
STATEMENT OF ADDITIONAL INFORMATION, WHICH IS INCORPORATED BY REFERENCE TO THIS
PROSPECTUS.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
- --------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87 12/31/86 12/31/85
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period.... $ 1.752 $ 1.676 $ 1.649 $ 1.438 $ 1.543 $ 1.332 $ 1.213 $ 1.227 $ 1.179 $ 0.987
Net investment income... 0.054 0.050 0.059 0.063 0.074 0.062 0.051 0.051 0.054 0.064
Net realized and
unrealized gains
(losses) on
investments............ (0.099) 0.145 0.070 0.223 (0.059) 0.221 0.119 0.025 0.089 0.192
---------- ---------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. (0.045) 0.195 0.129 0.286 0.015 0.283 0.170 0.076 0.143 0.256
Dividends from net
investment income...... (0.054) (0.050) (0.059) (0.063) (0.074) (0.062) (0.051) (0.051) (0.054) (0.064)
Distribution from net
realized gains on
securities............. (0.052) (0.069) (0.043) (0.010) (0.048) (0.010) 0.000 (0.039) (0.041) 0.000
Return of capital....... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
---------- ---------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
distributions.......... (0.106) (0.119) (0.102) (0.073) (0.122) (0.072) (0.051) (0.080) (0.095) (0.064)
---------- ---------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in net assets.......... (0.151) 0.078 0.027 0.213 (0.107) 0.211 0.119 (0.014) 0.048 0.192
Net asset value at end
of period.............. $ 1.600 $ 1.752 $ 1.676 $ 1.649 $ 1.436 $ 1.543 $ 1.332 $ 1.213 $ 1.227 $ 1.179
---------- ---------- -------- -------- -------- -------- -------- -------- -------- --------
---------- ---------- -------- -------- -------- -------- -------- -------- -------- --------
- --------------------------------------------------------------------------------------------------------------------------------
Total Return............ -2.74% 12.25% 8.30% 20.33% 1.28% 21.72% 14.24% 8.08% 12.70% 28.85%
Net Assets (in
thousands)............. $3,034,034 $2,426,550 $985,747 $831,424 $416,839 $371,917 $264,750 $239,704 $127,214 $41,288
Ratio of operating
expenses to average net
assets................. 0.65% 0.69% 0.78% 0.81% 0.89% 0.89% 0.90% 0.91% 0.98% 0.97%
Ratio of net investment
income to average net
assets................. 3.34% 3.07% 3.55% 4.13% 4.65% 4.14% 3.93% 4.00% 4.36% 6.03%
Portfolio turnover
rate................... 60.0% 55.3% 72.8% 42.1% 35.7% 33.5% 30.9% 28.3% 23.3% 63.0%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
HARTFORD BOND FUND, INC.
FINANCIAL HIGHLIGHTS
THE FOLLOWING INFORMATION, INSOFAR AS IT RELATES TO EACH OF THE FIVE YEARS IN
THE PERIOD ENDED DECEMBER 31, 1994, HAS BEEN EXAMINED BY ARTHUR ANDERSEN LLP,
INDEPENDENT PUBLIC ACCOUNTANTS, WHOSE REPORT THEREON IS INCLUDED IN THE
STATEMENT OF ADDITIONAL INFORMATION, WHICH IS INCORPORATED BY REFERENCE TO THIS
PROSPECTUS.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
- ----------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87 12/31/86 12/31/85
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period.... $ 1.044 $ 1.024 $ 1.081 $ 0.979 $ 0.976 $ 0.945 $ 0.952 $ 1.033 $ 1.0?7 $ 0.929
Net investment income... 0.060 0.062 0.074 0.072 0.075 0.079 0.077 0.080 0.091 0.104
Net realized and
unrealized gains
(losses) on
investments............ (0.100) 0.039 (0.019) 0.082 0.003 0.031 (0.007) (0.081) 0.028 0.078
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. (0.040) 0.101 0.055 0.154 0.078 0.110 0.070 (0.001) 0.127 0.182
Dividends from net
investment income...... (0.060) (0.062) (0.074) (0.072) (0.075) (0.079) (0.077) (0.080) (0.091) (0.104)
Distribution from net
realized gains on
securities............. (0.018) (0.019) (0.018) 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Return of capital....... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
distributions.......... (0.078) (0.081) (0.092) (0.072) (0.075) (0.079) (0.077) (0.081) (0.091) (0.104)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in net assets.......... (0.118) 0.020 (0.037) 0.082 0.003 0.031 (0.007) (0.081) 0.026 0.078
Net asset value at end
of period.............. $ 0.926 $ 1.044 $ 1.024 $ 1.081 $ 0.979 $ 0.978 $ 0.945 $ 0.952 $ 1.033 $ 1.007
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return............ -3.95% 10.24% 5.53% 16.43% 8.39% 12.10% 7.80% -0.01% 12.19% 20.62%
Net Assets (in
thousands)............. $247,458 $239,602 $128,538 $ 97,377 $ 70,915 $ 61,602 $ 54,215 $ 50,037 $ 57,160 $ 43,843
Ratio of operating
expenses to average net
assets................. 0.55% 0.57% 0.84% 0.66% 0.67% 0.67% 0.69% 0.69% 0.71% 0.69%
Ratio of net investment
income to average net
assets................. 6.23% 5.83% 7.21% 7.29% 7.82% 8.09% 8.12% 8.15% 8.93% 10.73%
Portfolio turnover
rate................... 328.8% 494.3% 434.1% 337.0% 161.6% 225.0% 230.3% 53.3% 48.7% 53.7%
Current Yield*.......... 7.19% 4.93% 6.48% 8.62% 8.17% 7.92% 9.15% 8.67% 8.82% 10.29%
- ----------------------------------------------------------------------------------------------------------------------------
*The yield information will fluctuate and publication of yield may not provide a basis for comparison with bank deposits,
other investments which are insured and/or pay a fixed yield for a stated period of time, or other investment companies. In
addition, the yield information may be of limited use for comparative purposes because it does not reflect charges imposed
at the Separate Account level which, if included, would decrease the yield.
</TABLE>
11
<PAGE>
HARTFORD MORTGAGE SECURITIES FUND, INC.
FINANCIAL HIGHLIGHTS
THE FOLLOWING INFORMATION, INSOFAR AS IT RELATES TO EACH OF THE FIVE YEARS IN
THE PERIOD ENDED DECEMBER 31, 1994, HAS BEEN EXAMINED BY ARTHUR ANDERSEN LLP,
INDEPENDENT PUBLIC ACCOUNTANTS, WHOSE REPORT THEREON IS INCLUDED IN THE
STATEMENT OF ADDITIONAL INFORMATION, WHICH IS INCORPORATED BY REFERENCE TO THIS
PROSPECTUS.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
- ----------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR 1/15/85
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87 12/31/86 12/31/85
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period.... $ 1.075 $ 1.079 1.115 $ 1.054 $ 1.045 $ 1.006 $ 1.011 $ 1.087 $ 1.077 $ 1.000
Net investment income... 0.068 0.071 0.088 0.088 0.087 0.088 0.087 0.093 0.104 0.111
Net realized and
unrealized gains
(losses) on
investments............ (0.085) (0.004) (0.038) 0.061 0.009 0.039 (0.005) (0.087) 0.010 0.077
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. (0.017) 0.067 0.050 0.149 0.096 0.127 0.082 0.026 0.114 0.188
Dividends from net
investment income...... (0.068) (0.071) (0.088) (0.088) (0.087) (0.088) (0.087) (0.093) (0.104) (0.111)
Distribution from net
realized gains on
securities............. (0.005) 0.000 0.000 0.000 0.000 0.000 0.000 (0.009) 0.000 0.000
Return of capital....... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
distributions.......... (0.073) (0.071) (0.088) (0.088) (0.087) (0.088) (0.087) (0.102) (0.104) (0.111)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in net assets.......... (0.090) (0.004) (0.038) 0.061 0.009 0.039 (0.005) (0.076) 0.010 0.077
Net asset value at end
of period.............. $ 0.984 $ 1.075 $ 1.079 $ 1.115 $ 1.054 $ 1.045 $ 1.006 $ 1.011 $ 1.087 $ 1.077
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return............ -1.61% 6.31% 4.64% 14.71% 8.70% 13.13% 8.38% 2.64% 11.13% 20.61%
Net Assets (in
thousands)............. $304,147 $365,198 $258,711 $162,484 $105,620 $85,908 $85,075 $84,075 $100,518 $50,090
Ratio of operating
expenses to average net
assets................. 0.48% 0.49% 0.56% 0.58% 0.58% 0.58% 0.60% 0.61% 0.62% 0.56%
Ratio of net investment
income to average net
assets................. 6.65% 6.49% 7.98% 8.25% 8.42% 8.84% 8.58% 9.02% 9.57%
Portfolio turnover
rate................... 385.7% 183.4% 277.2% 152.2% 85.6% 91.3% 185.0% 143.8% 103.1% 124.7%
Current Yield**......... 7.84% 5.73% 7.51% 8.16% 8.21% 8.28% 9.12% 9.41% 8.80% 10.33%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Fund was declared effective by the Securities and Exchange Commission on
January 15, 1985.
* Annualized
** The yield information will fluctuate and publication of yield may not
provide a basis for comparison with bank deposits, other investments which
are insured and/or pay a fixed yield for a stated period of time, or other
investment companies. In addition, the yield information may be of limited
use for comparative purposes because it does not reflect charges imposed at
the Separate Account level which, if included, would decrease the yield.
12
<PAGE>
HVA MONEY MARKET FUND, INC.
FINANCIAL HIGHLIGHTS
THE FOLLOWING INFORMATION, INSOFAR AS IT RELATES TO EACH OF THE FIVE YEARS IN
THE PERIOD ENDED DECEMBER 31, 1994, HAS BEEN EXAMINED BY ARTHUR ANDERSEN LLP,
INDEPENDENT PUBLIC ACCOUNTANTS, WHOSE REPORT THEREON IS INCLUDED IN THE
STATEMENT OF ADDITIONAL INFORMATION, WHICH IS INCORPORATED BY REFERENCE TO THIS
PROSPECTUS.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
- ----------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87 12/31/86 12/31/85
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income... 0.039 0.029 0.038 0.059 0.078 0.088 0.071 0.063 0.068 0.082
Net realized and
unrealized gains
(losses) on
investments............ 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. 0.039 0.029 0.038 0.059 0.078 0.088 0.071 0.063 0.068 0.082
Dividends from net
investment income...... (0.039) (0.029) (0.038) (0.059) (0.078) (0.088) (0.071) (0.063) (0.068) (0.082)
Distribution from net
realized gains on
securities............. 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Return of capital....... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
distributions.......... (0.039) (0.029) (0.038) (0.059) (0.078) (0.088) (0.071) (0.063) (0.068) (0.082)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in net assets.......... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Net asset value at end
of period.............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return............ 3.95% 2.94% 3.63% 6.01% 8.03% 9.10% 7.40% 6.49% 8.77% 8.53%
Net Assets (in
thousands)............. $321,465 $234,088 $180,248 $177,483 $194,462 $129,808 $127,348 $104,002 $79,683 $84,025
Ratio of operating
expenses to average net
assets................. 0.47% 0.46% 0.53% 0.54% 0.57% 0.58% 0.58% 0.58% 0.58% 0.55%
Ratio of net investment
income to average net
assets................. 3.99% 2.81% 3.60% 5.88% 7.80% 8.75% 7.19% 6.36% 6.58% 8.21%
Portfolio turnover
rate................... -- -- -- -- -- -- -- -- -- --
Current Yield*.......... 5.43% 2.89% 3.09% 4.66% 7.73% 8.21% 8.48% 7.17% 5.45% 7.78%
Effective Yield*........ 5.58% 2.93% 3.14% 4.79% 8.03% 8.55% 8.86% 7.43% 5.60% 6.13%
- ----------------------------------------------------------------------------------------------------------------------------
* The yield information will fluctuate and publication of yield may not provide a basis for comparison with bank deposits,
other investments which are insured and/or pay a fixed yield for a stated period of time, or other investment companies.
In addition, the yield information may be of limited use for comparative purposes because it does not reflect charges
imposed at the Separate Account level which, if included, would decrease the yield.
</TABLE>
13
<PAGE>
HARTFORD U.S. GOVERNMENT MONEY MARKET FUND, INC.
FINANCIAL HIGHLIGHTS
THE FOLLOWING INFORMATION, INSOFAR AS IT RELATES TO EACH OF THE FIVE YEARS IN
THE PERIOD ENDED DECEMBER 31, 1994, HAS BEEN EXAMINED BY ARTHUR ANDERSEN LLP,
INDEPENDENT PUBLIC ACCOUNTANTS, WHOSE REPORT THEREON IS INCLUDED IN THE
STATEMENT OF ADDITIONAL INFORMATION, WHICH IS INCORPORATED BY REFERENCE TO THIS
PROSPECTUS.
<TABLE>
<CAPTION>
(FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
- ----------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87 12/31/86 12/31/85
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income... 0.036 0.027 0.032 0.055 0.073 0.081 0.057 0.056 0.081 0.078
Net realized and
unrealized gains
(losses) on
investments............ 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. 0.036 0.027 0.032 0.055 0.073 0.081 0.057 0.056 0.081 0.078
Dividends from net
investment income...... (0.036) (0.027) (0.032) (0.055) (0.073) (0.081) (0.057) (0.056) (0.081) (0.078)
Distribution from net
realized gains on
securities............. 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Return of capital....... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
distributions.......... (0.036) (0.027) (0.032) (0.055) (0.073) (0.081) (0.057) (0.056) (0.081) (0.078)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in net assets.......... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Net asset value at end
of period.............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return............ 3.67% 2.68% 3.22% 5.61% 7.52% 8.43% 6.92% 5.75% 6.29% 8.07%
Net Assets (in
thousands)............. $9,619 $9,449 $10,525 $11,257 $10,496 $7,814 $7,262 $5,888 $5,812 $6,455
Ratio of operating
expenses to average net
assets................. 0.58% 0.58% 0.75% 0.73% 0.73% 0.77% 0.75% 0.58% 0.60% 0.82%
Ratio of net investment
income to average net
assets................. 3.63% 2.85% 3.19% 5.48% 7.29% 8.14% 8.78% 5.57% 6.08% 7.72%
Portfolio turnover
rate................... -- -- -- -- -- -- -- -- -- --
Current Yield*.......... 5.14% 2.87% 2.69% 4.24% 7.59% 7.53% 8.27% 6.17% 5.28% 7.20%
Effective Yield*........ 5.27% 2.71% 2.72% 4.31% 7.88% 7.82% 8.82% 6.36% 5.40% 7.46%
- ----------------------------------------------------------------------------------------------------------------------------
* The yield information will fluctuate and publication of yield may not provide a basis for comparison with bank deposits,
other investments which are insured and/or pay a fixed yield for a stated period of time, or other investment companies. In
addition, the yield information may be of limited use for comparative purposes because its does not reflect charges imposed
at the Separate Account level which, if included, would decrease the yield.
</TABLE>
14
<PAGE>
THE FUNDS
The Funds are made available to serve as the underlying investment vehicles
for certain variable annuity and variable life insurance separate accounts of
ITT Hartford Life Insurance Companies. The Hartford Investment Management
Company, Inc. ("HIMCO" or the "Adviser") serves as investment adviser to
Hartford Index Fund, Inc., Hartford Bond Fund, Inc., Hartford Mortgage
Securities Fund, Inc., HVA Money Market Fund, Inc. and Hartford U.S. Government
Money Market Fund, Inc. and as investment manager to Hartford Capital
Appreciation Fund, Inc. (formerly Hartford Aggressive Growth Fund, Inc.),
Hartford Dividend and Growth Fund, Inc., Hartford International Opportunities
Fund, Inc., Hartford Stock Fund, Inc., Hartford Advisers Fund, Inc., and
Hartford International Advisers Fund, Inc. Wellington Management Company ("WMC"
or the "Sub-Adviser") serves as investment sub-adviser to Hartford Capital
Appreciation Fund, Inc., Hartford Dividend and Growth Fund, Inc., Hartford
International Opportunities Fund, Inc., Hartford Stock Fund, Inc., Hartford
Advisers Fund, Inc., and Hartford International Advisers Fund, Inc.
INVESTMENT OBJECTIVES AND POLICIES
OF THE FUNDS
The Funds have different investment objectives and policies, as described
below. The differences in objectives and policies among the Funds can be
expected to affect the return of each Fund and the degree of market and
financial risk to which each Fund is subject. For more information about the
investment strategies employed by the Funds, see "Common Investment Policies and
Risk Factors." The investment objective of each Fund is fundamental and cannot
be changed without the affirmative vote of a majority of the outstanding voting
securities of the particular Fund. All other policies not specifically
designated as fundamental are nonfundamental and may be changed by the Board of
Directors of the particular Fund. See the Statement of Additional Information
for a complete listing of investment restrictions.
HARTFORD CAPITAL APPRECIATION FUND, INC. (FORMERLY HARTFORD AGGRESSIVE GROWTH
FUND, INC.)
Hartford Capital Appreciation Fund, Inc. (the "Capital Appreciation Fund")
was incorporated in 1983 under Maryland law.
INVESTMENT OBJECTIVE. The Capital Appreciation Fund seeks 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.
INVESTMENT POLICIES. The Capital Appreciation Fund seeks to achieve its
objective by investing primarily in equity securities and securities convertible
into equity securities. The Sub-Adviser identifies, through fundamental
analysis, companies that it believes have substantial near-term capital
appreciation potential regardless of company size or industry sector. This
approach is sometimes referred to as a "stock picking" approach and results in
having all market capitalization sectors (i.e., small, medium, and large
companies) represented in the portfolio. Small and medium companies are selected
primarily on the basis of dynamic earnings growth potential. Larger companies
are selected primarily based on the expectation for a catalyst event that will
trigger stock price appreciation. Fundamental analysis involves the assessment
of a company through such factors as its business environment, management,
balance sheet, income statement, anticipated earnings, revenues, dividends, and
other related measures of value.
The Capital Appreciation Fund will invest primarily in securities issued by
U.S. companies but may also invest in securities issued by non-U.S. companies,
including those traded in U.S. markets and non-U.S. markets. Under normal
circumstances, securities of non-U.S. companies will not exceed 20% of the
Capital Appreciation Fund's total assets. The Capital Appreciation Fund's
investments in securities of non-U.S. companies may include ADRs and GDRs. When
selecting securities of non-U.S. issuers, the Sub-Adviser also will evaluate the
economic and political climate and the principal securities markets of the
country in which an issuer is located. The Capital Appreciation Fund will be
subject to certain risks as a result of its ability to invest in the securities
of non-U.S. companies. See "Common Investment Policies and Risk Factors."
From time to time, the Capital Appreciation Fund may invest in debt
securities. The non- convertible debt securities in which the Capital
Appreciation Fund may invest include debt securities assigned within the four
highest bond rating categories by Moody's or S&P, i.e., investment grade, or
considered to be of comparable
15
<PAGE>
quality as determined by the Sub-Adviser. In addition, the Capital Appreciation
Fund may invest up to 5% of total assets in high yield debt securities, commonly
known as "junk bonds." Such securities are rated as low as "C" by Moody's and
S&P, or if unrated, are of comparable quality as determined by the Sub-Adviser.
See "Common Investment Policies and Risk Factors."
Although the Capital Appreciation Fund intends to be fully invested in
equity and debt securities, it may hold cash or cash equivalents and may invest
any portion or all of its assets in high quality money market instruments in the
following circumstances: (1) during periods when the Sub- Adviser deems it
necessary for temporary defensive purposes; (2) to meet liquidity needs; or (3)
in anticipation of investment of its assets.
The Capital Appreciation Fund may invest up to 10% of its total assets in
illiquid securities and may from time to time purchase securities on a
when-issued or delayed delivery basis. In addition, the Capital Appreciation
Fund may invest to a limited extent in other investment companies and may enter
into certain currency transactions. Finally, the Capital Appreciation Fund may
invest in options, futures, and options on futures. See "Common Investment
Policies and Risk Factors."
HARTFORD DIVIDEND AND GROWTH FUND, INC.
Hartford Dividend and Growth Fund, Inc. (the "Dividend and Growth Fund") was
incorporated in 1993 under Maryland law.
INVESTMENT OBJECTIVE. The Dividend and Growth Fund seeks to achieve a high
level of current income consistent with growth of capital and reasonable
investment risk.
INVESTMENT POLICIES. The Dividend and Growth Fund seeks to achieve its
objective by investing primarily in equity securities and securities convertible
into equity securities that typically have above average income yield and whose
prospects for capital appreciation are considered favorable by the Sub-Adviser.
The Sub-Adviser uses fundamental analysis to evaluate a security for purchase or
sale by the Dividend and Growth Fund. Fundamental analysis involves the
assessment of a company through such factors as its business environment,
management, balance sheet, income statement, anticipated earnings, revenues,
dividends, and other related measures of value. As a key component of the
fundamental analysis done for the Dividend and Growth Fund, the Sub-Adviser
evaluates a company's ability to sustain and potentially increase its dividend.
The Dividend and Growth Fund's portfolio will be broadly diversified by industry
and company; the Fund seeks to diversify its investments over a carefully
selected list of securities in order to moderate the risks inherent in equity
investments.
The Dividend and Growth Fund will invest primarily in securities issued by
U.S. companies but may also invest in securities issued by non-U.S. companies,
including those traded in U.S. markets and non-U.S. markets. Under normal
circumstances, securities of non-U.S. companies will not exceed 20% of the
Dividend and Growth Fund's total assets. The Dividend and Growth Fund's
investments in securities of non-U.S. companies may include ADRs and GDRs. When
selecting securities of non-U.S. issuers, the Sub-Adviser also will evaluate the
economic and political climate and the principal securities markets of the
country in which an issuer is located. The Dividend and Growth Fund will be
subject to certain risks as a result of its ability to invest in the securities
of non-U.S. companies. See "Common Investment Policies and Risk Factors."
From time to time, the Dividend and Growth Fund may invest in debt
securities. The non- convertible debt securities in which the Dividend and
Growth Fund may invest include debt securities assigned within the four highest
bond rating categories by Moody's or S&P, i.e., investment grade, or considered
to be of comparable quality as determined by the Sub-Adviser.
Although the Dividend and Growth Fund intends to be fully invested in equity
and debt securities, it may hold cash or cash equivalents and may invest any
portion or all of its assets in high quality money market instruments in the
following circumstances: (1) during periods when the Sub- Adviser deems it
necessary for temporary defensive purposes; (2) to meet liquidity needs; or (3)
in anticipation of investment of its assets.
The Dividend and Growth Fund may invest up to 15% of its total assets in
illiquid securities and may from time to time purchase securities on a
when-issued or delayed delivery basis. In addition, the Dividend and Growth Fund
may invest to a limited extent in other investment companies and may engage in
certain currency transactions. Finally, the Dividend and Growth Fund may invest
in options, futures, and options on futures. See "Common Investment Policies and
Risk Factors."
16
<PAGE>
HARTFORD INDEX FUND, INC.
Hartford Index Fund, Inc. (the "Index Fund") was incorporated in 1983 under
Maryland law.
INVESTMENT OBJECTIVE. The Index Fund seeks to provide investment results
which approximate the price and yield performance of publicly-traded common
stocks in the aggregate.
INVESTMENT POLICIES. The Index Fund uses the Standard & Poor's 500 Composite
Stock Price Index (the "Index") as its standard performance comparison because
it represents a significant proportion of the total market value of all common
stocks, is well known to investors and, in the opinion of the management of the
Index Fund, is representative of the performance of publicly-traded common
stocks. Therefore, the Index Fund attempts to approximate the capital
performance and dividend income of the Index.
The Index Fund will generally invest in no fewer than 475 stocks. The
Adviser will select stocks for the Index Fund's portfolio after taking into
account their individual weights in the Index. Temporary cash balances, normally
not expected to exceed 2% of the Index Fund's net assets, may be invested in
short-term money market instruments. The Index Fund may invest in ADRs and GDRs.
The Index Fund may also from time to time enter into stock index futures
contracts and options on such futures contracts to maintain optimal exposure to
the Index and to hedge against changes in security prices. See "Common
Investment Policies and Risk Factors."
The Index is composed of 500 selected common stocks, most of which are
listed on the New York Stock Exchange. S&P chooses the stocks to be included in
the Index on a proprietary basis. Inclusion of a stock in the Index in no way
implies an opinion by S&P as to its attractiveness as an investment; nor is S&P
a sponsor or in any other way affiliated with the Index Fund.
The weightings of stocks in the Index are based on each stock's relative
total market value, that is, its market price per share times the number of
shares outstanding. Because of this weighting, as of December 31, 1994, 50
percent of the Index was composed of the 58 largest companies, the five largest
being General Electric Co., AT&T Corp., Exxon Corp., Coca-Cola Company and Royal
Dutch Petroleum.
No attempt is made to "manage" the Index Fund's portfolio in the traditional
sense, using economic, financial and market analysis, nor will the adverse
financial situation of a company directly result in its elimination from the
Index Fund's portfolio unless, of course, the company is removed from the Index.
From time to time administrative adjustments may be made in the Index Fund's
portfolio because of mergers, changes in the composition of the Index and
similar reasons.
The Index Fund's management believes that the "indexing" approach described
above is an effective method of substantially duplicating percentage changes in
the Index. It is a reasonable expectation that the correlation between the
performance of the Index Fund (before expenses) and that of the Index will be
above 98%; a figure of 100% would indicate perfect correlation. The Index Fund
is regularly monitored to determine if it is meeting its targeted performance.
In the event of any deviation from the targeted performance, the security
holdings of the Index Fund are rebalanced to better replicate the Index. At some
time in the future, the Board of Directors of the Index Fund may, subject to
shareholder approval, select another index if such a standard of comparison is
deemed to be more representative of the performance of common stocks.
The Index Fund's ability to approximate the performance of the Index will
depend to some extent on the size of cash flows into and out of the Index Fund.
Investment changes to accommodate these cash flows will be made to maintain the
similarity of the Index Fund's portfolio to the Index, to the maximum
practicable extent.
HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC.
Hartford International Opportunities Fund, Inc. (the "International
Opportunities Fund") was incorporated in 1990 under Maryland law.
INVESTMENT OBJECTIVE. The International Opportunities Fund seeks to achieve
long-term total rate of return consistent with prudent investment risk through
investment primarily in equity securities issued by non-U.S. companies.
INVESTMENT POLICIES. The International Opportunities Fund seeks to achieve
its investment objective by investing in a diversified portfolio of primarily
equity securities which covers a broad range of countries, industries, and
companies. The International Opportunities Fund anticipates that, under normal
market conditions, it will diversify its investments among a minimum of five
countries; the Fund will not invest more
17
<PAGE>
than 20% of its net assets in securities of issuers located in any one country,
except that it may invest up to 35% of its net assets in securities of issuers
located in any one of the following countries: Australia, Canada, France, Japan,
the United Kingdom or Germany.
Securities in which the International Opportunities Fund invests are
denominated in both U.S. dollars and non-U.S. currencies (including the European
Currency Unit) and generally are traded on non-U.S. markets.
Under normal market conditions, at least 70% of the International
Opportunities Fund's total assets will be invested in equity securities issued
by non-U.S. companies. Equity securities in which the International
Opportunities Fund invests include common stocks, preferred stocks, convertible
securities, and warrants and rights to acquire such securities. The
International Opportunities Fund may invest in ADRs and GDRs. See "Common
Investment Policies and Risk Factors." Equity investments are selected on the
basis of fundamental analysis to identify those markets and securities that
provide capital appreciation potential. Fundamental analysis involves the
assessment of a company through such factors as its business environment,
management, balance sheet, income statement, anticipated earnings, revenues,
dividends and other related measures of value. In analyzing companies for
investment, the Sub-Adviser looks for, among other things, a strong balance
sheet, attractive industry dynamics, strong competitive advantages, and
attractive relative value within the context of a security's primary trading
market. In addition to fundamental analysis of companies and industries, the
Sub-Adviser evaluates the economic and political environments of the countries
in which the securities are traded. The International Opportunities Fund's
investments in debt securities will be substantially similar to the debt
securities investments permitted for the International Advisers Fund. See
"Hartford International Advisers Fund, Inc. -- Investment Policies."
Although the International Opportunities Fund intends to be fully invested
in equity and debt securities, it may hold cash and cash equivalents (U.S.
dollars, non-U.S. currencies, multinational currency units) and may invest any
portion or all of its assets in high quality money market instruments of U.S.,
non-U.S., or supranational issuers in the following circumstances: (1) during
periods when the Sub-Adviser deems it necessary for temporary defensive
purposes; (2) to meet liquidity needs; or (3) in anticipation of investment of
its assets. The International Opportunities Fund may invest in non-U.S. money
market funds and commingled pools offered by non-U.S. banks.
The International Opportunities Fund will be subject to certain risks as a
result of its ability to invest in the securities of non-U.S. companies. The
International Opportunities Fund is permitted to invest up to 15% of its total
assets in illiquid securities and may from time to time purchase securities on a
when-issued or delayed delivery basis. In addition, the International
Opportunities Fund may invest to a limited extent in other investment companies
and enter into certain currency transactions. Finally, the International
Opportunities Fund is permitted to invest in options, futures and options on
futures. See "Common Investment Policies and Risk Factors."
HARTFORD STOCK FUND, INC.
Hartford Stock Fund, Inc. (the "Stock Fund") was incorporated in 1976 under
Maryland law.
INVESTMENT OBJECTIVE. The Stock Fund seeks to achieve long-term capital
growth primarily through capital appreciation, with income a secondary
consideration, by investing in primarily equity securities.
INVESTMENT POLICIES. The Stock Fund seeks to achieve its objective by
investing primarily in equity securities and securities convertible into equity
securities, using a two-tiered investment approach. First, under what is
sometimes referred to as a "top down" approach, the Sub-Adviser analyzes the
macro economic and investment environment. This includes an evaluation of
economic conditions, U.S. fiscal and monetary policy, demographic trends, and
investor sentiment. Through top down analysis, the Sub-Adviser anticipates
secular and cyclical changes and identifies industries and economic sectors that
are expected to grow faster than the overall economy.
Second, top down analysis is followed by what is sometimes referred to as a
"bottom up" approach, which is the use of fundamental analysis to identify
specific securities for purchase or sale. The Stock Fund's portfolio emphasizes
high-quality growth companies. The key characteristics of high-quality growth
companies include a leadership position within an industry, a strong balance
sheet, a high return on equity, sustainable or increasing dividends, a strong
management team, and a globally competitive position. Fundamental analysis
involves the assessment of a company through such factors as its business
environment, management, balance sheet, income statement, anticipated earnings,
revenues, dividends, and other related measures of value.
18
<PAGE>
The Stock Fund will invest primarily in securities issued by U.S. companies
but may also invest in securities issued by non-U.S. companies, including those
traded in U.S. markets and non-U.S. markets. Under normal circumstances,
securities of non-U.S. companies will not exceed 20% of the Stock Fund's total
assets. The Stock Fund's investments in securities of non-U.S. companies may
include ADRs and GDRs. When selecting securities of non-U.S. issuers, the
Sub-Adviser also will evaluate the economic and political climate and the
principal securities markets of the country in which an issuer is located. The
Stock Fund will be subject to certain risks as a result of its ability to invest
in the securities of non-U.S. companies. See "Common Investment Policies and
Risk Factors."
From time to time, the Stock Fund may invest in debt securities. The
non-convertible debt securities in which the Stock Fund may invest include debt
securities assigned within the four highest bond rating categories by Moody's or
S&P, i.e., investment grade, or considered to be of comparable quality as
determined by the Sub-Adviser.
Although the Stock Fund intends to be fully invested primarily in equity
securities and securities convertible into equity securities it may hold cash or
cash equivalents and may invest any portion or all of its assets in high quality
money market instruments in the following circumstances: (1) during periods when
the Sub-Adviser deems it necessary for temporary defensive purposes; (2) to meet
liquidity needs; or (3) in anticipation of investment of its assets.
The Stock Fund may invest up to 10% of its total assets in illiquid
securities and may from time to time purchase securities on a when-issued or
delayed delivery basis. In addition, the Stock Fund may invest to a limited
extent in other investment companies and may enter into certain currency
transactions. Finally, the Stock Fund may invest in options, futures and options
on futures. See "Common Investment Policies and Risk Factors."
HARTFORD ADVISERS FUND, INC.
Hartford Advisers Fund, Inc. (the "Advisers Fund") was incorporated in 1982
under Maryland law.
INVESTMENT OBJECTIVE. The Advisers Fund seeks 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.
INVESTMENT POLICIES. The Advisers Fund seeks to achieve its objective
through the active allocation of its assets among the asset categories of equity
and debt securities and money market instruments, based upon the Sub-Adviser's
judgment of the projected investment environment for financial assets, relative
fundamental values and attractiveness of each asset category, and expected
future returns of each asset category. The Sub-Adviser will base its asset
allocation decisions on fundamental analysis and will not attempt to make
short-term market timing decisions among asset categories. As a result, shifts
in asset allocation are expected to be gradual and continuous and the Advisers
Fund will normally have some portion of its assets invested in each asset
category. The Advisers Fund does not have percentage limitations on the amount
allocated to each asset category.
The Advisers Fund's investments in equity securities and securities that are
convertible into equity securities will be substantially similar to the
investments permitted for the Stock Fund. See "Hartford Stock Fund, Inc. --
Investment Policies." The Advisers Fund's investments in debt securities will be
substantially similar to the investments permitted for the Bond Fund. See
"Hartford Bond Fund, Inc. -- Investment Policies." In the event a security owned
by the Advisers Fund is downgraded to a rating category below investment grade,
the Advisers Fund generally will sell it within a reasonable period thereafter
based on the Sub-Adviser's outlook for the issuer and the security.
The Advisers Fund will invest primarily in securities issued by U.S.
companies but may also invest in securities issued by non-U.S. companies,
including those traded in U.S. markets and non-U.S. markets. Under normal
circumstances, securities of non-U.S. companies will not exceed 20% of the
Advisers Fund's total assets. The Advisers Fund's investments in securities of
non-U.S. companies may include ADRs and GDRs. When selecting securities of
non-U.S. issuers, the Sub-Adviser also will evaluate the economic and political
climate and the principal securities markets of the country in which an issuer
is located. The Advisers Fund will be subject to certain risks as a result of
its ability to invest in the securities of non-U.S. companies. See "Common
Investment Policies and Risk Factors."
19
<PAGE>
The Advisers Fund may hold cash and cash equivalents and may invest any
portion or all of its assets in high quality money market instruments in the
following circumstances: (1) when the Sub-Adviser expects returns on such
instruments to be attractive relative to investments in equity and debt
securities; (2) during periods when the Sub-Adviser deems it necessary for
temporary defensive purposes; (3) to meet liquidity needs; or (4) in
anticipation of investment of its assets.
The Advisers Fund may invest up to 10% of its total assets in illiquid
securities and may from time to time purchase securities on a when-issued or
delayed delivery basis. In addition, the Advisers Fund may invest to a limited
extent in other investment companies and enter into certain currency
transactions. Finally, the Advisers Fund may invest in options, futures, and
options on futures. See "Common Investment Policies and Risk Factors."
HARTFORD INTERNATIONAL ADVISERS FUND, INC.
Hartford International Advisers Fund, Inc. (the "International Advisers
Fund") was incorporated in 1994 under Maryland law.
INVESTMENT OBJECTIVE. The International Advisers Fund seeks to achieve
maximum long-term total rate of return consistent with prudent investment risk.
INVESTMENT POLICIES. The International Advisers Fund seeks to achieve its
objective through the active allocation of its assets among the asset categories
of equity and debt securities and money market instruments, based upon its
judgment of the projected investment environment for financial assets, relative
fundamental values and attractiveness of each asset category, and expected
future returns of each asset category. The Sub-Adviser will base its asset
allocation decisions on fundamental analysis and will not attempt to make
short-term timing decisions among asset categories. As a result, shifts in asset
allocation are expected to be gradual and continuous and the International
Advisers Fund will normally have some portion of its assets invested in each
asset category at all times. The International Advisers Fund does not have
percentage limitations on the amount allocated to each asset category.
The International Advisers Fund will consist of a diversified portfolio of
securities covering a broad range of countries, industries, and companies. The
International Advisers Fund anticipates that, under normal market conditions, it
will diversify its investments among a minimum of five countries; the Fund will
not invest more than 20% of its net assets in securities of issuers located in
any one country, except that it may invest up to 35% of its net assets in
securities of issuers located in any one of the following countries: Australia,
Canada, France, Japan, the United Kingdom or Germany.
Securities in which the International Advisers Fund invests are denominated
in both U.S. dollars and non-U.S. currencies (including the European Currency
Unit) and generally are traded on non-U.S. markets.
The International Advisers Fund's investments in equity securities will be
substantially similar to the equity securities investments permitted for the
International Opportunities Fund. See "Hartford International Opportunities
Fund, Inc. -- Investment Policies."
The International Advisers Fund's investments in debt securities include,
but are not limited to: (1) debt securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; (2) debt obligations issued or
guaranteed by a non-U.S. sovereign government or one of its agencies or
political subdivisions, including Brady Bonds (see "Common Investment Policies
and Risk Factors"); (3) debt obligations issued or guaranteed by supranational
organizations such as the World Bank; (4) debt obligations of non-U.S. banks and
bank holding companies; (5) non-U.S. corporate debt securities; (6) debt
obligations of U.S. banks and corporations; (7) non-U.S. commercial paper; (8)
asset-backed securities and mortgage-related securities, including CMOs; these
debt securities will be rated investment grade by Moody's or S&P, or, if
unrated, will be determined by the Sub-Adviser to be of comparable quality (see
"Common Investment Policies and Risk Factors"); and (9) repurchase agreements
involving any of the foregoing. The International Advisers Fund's investments in
debt securities will be based on an analysis of such factors as yield, credit
quality, economic policies, inflation rates, and the pace of economic growth in
various markets.
Debt securities in which the International Advisers Fund may invest include
investment grade, non-convertible debt securities assigned within the four
highest bond rating categories by Moody's or S&P, or, if unrated, which are
determined by the Sub-Adviser to be of comparable quality. In addition, the
International
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Advisers Fund may invest up to 15% of its total assets in high yield debt
securities, commonly known as "junk bonds." Such securities are rated as low as
"C" by Moody's and by S&P, or, if unrated, are of comparable quality as
determined by the Sub-Adviser. See "Common Investment Policies and Risk
Factors."
The International Advisers Fund may hold cash and cash equivalents (U.S.
dollars, non-U.S. currencies, multinational currency units) and may invest any
portion or all of its assets in high quality money market instruments,
including, but not limited to, instruments of U.S., non-U.S., or supranational
issuers. These money market instruments may also include non-U.S. money market
funds and commingled pools offered by non-U.S. banks. The International Advisers
Fund may invest in high quality money market instruments in the following
circumstances: (1) when the Sub-Adviser expects returns on such instruments to
be attractive relative to investments in equity and debt securities; (2) during
periods when the Sub-Adviser deems it necessary for temporary defensive
purposes; (3) to meet liquidity needs; or (4) in anticipation of investment of
its assets.
The International Advisers Fund will be subject to certain risks as a result
of its ability to invest in the securities of non-U.S. companies. The
International Advisers Fund may invest up to 15% of its total assets in illiquid
securities and may from time to time purchase securities on a when-issued or
delayed delivery basis. In addition, the International Advisers Fund may invest
to a limited extent in other investment companies and may enter into certain
currency transactions. Finally, the International Advisers Fund may invest in
options, futures, and options on futures. See "Common Investment Policies and
Risk Factors."
HARTFORD BOND FUND, INC.
Hartford Bond Fund, Inc. (the "Bond Fund") was incorporated in 1982 under
Maryland law.
INVESTMENT OBJECTIVE. The Bond Fund seeks to achieve maximum current income
consistent with preservation of capital by investing primarily in fixed-income
securities.
INVESTMENT POLICIES. The Bond Fund's investments in bonds and other debt
securities include: (i) securities issued or guaranteed as to principal or
interest by the U.S. Government, its agencies or instrumentalities; (ii)
publicly-traded, non-convertible debt securities issued or guaranteed by U.S.
corporations or other issuers and rated investment grade by Moody's or S&P, or
if unrated, determined by the Adviser to be of comparable quality; (iii)
asset-backed securities and mortgage- related securities, including CMOs, which
are rated investment grade by Moody's or S&P, or, if unrated, which are
determined by the Adviser to be of comparable quality (see "Common Investment
Policies and Risk Factors"); (iv) securities issued or guaranteed as to
principal or interest by a sovereign government or one of its agencies or
political subdivisions, supranational entities such as development banks,
non-U.S. corporations, banks or bank holding companies, or other non-U.S.
issuers and rated investment grade by Moody's or S&P, or, if unrated, which are
determined by the Adviser to be of comparable quality. Bonds and other debt
securities owned by the Bond Fund will be denominated in U.S. dollars. In the
event a security owned by the Bond Fund is downgraded to a rating category below
investment grade, the Bond Fund generally will sell it within a reasonable
period thereafter based on the Adviser's outlook for the issuer and the
security.
The Bond Fund will invest primarily in securities issued by U.S. companies
but may also invest in securities issued by non-U.S. companies, including those
traded in U.S. markets and non-U.S. markets. Under normal circumstances,
securities of non-U.S. companies will not exceed 20% of the Bond Fund's total
assets. The Bond Fund's investments in securities of non-U.S. companies may
include ADRs and GDRs. When selecting securities of non-U.S. issuers, the
Adviser also will evaluate the economic and political climate, and the principal
securities markets of the country in which an issuer is located. The Bond Fund
will be subject to certain risks as a result of its ability to invest in the
securities of non-U.S. companies. See "Common Investment Policies and Risk
Factors."
The Bond Fund will invest at least 65% of its total assets in bonds and debt
securities with a maturity of at least one year. The Bond Fund may invest up to
15% of its total assets in preferred stocks, convertible securities, and
securities carrying warrants to purchase equity securities. The Bond Fund will
not invest in common stocks directly, but may retain, for reasonable periods of
time, common stocks acquired upon conversion of debt securities or upon exercise
of warrants acquired with debt securities.
Although the Bond Fund intends to be fully invested in equity and debt
securities, it may hold cash or cash equivalents and may invest any portion or
all of its assets in high quality money market instruments in the following
circumstances: (1) during periods when the Adviser deems it necessary for
temporary defensive purposes; (2) to meet liquidity needs; or (3) in
anticipation of investment of its assets.
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The Bond Fund may invest up to 10% of its total assets in illiquid
securities and may from time to time purchase securities on a when-issued or
delayed delivery basis. In addition, the Bond Fund may invest to a limited
extent in other investment companies.
HARTFORD MORTGAGE SECURITIES FUND, INC.
Hartford Mortgage Securities Fund, Inc. (the "Mortgage Securities Fund") was
incorporated in 1984 under Maryland law.
INVESTMENT OBJECTIVE. The Mortgage Securities Fund seeks maximum current
income consistent with safety of principal and maintenance of liquidity by
investing primarily in mortgage-related securities, including securities issued
by the Government National Mortgage Association.
INVESTMENT POLICIES. The Mortgage Securities Fund seeks to achieve its
objective by investing, under normal circumstances, at least 65% of its total
assets in high quality mortgage-related securities either (i) issued by U.S.
Government agencies, instrumentalities or sponsored corporations or (ii) rated A
or better by Moody's or S&P or, if not rated, which are of equivalent investment
quality as determined by the Adviser. At times the Mortgage Securities Fund may
invest in mortgage-related securities not meeting the foregoing investment
quality standards when the Adviser deems such investments to be consistent with
the Fund's investment objective; however, no such investments will be made in
excess of 20% of the value of the Fund's total assets. Such investments will be
considered mortgage-related securities for purposes of the policy that the Fund
invest at least 65% of the value of its total assets in mortgage-related
securities, including securities issued by the GNMA. See "Common Investment
Policies and Risk Factors".
Consistent with its objective, the Mortgage Securities Fund may seek to
increase its current return by writing covered call or covered put options with
respect to some or all of the securities held in its portfolio. In addition,
through the writing and purchase of options and the purchase and sale of
interest rate futures contracts and related options, the Mortgage Securities
Fund may at times seek to reduce fluctuations in net asset value by hedging
against a decline in the value of securities owned by the Fund or an increase in
the price of securities which the Fund plans to purchase. The Mortgage
Securities Fund may also invest up to 10% of its total assets in illiquid
securities, purchase asset-backed securities, and enter into swap transactions.
See "Common Investment Policies and Risk Factors."
Although the Mortgage Securities Fund intends to be fully invested in debt
securities, it may hold cash or cash equivalents and invest any portion or all
of its assets in high quality money market instruments in the following
circumstances: (1) during periods when the Sub-Adviser deems it necessary for
temporary defensive purposes; (2) to meet liquidity needs; or (3) in
anticipation of investment of its assets.
HARTFORD U.S. GOVERNMENT MONEY MARKET FUND, INC.
Hartford U.S. Government Money Market Fund, Inc. (the "U.S. Government Money
Market Fund") was incorporated in 1982 under Maryland law.
INVESTMENT OBJECTIVE. The U.S. Government Money Market Fund seeks to achieve
maximum current income consistent with preservation of capital.
INVESTMENT POLICIES. The U.S. Government Money Market Fund's portfolio will
consist entirely of cash and investments permitted by Rule 2a-7 under the 1940
Act. Each has an effective maturity date of 397 days or less, computed in
accordance with Rule 2a-7, from date of purchase. The average maturity of the
portfolio will vary according to the Adviser's appraisal of money market
conditions and will not exceed 90 days.
The U.S. Government Money Market Fund seeks to achieve its objective by
investing in short-term, marketable obligations issued or guaranteed by the U.S.
Government or by agencies or instrumentalities of the U.S. Government, whether
or not they are guaranteed by the full faith and credit of the U.S. government.
HVA MONEY MARKET FUND, INC.
HVA Money Market Fund, Inc. (the "Money Market Fund") was incorporated in
1982 under Maryland law.
INVESTMENT OBJECTIVE. The Money Market Fund seeks to achieve maximum current
income consistent with liquidity and preservation of capital.
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INVESTMENT POLICIES. The Money Market Fund's portfolio will consist entirely
of cash and investments permitted under Rule 2a-7 of the 1940 Act. Each has an
effective maturity date of 397 days or less computed in accordance with Rule
2a-7. The average maturity of the portfolio will vary according to the Adviser's
appraisal of money market conditions and will not exceed 90 days.
The Money Market Fund seeks to achieve its objective by investing in money
market securities such as, but not limited to: (a) banker's acceptances; (b)
obligations of governments (whether U.S. or non-U.S.) and their agencies and
instrumentalities; (c) short-term corporate obligations, including commercial
paper, notes, and bonds; (d) other short-term debt obligations; (e) obligations
of U.S. banks, non-U.S. branches of U.S. banks (Eurodollars), U.S. branches and
agencies of non-U.S. banks (Yankee dollars), and non-U.S. branches of non-U.S.
banks; and (f) asset-backed securities. See "Common Investment Policies and Risk
Factors." Under normal circumstances, foreign securities will not exceed 25% of
the Money Market Fund's total assets.
The Money Market Fund will make portfolio investments primarily in
anticipation of or in response to changing economic and money market conditions
and trends. However, it is anticipated that from time to time the Money Market
Fund will take advantage of temporary disparities in the yield relationships
among the different segments of the money market or among particular instruments
within the same segment of the market, to make purchases and sales when the
Adviser deems that such transactions will improve the yield or return of the
portfolio.
COMMON INVESTMENT POLICIES AND
RISK FACTORS
REPURCHASE AGREEMENTS
The Funds may enter into repurchase agreements with respect to securities
issued or guaranteed by the U.S. Government, with commercial banks having assets
in excess of $1 billion or with recognized government securities dealers with
net capital in excess of $50 million. The Fund's Boards of Directors have
established standards for evaluation of the creditworthiness of the banks and
securities dealers with which the Funds will engage in repurchase agreements and
monitors on a quarterly basis the Adviser's and Sub-Adviser's compliance with
such standards.
A repurchase agreement is an agreement by which the seller of a security
agrees to repurchase the security sold at a mutually agreed upon time and price.
It may also be viewed as the loan of money by a Fund to the seller. The resale
price normally is in excess of the purchase price, reflecting an agreed upon
market rate. The rate is effective for the period of time a Fund is invested in
the agreement and is not related to the coupon rate on the underlying security.
The period of these repurchase agreements will usually be short, from overnight
to one week, and at no time will a Fund invest in repurchase agreements for a
period of more than one year. The securities which are subject to repurchase
agreements, however, may have maturity dates in excess of one year from the
effective date of the repurchase agreement. A Fund will always receive as
collateral securities whose market value, including accrued interest, will be at
least equal to 100% of the dollar amount invested by a Fund in each agreement,
and a Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer. If the seller defaults, a Fund might incur a
loss if the value of the collateral securing the repurchase agreement declines
and may incur disposition costs in connection with liquidating the collateral. A
Fund may not enter into a repurchase agreement with more than seven days to
maturity if, as a result, more than 10% of the Fund's total assets would be
invested in such repurchase agreements together with any other investment for
which market quotations are not readily available.
ILLIQUID SECURITIES
Each Fund, except the Index Fund, the U.S. Government Money Market Fund and
the Money Market Fund, is permitted to invest in illiquid securities. No
illiquid securities will be acquired if upon the purchase more than 10% or 15%
of the value of a Fund's total assets, varying by Fund (15% for the Dividend and
Growth Fund, International Advisers Fund and International Opportunities Fund,
10% for the Advisers Fund, Capital Appreciation Fund, Bond Fund, Mortgage
Securities Fund and Stock Fund), would consist of these securities. "Illiquid
securities" are securities that may not be sold or disposed of in the ordinary
course of business within seven days at approximately the price used to
determine a Fund's net asset value.
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Under current interpretations of the SEC Staff, the following securities in
which a Fund may invest will be considered illiquid: (1) repurchase agreements
maturing in more than seven days; (2) certain restricted securities (securities
whose public resale is subject to legal or contractual restrictions); (3)
options, with respect to specific securities, not traded on a national
securities exchange that are not readily marketable; and (4) any other
securities in which a Fund may invest that are not readily marketable.
These Funds may purchase without limit, however, certain restricted
securities that can be resold to qualifying institutions pursuant to a
regulatory exemption under Rule 144A under the 1933 Act ("Rule 144A
securities"). If a dealer or institutional trading market exists for Rule 144A
securities, such securities are deemed to be liquid and thus treated as exempt
from a Fund's 10% or 15% limitation on the investment in illiquid securities.
Under the supervision of the Board of Directors, the Adviser or Sub-Adviser
determines the liquidity of Rule 144A securities and, through reports from the
Adviser or Sub-Adviser, the Board of Directors monitors trading activity in
these securities. In reaching liquidity decisions, the Adviser or Sub-Adviser
will consider, among other things, the following factors: (1) the frequency of
trades and price quotes for the security; (2) the number of dealers willing to
purchase or sell the security and the number of other potential purchasers; (3)
dealer undertakings to make a market in the security; and (4) the nature of the
security and the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the procedures for transfer).
Because institutional trading in Rule 144A securities is relatively new, it is
difficult to predict accurately how these markets will develop. If institutional
trading in Rule 144A securities declines, a Fund's liquidity could be adversely
affected to the extent that a Fund is invested in such securities.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
The Capital Appreciation Fund, the Dividend and Growth Fund, the
International Opportunities Fund, the Stock Fund, the Index Fund, the Advisers
Fund, the International Advisers Fund, the Bond Fund and the Mortgage Securities
Fund may purchase or sell securities on a when-issued or delayed-delivery basis.
When-issued or delayed-delivery transactions arise when securities are purchased
or sold with payment and delivery taking place in the future in order to secure
what is considered to be an advantageous price and yield at the time of entering
into the transaction. While these Funds will purchase securities on a
when-issued or delayed-delivery basis only with the intention of acquiring the
securities, the Funds may sell the securities before the settlement date, if the
Adviser or Sub-Adviser deems it advisable. At the time a Fund makes the
commitment to purchase securities on a when-issued or delayed-delivery basis,
the Fund will record the transaction and thereafter reflect the value, each day,
of such security in determining the net asset value of the Fund. At the time of
delivery of the securities, the value may be more or less than the purchase
price. The Fund's Custodian will maintain, in a segregated account of the Fund,
cash, U.S. Government securities or other liquid, high-grade debt obligations
having a value equal to or greater than the Fund's purchase commitments; the
custodian will likewise segregate securities sold on a delayed-delivery basis.
OTHER INVESTMENT COMPANIES
The Capital Appreciation Fund, the Dividend and Growth Fund, the
International Opportunities Fund, the Bond Fund, the Stock Fund, the Advisers
Fund, and the International Advisers Fund are permitted to invest in other
investment companies. Securities issued in certain countries are currently
accessible to the Funds only through such investments. The investment in other
investment companies is limited in amount by the 1940 Act, and will involve the
indirect payment of a portion of the expenses, including advisory fees, of such
other investment companies. No Fund may acquire more than 3% of the outstanding
voting securities of any other investment company, and no Fund may have more
than 5% of its total assets invested in any other investment company. See
"Investment Restrictions of the Funds" in the Statement of Additional
Information.
CURRENCY TRANSACTIONS
The Capital Appreciation Fund, the Dividend and Growth Fund, the
International Opportunities Fund, the Stock Fund, the Advisers Fund and the
International Advisers Fund may engage in currency transactions to hedge the
value of portfolio securities denominated in particular currencies against
fluctuations in relative value. Currency transactions include forward currency
contracts, exchange-listed and over-the-counter ("OTC") currency futures
contracts and options thereon, exchange listed and OTC options on currencies,
and currency swaps.
These Funds may invest in forward currency contracts, which involve a
privately negotiated obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of
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the contract agreed upon by the parties, at a price set at the time of the
contract. In addition, these Funds may engage in currency swaps, which are
agreements to exchange cash flows based on the notional difference among two or
more currencies. See "Swap Agreements." These Funds also may engage in
exchange-listed and OTC currency futures contracts and options thereon, and
exchange listed and OTC options on currencies. See "Options and Futures
Contracts."
These Funds may cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to increase or decline
in value relative to other currencies to which the Funds have, or in which the
Funds expect to have, exposure. To reduce the effect of currency fluctuation on
the value of existing or anticipated holdings of their securities, these Funds
may also engage in proxy hedging. Proxy hedging is used when the currency to
which a portfolio holding is exposed is difficult to hedge generally or
difficult to hedge against the U.S. dollar. Proxy hedging entails entering into
a forward contract to buy U.S. dollars and to sell a currency, the changes in
the value of which generally are considered to be linked to the currency to
which the portfolio holding is exposed. The amount of the contract would not
exceed the market value of the Fund's securities denominated in the linked
currency.
The use of currency transactions to protect the value of a Fund's assets
against a decline in the value of a currency does not eliminate fluctuations in
the value of the Fund's underlying securities. Further, these Funds may enter
into currency transactions only with counterparties that the Sub-Adviser deems
to be creditworthy.
OPTIONS AND FUTURES CONTRACTS
In seeking to protect against the effect of changes in equity market values,
currency exchange rates or interest rates that are adverse to the present or
prospective position of the Funds, for cash flow management, and, to a lesser
extent, to enhance returns, the Capital Appreciation Fund, the Dividend and
Growth Fund, the Index Fund, the International Opportunities Fund, the Stock
Fund, the Advisers Fund, the International Advisers Fund, the Bond Fund and the
Mortgage Securities Fund may employ certain hedging, income enhancement and risk
management techniques, including the purchase and sale of options, futures and
options on futures involving equity and debt securities and foreign currencies,
aggregates of equity and debt securities, indices of prices of equity and debt
securities, and other financial indices. A Fund's ability to engage in these
practices may be limited by tax considerations and certain other legal
considerations.
These Funds may write covered call options or purchase covered put options
on portfolio securities as a partial hedge (to the extent of the premium
received less transaction costs) against a decline in the value of portfolio
securities and in circumstances in which the Adviser or the Sub-Adviser
anticipates that the price of the underlying securities will not increase above
the exercise price of the option by an amount greater than the premium received
(less transaction costs incurred) by the Fund. This strategy limits potential
capital appreciation in the portfolio securities subject to the put or call
option.
These Funds may also write covered put and call options and purchase put and
call options on foreign currencies to hedge against the risk of foreign exchange
fluctuations on foreign securities the particular Fund holds in its portfolio or
that it intends to purchase. For example, if a Fund enters into a contract to
purchase securities denominated in foreign currency, it could effectively
establish the maximum U.S. dollar cost of the securities by purchasing call
options on that foreign currency. Similarly, if a Fund held securities
denominated in a foreign currency and anticipated a decline in the value of that
currency against the U.S. dollar, the Fund could hedge against such a decline by
purchasing a put option on the foreign currency involved.
In addition, these Funds may purchase put and call options and write covered
put and call options on aggregates of equity and debt securities, indices of
prices of equity and debt securities and other financial indices, and may enter
into futures contracts and options thereon for the purchase or sale of
aggregates of equity and debt securities, indices of equity and debt securities
and other financial indices, all for the purpose of protecting against potential
changes in the market value of portfolio securities or in interest rates.
Aggregates are composites of equity or debt securities that are not tied to a
commonly known index. An index is a measure of the value of a group of
securities or other interests. An index assigns relative values to the
securities included in that index, and the index fluctuates with changes in the
market value of those securities.
These Funds may write covered options only. "Covered" means that, so long as
a Fund is obligated as the writer of a call option, it will own either the
underlying securities or currency or an option to purchase the same underlying
securities or currency having an expiration date not earlier than the expiration
date of the covered option and an exercise price equal to or less than the
exercise price of the covered option, or will establish or maintain with its
custodian for the term of the option a segregated account consisting of cash,
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U.S. Government securities or other liquid, high grade debt obligations having a
value equal to the fluctuating market value of the optioned securities or
currencies. A Fund will cover any put option it writes by maintaining a
segregated account with its custodian as described above. A Fund will not write
covered call options on portfolio securities representing more than 25% of the
value of its total assets.
To hedge against fluctuations in currency exchange rates, these Funds may
purchase or sell foreign currency futures contracts, and write put and call
options and purchase put and call options on such futures contracts. For
example, a Fund may use foreign currency futures contracts when it anticipates a
general weakening of the foreign currency exchange rate that could adversely
affect the market values of the Fund's foreign securities holdings. In this
case, the sale of futures contracts on the underlying currency may reduce the
risk of the Fund of a reduction in market value caused by foreign currency
variations and, by so doing, provide an alternative to the liquidation of
securities positions in the Fund and resulting transaction costs. When the Fund
anticipates a significant foreign exchange rate increase while intending to
invest in a non-U.S. security, the Fund may purchase a foreign currency futures
contract to hedge against a rise in foreign exchange rates pending completion of
the anticipated transaction. Such a purchase of a futures contract would serve
as a temporary measure to protect the Fund against any rise in the foreign
exchange rate that may add additional costs to acquiring the non-U.S. security
position. The Fund similarly may use futures contracts on equity and debt
securities to hedge against fluctuations in the value of securities it owns or
expects to acquire.
These Funds also may purchase call or put options on foreign currency
futures contracts to obtain a fixed foreign exchange rate at limited risk. A
Fund may purchase a call option on a foreign currency futures contract to hedge
against a rise in the foreign exchange rate while intending to invest in a
non-U.S. security of the same currency. A Fund may purchase put options on
foreign currency futures contracts to hedge against a decline in the foreign
exchange rate or the value of its non-U.S. portfolio securities. A Fund may
write a call option on a foreign currency futures contract as a partial hedge
against the effects of declining foreign exchange rates on the value of non-U.S.
securities and in circumstances in which the Fund anticipates that the foreign
exchange rate will not increase above the exercise price of the option by an
amount greater than the premium received (less transaction costs incurred by the
Fund). This strategy will limit potential capital appreciation in the underlying
currency.
To the extent that a Fund enters into futures contracts, options on futures
contracts and options on foreign currencies that are traded on an exchange
regulated by the CFTC, in each case that are not for BONA FIDE hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions may not exceed 5% of the liquidation value of the
Fund's portfolio, after taking into account the unrealized profits and
unrealized losses on any such contracts the Fund has entered into. However, the
"in-the-money" amount of such options may be excluded in computing the 5% limit.
Adoption of this guideline will not limit the percentage of the Fund's assets at
risk to 5%.
Although any one Fund may not employ all or any of the foregoing strategies,
its use of options, futures and options thereon and forward currency contracts
(as described under "Currency Transactions") would involve certain investment
risks and transaction costs to which it might not be subject were such
strategies not employed. Such risks include: (1) dependence on a Fund's ability
to predict movements in the prices of individual securities, fluctuations in the
general securities markets or market sections and movements in interest rates
and currency markets; (2) imperfect correlation between movements in the price
of the securities or currencies hedged or used for cover; (3) the fact that
skills and techniques needed to trade options,
futures contracts and options thereon or to use forward currency contracts are
different from those needed to select the securities in which a Fund invests;
(4) lack of assurance that a liquid secondary market will exist for any
particular option, futures contract, option thereon or forward contract at any
particular time, which may affect a Fund's ability to establish or close out a
position; (5) possible impediments to effective portfolio management or the
ability to meet current obligations caused by the segregation of a large
percentage of a Fund's assets to cover its obligations; and (6) the possible
need to defer closing out certain options, futures contracts, options thereon
and forward contracts in order to continue to qualify for the beneficial tax
treatment afforded "regulated investment companies" under the Code. In the event
that the anticipated change in the price of the securities or currencies that
are the subject of such a strategy does not occur, it may be that a Fund would
have been in a better position had it not used such a strategy at all.
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NON-U.S. SECURITIES, INCLUDING ADRS AND GDRS
Each Fund, except the Mortgage Securities Fund and the U.S. Government Money
Market Fund, is permitted to invest a portion of its assets in non-U.S.
securities, including, in the case of permitted equity investments, ADRs and
GDRs, as described under each Fund's investment objective and policies. ADRs are
certificates issued by a U.S. bank or trust company and represent the right to
receive securities of a non-U.S. issuer deposited in a domestic bank or non-U.S.
branch of a U.S. bank. ADRs are traded on a U.S. securities exchange, or in an
over-the-counter market, and are denominated in U.S. dollars. GDRs are
certificates issued globally and evidence a similar ownership arrangement. GDRs
are traded on non-U.S. securities exchanges and are denominated in non-U.S.
currencies. The value of an ADR or a GDR will fluctuate with the value of the
underlying security, will reflect any changes in exchange rates and otherwise
will involve risks associated with investing in non-U.S. securities.
The International Opportunities Fund and the International Advisers Fund are
permitted to invest in Brady Bonds, which are debt securities issued under the
framework of the Brady Plan, an initiative announced by former U.S. Treasury
Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to
restructure their outstanding external commercial bank debt. In restructuring
its external debt under the Brady Plan framework, a debtor nation negotiates
with its existing bank lenders as well as multilateral institutions such as the
World Bank and the IMF. The Brady Plan framework, as it has developed,
contemplates the exchange of commercial bank debt for newly issued bonds ("Brady
Bonds"). Brady Bonds may also be issued in respect of new money being advanced
by existing lenders in connection with debt restructuring. Agreements
implemented under the Brady Plan to date are designed to achieve debt and
debt-service reduction through specific options negotiated by a debtor nation
with its creditors. As a result, the financial packages offered by each country
differ. Brady Bonds issued to date may be purchased and sold in the secondary
markets through U.S. securities dealers and other financial institutions and are
generally maintained through European securities depositories. See also "High
Yield Securities."
Investing in securities issued by non-U.S. companies involves considerations
and potential risks not typically associated with investing in obligations
issued by U.S. companies. Less information may be available about non-U.S.
companies than about U.S. companies and non-U.S. companies generally are not
subject to uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements comparable to those applicable to
U.S. companies. The values of non-U.S. investments are affected by changes in
currency rates or exchange control regulations, restrictions or prohibition on
the repatriation of non-U.S. currencies, application of non-U.S. tax laws,
including withholding taxes, changes in governmental administration or economic
or monetary policy (in the U.S. or outside the U.S.) or changed circumstances in
dealings between nations. Costs are also incurred in connection with conversions
between various currencies.
Investing in non-U.S. sovereign debt will expose a Fund to the direct or
indirect consequences of political, social or economic changes in the developing
and emerging countries that issue the securities. The ability and willingness of
sovereign obligors in developing and emerging countries or the governmental
authorities that control repayment of their external debt to pay principal and
interest on such debt when due may depend on general economic and political
conditions within the relevant country. Countries such as those in which the
Funds may invest have historically experienced, and may continue to experience,
high rates of inflation, high interest rates, exchange rate trade difficulties
and unemployment. Some of these countries are also characterized by political
uncertainty or instability. Additional factors which may influence the ability
or willingness to service debt include, but are not limited to, a country's cash
flow situation, the availability of sufficient foreign exchange on the date a
payment is due, the relative size of its debt service burden to the economy as a
whole, and its government's policy towards the IMF, the World Bank and other
international agencies.
MORTGAGE-RELATED SECURITIES
The mortgage-related securities in which the International Opportunities
Fund, International Advisers Fund, Advisers Fund and Bond Fund may invest, and
the Mortgage Securities Fund principally invests, provide funds for mortgage
loans made to residential home buyers. These include securities which represent
interests in pools of mortgage loans made by lenders such as savings and loan
institutions, mortgage bankers, commercial banks and others. Pools of mortgage
loans are assembled for sale to investors (such as the Funds) by various
governmental, government-related and private organizations. These Funds may also
invest in similar mortgage-related securities which provide funds for
multi-family residences or commercial real estate properties. CMOs will also be
considered mortgage-related securities.
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Interests in pools of mortgage-related securities differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates.
Instead, these securities provide a monthly payment which consists of both
interest and principal payments. In effect, these payments are a "pass-through"
of the monthly payments made by the individual borrowers on their mortgage
loans, net of any fees paid to the issuer, servicer, insurer or guarantor of
such securities. Additional payments are caused by repayments of principal
resulting from the sale of the underlying property, refinancing or foreclosure,
net of fees or costs which may be incurred. Some mortgage-related securities
(such as GNMA securities) are described as "modified pass-through." These
securities entitle the holder to receive all interest and principal payments
owed on the mortgage pool, net of certain fees, regardless of whether or not the
mortgagor actually makes the payment.
The principal governmental (i.e., backed by the full faith and credit of the
U.S. Government) guarantor of mortgage-related securities is the GNMA. GNMA is a
wholly-owned United States Government corporation within the Department of
Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the U.S. Government, the timely payment of principal and
interest on securities known as Ginnie Maes issued by institutions approved by
GNMA (such as savings and loan institutions, commercial banks and mortgage
bankers) and backed by pools of FHA-insured or VA-guaranteed mortgages.
Government-related (i.e., not backed by the full faith and credit of the
U.S. Government) guarantors include the FNMA and the FHLMC. FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is
subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases residential mortgages from a list of approved seller/servicers
which include state and federally-chartered savings and loan associations,
mutual savings banks, commercial banks and credit unions and mortgage bankers.
Pass-through securities known as Fannie Maes issued by FNMA are guaranteed as to
timely payment of principal and interest by FNMA but are not backed by the full
faith and credit of the U.S. Government. FHLMC is a corporate instrumentality of
the U.S. Government created by Congress in 1970 for the purpose of increasing
the availability of mortgage credit for residential housing. Its stock is owned
by the twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PCs") known as Freddy Macs which represent interests in mortgages from
portfolios created by FHLMC. FHLMC guarantees the timely payment of interest and
ultimate collection of principal but PCs are not backed by the full faith and
credit of the United States Government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, investment banks, mortgage bankers and other secondary market issuers
also create pass-through pools of conventional residential mortgage loans. Such
issuers may in addition be the originators of the underlying mortgage loans as
well as the guarantors of the mortgage-related securities. Pools created by such
non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government guarantees of payments in the former pools. However, timely payment
of interest and principal in these pools is supported by various forms of
insurance or guarantees, including individual loan, title, pool and hazard
insurance. The insurance and guarantees are issued by government entities,
private insurers and the mortgage poolers. Such insurance and guarantees and the
credit worthiness of the issuers thereof will be considered in determining
whether a mortgage-related security meets a Fund's investment quality standards.
There can be no assurance that the private insurers can meet their obligations
under the policies. These Funds may buy mortgage-related securities without
insurance or guarantees if through an examination of the loan experience and
practices of the poolers the Adviser or Sub-Adviser determines that the
securities meet the Fund's quality standards. Although the market for such
securities is becoming increasingly liquid, securities issued by certain private
organizations may not be readily marketable.
These Funds may invest in CMOs, which are securities collateralized by
mortgages or mortgage-backed securities. CMOs are issued with a variety of
classes or series, which have different maturities.
These Funds expect that governmental, government-related or private entities
may create mortgage loan pools offering pass-through investments in addition to
those described above. The mortgages underlying these securities may be
alternative mortgage instruments, that is, mortgage instruments whose principal
or interest payments may vary or whose terms to maturity may differ from
customary long-term fixed rate mortgages. These Funds may invest in stripped
mortgage- backed securities, which security is separated into the interest and
principal component of a mortgage backed security and are sold as separate
securities. As
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new types of mortgage-related securities are developed and offered to investors,
the Adviser or Sub-Adviser will, consistent with a Fund's investment objective,
policies and quality standards, consider making investments in such new types of
securities.
ASSET-BACKED SECURITIES
The International Opportunities Fund, the International Advisers Fund, the
Advisers Fund, the Bond Fund, the Mortgage Securities Fund, and the Money Market
Fund may invest in asset-backed securities. The securitization techniques used
for asset-backed securities are similar to those used for mortgage-related
securities. The collateral for these securities has included home equity loans,
automobile and credit card receivables, boat loans, computer leases, airplane
leases, mobile home loans, recreational vehicle loans and hospital account
receivables. These Funds may invest in these and other types of asset-backed
securities that may be developed in the future.
SWAP AGREEMENTS
Each Fund, except the Index Fund, the U.S. Government Money Market Fund and
the Money Market Fund, may enter into interest rate swaps, currency swaps, and
other types of swap agreements such as caps, collars, and floors. In a typical
interest rate swap, one party agrees to make regular payments equal to a
floating interest rate multiplied by a "notional principal amount," in return
for payments equal to a fixed rate multiplied by the same amount, for a
specified period of time. If a swap agreement provides for payments in different
currencies, the parties might agree to exchange the notional principal amount as
well. Swaps may also depend on other prices or rates, such as the value of an
index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements will tend to shift a Fund's investment exposure from one
type of investment to another. For example, if a Fund agreed to exchange
floating rate payments for fixed rate payments, the swap agreement would tend to
decrease the Fund's exposure to rising interest rates. Caps and floors have an
effect similar to buying or writing options. Depending on how they are used,
swap agreements may increase or decrease the overall volatility of a Fund's
investments and its share price and yield.
INVESTMENT GRADE SECURITIES
The U.S. Government Money Market Fund and the Money Market Fund are
permitted to invest only in high-quality short-term instruments as defined by
Rule 2a-7 under the 1940 Act. Each of the other Funds is permitted to invest in
investment grade securities (i.e., rated as low as "Baa" by Moody's and as low
as "BBB" by S&P, and unrated securities of comparable quality as determined by
the Adviser or Sub-Adviser). Debt securities carrying the fourth highest rating
(i.e., "Baa" by Moody's and "BBB" by S&P, and unrated securities of comparable
quality as determined by the Adviser or Sub-Adviser) are viewed to have adequate
capacity for payment of principal and interest, but do involve a higher degree
of risk than that associated with investments in debt securities in the higher
rating categories and such bonds lack outstanding investment characteristics and
do have speculative characteristics.
MONEY MARKET INSTRUMENTS
The Funds may invest in high quality money market instruments, including,
but not limited to: (1) securities issued or guaranteed by governments, their
agencies or instrumentalities; (2) commercial paper; (3) certificates of
deposit; (4) bankers' acceptances and other bank obligations; and (5) repurchase
agreements involving any of the foregoing. The U.S. Government Money Market Fund
may only invest in high quality money market instruments, issued or guaranteed
by the U.S. Government, its agencies or instrumentalities.
HIGH YIELD SECURITIES
To the extent described in their investment policies, the Capital
Appreciation Fund, the International Opportunities Fund and the International
Advisers Fund are permitted to invest in high yield securities, commonly known
as "junk bonds" (i.e., rated as low as "C" by Moody's and by S&P, and unrated
securities of
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comparable quality as determined by the Sub-Adviser). Securities in the rating
categories below Baa as determined by Moody's and BBB as determined by S&P are
considered to be of poor standing and predominantly speculative. The rating
services' descriptions of securities in the lower rating categories, including
their speculative characteristics, are set forth in the Appendix to this
Prospectus. These securities are considered to have extremely poor prospects of
ever attaining any real investment standing, to have a current identifiable
vulnerability to default, to be unlikely to have the capacity to pay interest
and repay principal when due in the event of adverse business, financial or
economic conditions, and/or to be in default or not current in the payment of
interest or principal. These securities are considered speculative with respect
to the issuer's capacity to pay interest and repay principal in accordance with
the terms of the obligations. Accordingly, it is possible that these types of
factors could, in certain instances, reduce the value of securities held by a
Fund with a commensurate effect on the value of the Fund's shares.
OTHER RISK FACTORS
As mutual funds that primarily invest in equity and/or debt securities, each
Fund is subject to market risk, i.e., the possibility that equity and/or debt
prices in general will decline over short or even extended periods of time. The
financial markets tend to be cyclical, with periods when security prices
generally rise and periods when security prices generally decline.
The value of the debt securities in which the Funds invest will tend to
increase when interest rates are falling and to decrease when interest rates are
rising.
No Fund should be considered to be a complete investment program in and of
itself. Each prospective purchaser should take into account his or her own
investment objectives as well as his or her other investments when considering
the purchase of shares of any investment company.
There can be no assurance that the investment objectives of the Funds will
be met. In addition, the risk inherent in investing in the Funds is common to
any security -- the net asset value will fluctuate in response to changes in
economic conditions, interest rates and the market's perception of the
underlying portfolio securities of each Fund.
HIMCO, as Adviser to certain Funds, and WMC, as Sub-Adviser to certain
Funds, attempt, in pursuit of a Fund's investment objective, to select
appropriate individual securities for inclusion in a Fund's portfolio. In
addition, HIMCO and WMC attempt to successfully forecast market trends and
increase investments in the types of securities best suited to take advantage of
such trends. Thus, the investor is dependent on HIMCO's and WMC's success not
only in selecting individual securities, but also in identifying attractive
asset classes to determine the total mix of invested assets.
MANAGEMENT OF THE FUNDS
Each Fund's Board of Directors manages the business and affairs of that Fund
and takes action on all matters not reserved for the shareholders, including the
annual election of officers of the Fund who carry out all orders and resolutions
of the Board of Directors and carry out functions relating to the day to day
management of the affairs of the Fund.
INVESTMENT ADVISORY AND MANAGEMENT SERVICES
HIMCO serves as investment adviser or manager to each Fund. HIMCO serves as
investment adviser to the Bond Fund, the Money Market Fund, the U.S. Government
Money Market Fund, the Mortgage Securities Fund and the Index Fund, pursuant to
Investment Advisory Agreements, effective as of August 1, 1984, with each Fund.
HIMCO serves as investment manager for the Advisers Fund, the Capital
Appreciation Fund and the Stock Fund, pursuant to Investment Management
Agreements, effective as of August 1, 1984, with each Fund. Each of these
agreements was approved by the Funds' Board of Directors on July 17, 1984, was
renewed on July 22, 1986 and has been reapproved each year since. Each of these
agreements was approved by the shareholders on October 31, 1984. HIMCO serves as
the investment manager for the International Opportunities Fund, pursuant to an
Investment Management Agreement, effective as of June 15, 1990, with the Fund.
This agreement was approved by the Fund's Board of Directors on January 30,
1990, was renewed on April 22, 1991 and has been reapproved each year since, and
was approved by the Fund's shareholders on April 22, 1991. HIMCO serves as the
investment manager for the Dividend and Growth Fund,
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pursuant to an Investment Management Agreement, effective as of March 8, 1994,
with the Fund. This agreement was approved by the Fund's Board of Directors on
January 25, 1994, and by the Fund's shareholders on March 8, 1994. HIMCO serves
as the investment manager for the International Advisers Fund, pursuant to an
Investment Management Agreement, effective as of February 28, 1995, with the
Fund. This agreement was approved by the Fund's Board of Directors on October
21, 1994 and by the Fund's shareholders on February 28, 1995.
The Investment Advisory Agreements with respect to the Bond Fund, the Money
Market Fund, the U.S. Government Money Market Fund, the Mortgage Securities Fund
and the Index Fund will remain in effect through July 31, 1995, unless sooner
terminated or reapproved. The Investment Management Agreements with respect to
the Advisers Fund, the Capital Appreciation Fund and the Stock Fund will remain
in effect through July 31, 1995, unless sooner terminated or reapproved. The
Investment Management Agreement with respect to the International Opportunities
Fund will remain in effect through June 30, 1995, unless sooner terminated. The
Investment Management Agreement with respect to the Dividend and Growth Fund
will remain in effect through March 8, 1996, unless sooner terminated or
reapproved. The Investment Management Agreement with respect to the
International Advisers Fund will remain in effect through February 28, 1997,
unless sooner terminated or reapproved.
For 1994, the advisory and management fees for the Funds were as follows:
Advisers Fund, $12,575,934; Capital Appreciation Fund, $4,889,579; Bond Fund,
$808,161; Dividend and Growth Fund, $99,465; Index Fund, $300,556; International
Opportunities Fund, $2,546,060; Money Market Fund, $704,435; Mortgage Securities
Fund, $827,557; Stock Fund, $3,096,882; and U.S. Government Money Market Fund,
$23,635.
Under the terms of the Investment Advisory Agreements, HIMCO has
responsibility for the investment decisions with respect to the assets of the
Bond Fund, the Money Market Fund, the U.S. Government Money Market Fund, the
Mortgage Securities Fund and the Index Fund. HIMCO continuously provides the
Funds' Board of Directors with an investment program for its consideration and,
upon approval of the program by the Board, HIMCO implements the same by placing
orders for the purchase or sale of securities.
The investment advisory fee for the Money Market Fund, the U.S. Government
Money Market Fund and the Mortgage Securities Fund is .25% annually of the value
of the average daily net assets of each Fund. The investment advisory fee for
the Index Fund is .20% annually of the value of the average daily net assets of
the Fund. The investment advisory fee for the Bond Fund is:
.325% annually of the value of the average daily net assets of the Fund
up to $250,000,000;
.30% annually of the value of the next $250,000,000 of the average daily
net assets of the Fund;
.275% annually of the value of the next $500,000,000 of the average daily
net assets of the Fund;
.25% annually of the value of the average daily net assets of the Fund in
excess of $1,000,000,000.
Under the terms of the Investment Management Agreements, HIMCO, subject to
the supervision of the Funds' Board of Directors, provides investment management
supervision to the Stock Fund, the Advisers Fund, the Capital Appreciation Fund,
the International Opportunities Fund, the Dividend and Growth Fund and the
International Advisers Fund in accordance with the Funds' investment objectives,
policies and restrictions. HIMCO's responsibilities include:
(1) Engaging, subject to consultation with the Funds' Board of
Directors, the services of one or more firms to serve as investment
sub-adviser to the Funds;
(2) Reviewing from time to time the investment policies and restrictions
of the Funds in light of the Funds' performance and otherwise and, after
consultation with the investment sub-adviser, recommending any appropriate
changes to the Funds' Board of Directors;
(3) Supervising the investment program prepared for the Funds by the
investment sub-adviser;
(4) Monitoring on a continuing basis the performance of the Funds'
portfolio securities;
(5) Arranging for the provision of such economic and statistical data as
HIMCO shall determine or as may be requested by the Funds' Board of
Directors;
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(6) Providing the Funds' Board of Directors with such information
concerning important economic and political developments as HIMCO shall deem
appropriate or as shall be requested by the Funds' Board of Directors.
For services rendered to the Funds, HIMCO charges a monthly fee based on the
following annual rates as applied to the average of the calculated daily net
asset value of the Funds.
Advisers, Capital Appreciation, Dividend and Growth, International Advisers
and International Opportunities Funds:
.575% annually of the value of the average daily net assets of the Fund
up to $250,000,000;
.525% annually of the next $250,000,000 of the value of the average daily
net assets of the Fund;
.475% annually of the next $500,000,000 of the value of the average daily
net assets of the Fund;
.425% annually of the value of the average daily net assets of the Fund
in excess of $1,000,000,000.
HIMCO has agreed to waive its fees for the International Advisers Fund until
the assets (excluding assets contributed by companies affiliated by HIMCO) first
reach $20 million.
Stock Fund:
.325% annually of the value of the average daily net assets of the Fund
up to $250,000,000;
.275% annually of the value of the next $250,000,000 of the average daily
net assets of the Fund;
.225% annually of the next $500,000,000 of the value of the average daily
net assets of the Fund;
.150% annually of the value of the average daily net assets of the Fund
in excess of $1,000,000,000.
HIMCO, Hartford Plaza, Hartford, Connecticut 06115, is a wholly-owned
subsidiary of Hartford Life Insurance Company ("HL") and was organized under the
laws of the State of Connecticut in 1981. HIMCO also serves as investment
adviser to several other HL-sponsored funds which are also registered with the
SEC. HL is ultimately 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.
Certain officers of the Funds are also officers and directors of HIMCO;
Joseph H. Gareau is a Director and the President of HIMCO; Andrew W. Kohnke is a
Managing Director of HIMCO; Donald E. Waggaman, Jr. is the Treasurer of HIMCO;
and Charles M. O'Halloran is a Director, Secretary and Counsel of HIMCO.
INVESTMENT SUB-ADVISORY SERVICES
WMC serves as Sub-Adviser to the International Opportunities Fund, pursuant
to an Investment Sub-Advisory Agreement, effective as of June 15, 1990, with the
Fund. This agreement was approved by the Fund's Board of Directors on January
30, 1990, was renewed in 1992 and has been reapproved each year since. It was
approved by the Fund's shareholders on April 22, 1991. WMC serves as Sub-Adviser
to the Dividend and Growth Fund, pursuant to an Investment Sub-Advisory
Agreement, effective as of March 8, 1994, with the Fund. This agreement was
approved by the Fund's Board of Directors on October 26, 1993, and by the Fund's
shareholders on March 8, 1994. WMC serves as Sub-Adviser to the Advisers Fund,
the Capital Appreciation Fund and the Stock Fund pursuant to Investment
Sub-Advisory Agreements, effective as of May 1, 1994 with each Fund. Each of
these agreements was approved by the Fund's Board of Directors on January 24,
1994 and by the Fund's shareholders on April 26, 1994. WMC serves as Sub-Adviser
to the International Advisers Fund, pursuant to an Investment Sub-Advisory
Agreement, effective as of February 28, 1995, with the Fund. This agreement was
approved by the Fund's Board of Directors on October 21, 1994, and by the Fund's
shareholders on February 28, 1995.
Under the terms of the Investment Sub-Advisory Agreements, WMC provides an
investment program to HIMCO for use by HIMCO in rendering services to these
Funds. WMC makes all determinations with respect to the purchase and sale of
portfolio securities (subject to the terms and conditions of the investment
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objectives, policies and restrictions of these Funds and to the supervision of
the Funds' Board of Directors and HIMCO) and places, in the name of the Funds,
all orders for execution of these Funds' portfolio transactions. In conjunction
with such activities, WMC regularly furnishes reports to these Funds' Board of
Directors concerning economic forecasts, investment strategy, portfolio activity
and performance of the Funds.
For services rendered to these Funds, WMC charges a quarterly fee to HIMCO.
The Funds will not pay WMC's fee nor any part thereof, nor will the Funds have
any obligation or responsibility to do so. WMC's quarterly fee is based upon the
following annual rates as applied to the average of the calculated daily net
asset value of each Fund.
Advisers Fund, Stock Fund, Dividend and Growth Fund:
.325% annually of the value of the average daily net assets of the Fund
up to $50,000,000;
.25% annually of the next $100,000,000 of the value of the average daily
net assets of the Fund;
.20% annually of the next $350,000,000 of the value of the average daily
net assets of the Fund;
.15% annually of the value of the average daily net assets of the Fund in
excess of $500,000,000.
Capital Appreciation Fund, International Opportunities Fund and
International Advisers Fund:
.40% annually of the value of the average daily net assets of the Fund up
to $50,000,000;
.30% annually of the next $100,000,000 of the value of the average daily
net assets of the Fund;
.25% annually of the next $100,000,000 of the value of the average daily
net assets of the Fund;
.20% annually of the value of the average daily net assets of the Fund in
excess of $500,000,000.
WMC has agreed to waive its fees for the International Advisers Fund until
the assets (excluding assets contributed by companies affiliated with HIMCO)
first reach $20 million.
The Investment Sub-Advisory Agreements with respect to the Advisers Fund,
the Capital Appreciation Fund and the Stock Fund will remain in effect through
May 1, 1996, unless sooner terminated. The Investment Sub-Advisory Agreement
with respect to the International Opportunities Fund will remain in effect
through July 27, 1995, unless sooner terminated. The Investment Sub-Advisory
Agreement with respect to the Dividend and Growth Fund will remain in effect
through March 8, 1996, unless sooner terminated. The Investment Sub-Advisory
Agreement with respect to the International Advisers Fund will remain in effect
through February 28, 1997, unless sooner terminated.
WMC is a professional investment counseling firm which provides investment
services to investment companies, employee benefit plans, endowments,
foundations, and other institutions and individuals. As of March 31, 1995, WMC
held discretionary management authority with respect to approximately $88
billion of client assets. WMC and its predecessor organizations have provided
investment advisory services to investment companies since 1933 and to
investment counseling clients since 1960. WMC, 75 State Street, Boston, MA
02109, is a Massachusetts general partnership, of which the following persons
are managing partners: Robert W. Doran, Duncan M. McFarland, and John B. Neff.
PORTFOLIO MANAGERS
Saul J. Pannell, Senior Vice President of WMC, serves as portfolio manager
to the Capital Appreciation Fund. Mr. Pannell has been a portfolio manager with
WMC since 1979.
Laurie A. Gabriel, CFA and Senior Vice President of WMC, serves as portfolio
manager to the Dividend and Growth Fund. Ms. Gabriel joined WMC in 1976. She has
been a quantitative research analyst with WMC since 1986, and took on portfolio
management responsibilities in 1987.
The International Opportunities Fund is managed by WMC's Global Equity
Strategy Group, headed by Trond Skramstad, Senior Vice President of WMC. The
Global Equity Strategy Group is comprised of global portfolio managers and
senior investment professionals. No person or persons is primarily responsible
for making recommendations to or within the Global Equity Strategy Group. Prior
to joining WMC as Director of WMC's International Equity Department in 1993, Mr.
Skramstad was a global equity portfolio manager at Scudder, Stevens & Clark
since 1990.
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Rand L. Alexander, Senior Vice President of WMC, serves as portfolio manager
to the Stock Fund. Mr. Alexander has been a portfolio manager with WMC since
1990. He was employed by the Putnam Investment Management Company as a portfolio
manager and security analyst from 1981 until 1989.
Paul D. Kaplan, Senior Vice President of WMC, serves as portfolio manager to
the Advisers Fund. Mr. Kaplan manages the fixed income component of the Advisers
Fund. He has been a portfolio manager with WMC since 1982. Rand L. Alexander,
who is portfolio manager to the Stock Fund, manages the equity component of the
Advisers Fund.
The equity component of the International Advisers Fund is managed by WMC's
Global Equity Strategy Group, headed by Trond Skramstad. The debt component of
the International Advisers Fund is managed by Robert Evans, Vice President of
WMC. Prior to joining WMC as a portfolio manager in 1995, Mr. Evans was a Senior
Global Fixed Income Portfolio Manager with Pacific Investment Management Company
from 1991 through 1994, and in the Global Fixed Income Department of Lehman
Brothers International in London, England and New York City, New York from 1985
through 1990.
The Bond Fund and the Mortgage Securities Fund are both managed by Tracy T.
Eccles and Timothy J. Wilhide. Ms. Eccles is a Senior Vice President of HIMCO
and an Assistant Vice President of ITT Hartford Life. She is a Senior Portfolio
Manager, and also manages several fixed income insurance company separate
accounts. She has worked for ITT Hartford since 1986 trading various fixed
income securities, including mortgage-backed securities, corporates and
treasuries. Prior to joining ITT Hartford, Ms. Eccles worked as an international
trade officer for a major New York bank. A Chartered Financial Analyst, she
received her B.A. from Smith College and her MBA from Northwestern University.
Mr. Wilhide is a Portfolio Manager and Vice President of HIMCO. He has 17 years
of experience in the fixed income markets. Prior to joining ITT Hartford in June
1994, Mr. Wilhide was vice president and fixed income manager for J.P. Morgan &
Co. He received his B.A. from Gannon University and his MBA from the University
of Delaware.
ADMINISTRATIVE SERVICES FOR THE FUNDS
An Administrative Services Agreement between each Fund and HL provides that
HL will manage the business affairs and provide administrative services to each
Fund. Under the terms of these Agreements, HL will provide the following:
administrative personnel, services, equipment and facilities and office space
for proper operation of the Funds.
HL has also agreed to arrange for the provision of additional services
necessary for the proper operation of the Funds, although the Funds pay for
these services directly. See "Expenses of the Funds."
As compensation for the services to be performed by HL, each Fund pays to
HL, as promptly as possible after the last day of each month, a monthly fee
equal to the annual rate of .175% of the average daily net assets of the Fund.
EXPENSES OF THE FUNDS
Each Fund shall assume and pay the following costs and expenses: interest;
taxes; brokerage charges (which may be to affiliated broker-dealers); costs of
preparing, printing and filing any amendments or supplements to the registration
forms of each Fund and its securities; all federal and state registration,
qualification and filing costs and fees, (except the initial costs and fees,
which will be borne by HL), issuance and redemption expenses, transfer agency
and dividend and distribution disbursing agency costs and expenses; custodian
fees and expenses; accounting, auditing and legal expenses; fidelity bond and
other insurance premiums; fees and salaries of directors, officers and employees
of each Fund other than those who are also officers of HL; industry membership
dues; all annual and semiannual reports and prospectuses mailed to each Fund's
shareholders as well as all quarterly, annual and any other periodic report
required to be filed with the SEC or with any state; any notices required by a
federal or state regulatory authority, and any proxy solicitation materials
directed to each Fund's shareholders as well as all printing, mailing and
tabulation costs incurred in connection therewith, and any expenses incurred in
connection with the holding of meetings of each Fund's shareholders and other
miscellaneous expenses related directly to the Funds' operations and interest.
34
<PAGE>
The total expenses of each Fund including administrative and investment
advisory fees for 1994 as a percentage of the Funds' average net assets were as
follows: Stock Fund, .50%; Bond Fund, .55%; Money Market Fund, .47%; U.S.
Government Money Market Fund, .58%; Advisers Fund, .65%; Capital Appreciation
Fund, .72%; Mortgage Securities Fund, .48%; Index Fund .45%; International
Opportunities Fund, .85%; Dividend and Growth Fund, .83%. The International
Advisers Fund did not commence operations in 1994.
PERFORMANCE RELATED INFORMATION
The Funds may advertise certain performance related information. Performance
information about a Fund is based on the Fund's past performance only and is no
indication of future performance.
Each Fund may include its total return in advertisements or other sales
material. When a Fund advertises its total return, it will usually be calculated
for one year, five years, and ten years or some other relevant periods if the
Fund has not been in existence for at least ten years. Total return is measured
by comparing the value of an investment in the Fund at the beginning of the
relevant period to the value of the investment at the end of the period
(assuming immediate reinvestment of any dividends or capital gains
distributions).
The U.S. Government Money Market Fund and the Money Market Fund may
advertise yield and effective yield. The yield of each of those Funds is based
upon the income earned by the Fund over a seven-day period and then annualized,
i.e. the income earned in the period is assumed to be earned every seven days
over a 52-week period and stated as a percentage of the investment. Effective
yield is calculated similarly but when annualized, the income earned by the
investment is assumed to be reinvested in Fund shares and thus compounded in the
course of a 52-week period.
DIVIDENDS
The shareholders of each Fund shall be entitled to receive such dividends as
may be declared by each Fund's Board of Directors, from time to time based upon
the investment performance of the assets making up that Fund's portfolio. The
policy with respect to each Fund, except the U.S. Government Money Market Fund
and the Money Market Fund, is to pay dividends from net investment income
monthly and to make distributions of realized capital gains, if any, once each
year. The U.S. Government Money Market Fund and the Money Market Fund declare
dividends on a daily basis and pay them monthly.
Such dividends and distributions will be automatically invested in
additional full or fractional shares monthly on the last business day of each
month at the per share net asset value on that date. Provision is also made to
pay such dividends and distributions in cash if requested. Such dividends and
distributions will be in cash or in full or fractional shares of the Fund at net
asset value.
NET ASSET VALUE
The net asset value of each Fund's shares will be determined as of the close
of business (currently 4:00 P.M. Eastern Time) on each day the NYSE is open for
trading, except for the Bond Fund and the Mortgage Securities Fund. The Bond
Fund and the Mortgage Securities Fund will be closed for business when the bond
markets are closed. Orders for the purchase of a Fund's shares received prior to
the close of the NYSE on any day on which the Fund is open for business will be
priced at the per-share net asset value determined as of the close of the NYSE.
Orders received after the close of the NYSE or on a day on which the NYSE or a
Fund are not open for business will be priced at the per-share net asset value
next determined.
The per-share net asset value of the shares each Fund will be determined by
dividing the value of the Fund's assets, less the liabilities, by the number of
outstanding shares issued by the Fund.
Equity securities are valued at the last sales price as of the time when the
valuation is being made. If no sales took place on such day and in the case of
certain equity securities traded over-the-counter, then such securities are
valued at the mean between the bid and the asked prices. Debt securities (other
than short-term obligations) including mortgage-backed securities, are valued on
the basis of valuations furnished by an unaffiliated pricing service which
determines valuations for normal institutional size trading units of debt
securities. Short-term investments with a maturity of 60 days or less when
purchased are valued at cost plus
35
<PAGE>
interest earned (amortized cost), which approximates market value. Short-term
investments with a maturity of more than 60 days when purchased are valued based
on market quotations until the remaining days to maturity become less than 61
days.
From such time, until maturity, the investments are valued at amortized cost
using the value of the investment on the 61st day. Options are valued at the
last sales price; if no sale took place on such day, then options are valued at
the mean between the bid and asked prices.
Assets for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of a Fund's
Board of Directors.
PURCHASE OF FUND SHARES
Fund shares are made available to serve as the underlying investment
vehicles for variable annuity and variable life insurance separate accounts of
ITT Hartford Life Insurance Companies. Shares of the Funds are sold on a no-load
basis at their net asset values. See "Net Asset Value" and "Sale and Redemption
of Shares."
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 ITT Hartford Life Insurance
Companies and the Funds do not currently foresee any such disadvantages either
to variable annuity contract owners or variable life insurance policyowners,
each Fund's Board of Directors intends to monitor events in order to identify
any material conflicts between such contract owners and policyowners and to
determine what action, if any, should be taken in response thereto. If the Board
of Directors of a Fund were to conclude that separate funds should be
established for variable life and variable annuity separate accounts, the
variable life and variable annuity contract holders would not bear any expenses
attendant to the establishment of such separate funds.
SALE AND REDEMPTION OF SHARES
The shares of each Fund are sold and redeemed by the Fund at their net asset
value next determined after receipt of a purchase or redemption order in good
order in writing at its home office, P.O. Box 2999, Hartford, CT 06104-2999.
Hartford Equity Sales Company, Inc., Hartford, Connecticut, is the Fund's
principal underwriter. The value of shares redeemed may be more or less than
original cost, depending upon the market value of the portfolio securities at
the time of redemption. Payment for shares redeemed will be made within seven
days after the redemption request is received in proper form by the Funds.
However, the right to redeem Fund shares may be suspended or payment therefor
postponed for any period during which: (1) trading on the NYSE is closed for
other than weekends and holidays; (2) an emergency exists, as determined by the
SEC, as a result of which (a) disposal by a Fund of securities owned by it is
not reasonably practicable, or (b) it is not reasonably practicable for a Fund
to determine fairly the value of its net assets; or (3) the SEC by order so
permits for the protection of stockholders of the Funds.
FEDERAL INCOME TAXES
Each Fund has elected and intends to qualify under Part I of Subchapter M of
the Code. Each Fund intends to distribute all of its net income and gains to
shareholders. Such distributions are taxable income and capital gains. Each Fund
will inform shareholders of the amount and nature of such income and gains. Each
Fund may be subject to a 4% nondeductible excise tax as well as an income tax
measured with respect to certain undistributed amounts of income and capital
gain. Each Fund expects to make such additional distributions of net investment
income as are necessary to avoid the application of these taxes. For a
discussion of the tax implications of a purchase or sale of the Funds' shares by
the insurer, reference should be made to the section entitled "Federal Tax
Considerations" in the appropriate separate account prospectus.
If eligible, each Fund may make an election to pass through to its
shareholders, ITT Hartford Life Insurance Companies, a credit for any foreign
taxes paid during the year. If such election is made, the pass-
36
<PAGE>
through of the foreign tax credit will result in additional taxable income and
income tax to ITT Hartford Life Insurance Companies. The amount of additional
tax may be more than offset by the foreign tax credits which are passed through.
These foreign tax credits may provide a benefit to ITT Hartford Life Insurance
Companies.
OWNERSHIP AND CAPITALIZATION OF THE FUNDS
CAPITAL STOCK
As of the date of this prospectus, the authorized capital stock of the Funds
consisted of the following shares of a par value of $.10 per share: Advisers
Fund, 3 billion; Capital Appreciation Fund, 800 million; Bond Fund, 800 million;
Dividend and Growth Fund, 750 million; Index Fund, 400 million; International
Opportunities Fund, 1500 million; Money Market Fund, 800 million; Mortgage
Securities Fund, 800 million; Stock Fund, 800 million; U.S. Government Money
Market Fund, 100 million; International Advisers Fund, 100 million.
As of December 31, 1994, Hartford Accident and Indemnity Company owned
3,000,000 shares (5.4%) of Dividend and Growth Fund. As of March 1, 1995, HL
owned 10,000,000 shares (100%) of the International Advisers Fund.
At December 31, 1994, certain HL group pension contracts held direct
interests in shares of the Funds as follows:
<TABLE>
<CAPTION>
PERCENT OF
SHARES TOTAL SHARES
---------- ------------
<S> <C> <C>
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%
</TABLE>
VOTING
Each shareholder shall be entitled to one vote for each share of the Funds
held upon all matters submitted to the shareholders generally. With respect to
the Funds' shares, issued as described above under "Purchase of Fund Shares," as
well as Fund shares which are not otherwise attributable to variable annuity
contract owners or variable life policy holders, the ITT Hartford Life Insurance
Companies shall be the shareholders of record. Each of the ITT Hartford Life
Insurance Companies will vote all Fund shares, pro rata, according to the
written instructions of the contract owners of the variable annuity contracts
and the policy holders of the variable life contracts issued by it using the
Funds as investment vehicles. This position is consistent with the policy of the
SEC Staff.
OTHER RIGHTS
Each share of Fund stock, when issued and paid for in accordance with the
terms of the offering, will be fully paid and non-assessable. Shares of Fund
stock have no pre-emptive, subscription or conversion rights and are redeemable
as set forth under "Sale and Redemption of Shares." There are no shareholder
pre-emptive rights. Upon liquidation of a Fund, the shareholders of that Fund
shall be entitled to share, pro rata, in any assets of the Fund after discharge
of all liabilities and payment of the expenses of liquidation.
37
<PAGE>
GENERAL INFORMATION
REPORTS TO SHAREHOLDERS
The Funds will issue unaudited semiannual reports showing current
investments in each Fund and other information and annual financial statements
examined by independent auditors for the Funds.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENTS
Chase Manhattan Bank, N.A., New York, New York, serves as custodian of the
Funds' assets. Hartford Life Insurance Company, P.O. Box 2999, Hartford,
Connecticut 06104-2999, serves as Transfer and Dividend Disbursing Agent for the
Funds.
"MAJORITY" DEFINED
As used in this Prospectus, the term "majority of the Fund's outstanding
shares" means the vote of: (1) 67% or more of each Fund's shares present at a
meeting, if the holders of more than 50% of the outstanding shares of each Fund
are present or represented by proxy, or (2) more than 50% of each Fund's
outstanding shares, whichever is less.
PENDING LEGAL PROCEEDINGS
As of the date of this Prospectus, there are no pending legal proceedings
involving the Funds or the Adviser or Sub-Adviser as a party.
REQUESTS FOR INFORMATION
This Prospectus does not contain all the information included in the
Registration Statement filed with the SEC. The Registration Statement, including
the exhibits filed therewith, may be examined at the SEC's office in Washington,
D.C. Statements contained in the Prospectus as to the contents of any contract
or other document referred to herein are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part, each such statement being qualified, in all respects by such reference.
For additional information, write to "Hartford Family of Funds", c/o
Individual Annuity Operations, P.O. Box 2999, Hartford, CT 06104-2999.
38
<PAGE>
APPENDIX
RATINGS OF BONDS AND COMMERCIAL PAPER
The rating information which follows describes how the rating services
mentioned presently rate the described securities. No reliance is made upon the
rating firms as "experts" as that term is defined for securities purposes.
Rather, reliance on this information is on the basis that such ratings have
become generally accepted in the investment business.
RATING OF BONDS
Investments in publicly traded non-convertible corporate debt securities
issued by U.S. corporations will be made in such securities having one of the
four highest ratings assigned to such bonds by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("Standard & Poor's"). Such ratings
are as follows:
MOODY'S
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever earning any
real investment standing.
STANDARD & POOR'S
AAA--Bonds rated AAA are the highest grade obligations. Capacity to pay
interest and repay principal is extremely strong.
39
<PAGE>
AA--Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from AAA issues only in small degree.
A--Bonds rated A have a very strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the considerable
investment strength but are not entirely free from adverse effects of changes in
circumstances and economic conditions than debt in the highest rated categories.
BBB--Bonds rated BBB and regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category then in higher rated categories.
BB, B, CCC, CC, C--Debt rated BB, B, CCC, CC, and C is regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
RATING OF COMMERCIAL PAPER
Purchases of corporate debt securities used for short-term investment,
generally called commercial paper, will be limited to the top two grades of
Moody's, Standard & Poor's, Duff & Phelps, Fitch Investor Services and Thomson
Bank Watch or other NRSROs (nationally recognized statistical rating
organizations) rating services and will be an eligible security under Rule 2a-7.
MOODY'S
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rate Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
STANDARD & POOR'S
The relative strength or weakness of the following factors determines
whether the issuer's commercial paper is rated A-1 or A-2.
- Liquidity ratios are adequate to meet cash requirements.
Liquidity ratios are basically as follows, broken down by the type of
issuer:
Industrial Company: acid test ratio, cash flow as a percent of current
liabilities, short-term debt as a percent of current liabilities, short-term
debt as a percent of current assets.
40
<PAGE>
Utility: current liabilities as a percent of revenues, cash flow as a
percent of current liabilities, short-term debt as a percent of
capitalization.
Finance Company: current ratio, current liabilities as a percent of net
receivables, current liabilities as a percent of total liabilities.
- The long-term senior debt rating is "A" or better; in some
instances "BBB" credits may be allowed if other factors
outweigh the "BBB".
- The issuer has access to at least two additional channels of
borrowing.
- Basic earnings and cash flow have an upward trend with
allowances made for unusual circumstances.
- Typically, the issuer's industry is well established and the
issuer has a strong position within its industry.
- The reliability and quality of management are unquestioned.
41
<PAGE>
PROSPECTUS
MAY 1, 1995
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
4550 MONTGOMERY AVENUE
SUITE 1000N
BETHESDA, MARYLAND 20814
(301) 951-4820
(800) 368-2750
The Calvert Responsibly Invested Balanced Portfolio (formerly the Calvert
Socially Responsible Series) (the "Portfolio") is a series of Acacia Capital
Corporation (the "Fund"), an open-end management investment company whose
investment advisor is Calvert Asset Management Company, Inc. (the "Investment
Advisor").
The investment objective of the Portfolio is to achieve a total return above
the rate of inflation through an actively managed, nondiversified portfolio of
common and preferred stocks, bonds, and money market instruments which offer
income and capital growth opportunity and which satisfy the social concern
criteria established for the Portfolio. There can be no assurance that the
objective of the Portfolio will be realized. See "Investment Objective and
Policies."
This Prospectus sets forth the information that a prospective policyholder
should know before directing investment in the Portfolio and it should be read
and kept for future reference. A Statement of Additional Information dated May
1, 1995, which contains further information about the Fund, has been filed with
the Securities and Exchange Commission and is incorporated by reference into
this Prospectus. A copy of the Statement of Additional Information may be
obtained without charge by calling the Fund at the numbers above, or by writing
the Fund at 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814.
Shares of the Fund are offered only to insurance companies for allocation to
certain of their variable separate accounts.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FDIC, THE FEDERAL RESERVE
BOARD, OR ANY OTHER AGENCY.
- --------------------------------------------------------------------------------
42
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Financial Highlights............................................................................... 44
The Fund........................................................................................... 45
Investment Objective and Policies of the Portfolio................................................. 45
The Fund and Its Management........................................................................ 48
Purchase and Redemption of Shares.................................................................. 50
Dividends and Distributions........................................................................ 51
Total Return and Yield Information................................................................. 51
Taxes.............................................................................................. 52
Transfer and Dividend Disbursing Agent............................................................. 52
</TABLE>
43
<PAGE>
CRI BALANCED (FORMERLY, CRI MANAGED GROWTH)
FINANCIAL HIGHLIGHTS
The following table provides information about the Portfolio's financial
history. It expresses the information in terms of a single share outstanding
throughout each period. The table has been audited by those independent
accountants whose reports are included in the Fund's Annual Report to
Shareholders for each of the respective periods presented. The table should be
read in conjunction with the financial statements and their related notes. The
current Annual Report to Shareholders is incorporated by reference into the
Statement of Additional Information.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.537 $1.465 $1.403 $1.249 $1.247 $1.068
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income................. .046 .045 .044 .050 .050 .042
Net realized and unrealized gain
(loss) on investments................ (.097) .072 .062 .154 .002 .179
------- ------- ------- ------- ------- -------
Total from investment operations.... (.051) .117 .106 .204 .052 .221
------- ------- ------- ------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.. (.046) (.045) (.044) (.050) (.050) (.042)
------- ------- ------- ------- ------- -------
Total distributions................. (.046) (.045) (.044) (.050) (.050) (.042)
------- ------- ------- ------- ------- -------
Total increase (decrease) in net asset
value.................................. (.097) .072 .062 .154 .002 .179
------- ------- ------- ------- ------- -------
Net asset value, end of period.......... $1.440 $1.537 $1.465 $1.403 $1.249 $1.247
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
- --------------------------------------------------------------------------------------------------------------------------------
Total return(1)......................... (3.30%) 8.00% 7.61% 16.40% 4.18% 20.69%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Ratio of expenses to average net
assets................................. .80% .81% .85% .85% .77% .50%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Ratio of net income to average net
assets................................. 3.39% 3.69% 4.05% 4.49% 5.69% 4.85%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Increase reflected in net income ratio
due to expense reimbursement........... -- -- -- -- -- .46%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Portfolio turnover...................... 43% 14% 15% 12% 11% 28%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Net assets, end of period............... $ 66,592,680 $ 53,999,759 $ 28,471,358 $ 14,945,973 $ 6,759,546 $ 2,572,761
----------- ----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ----------- ---------- ----------
Number of shares outstanding at end of
period (in thousands).................. 46,244 35,142 19,433 10,656 5,410 2,064
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FROM INCEPTION
(SEPT. 2, 1986)
TO DEC. 31,
1988 1987 1986
- ------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.... $1.004 $0.958 $1.000
------- ------- ---------
------- ------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income................. .054 .019 .010
Net realized and unrealized gain
(loss) on investments................ .064 .046 (.042)
------- ------- ---------
Total from investment operations.... .118 .065 (.032)
------- ------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.. (.054) (.019) (.010)
------- ------- ---------
Total distributions................. (.054) (.019) (.010)
------- ------- ---------
Total increase (decrease) in net asset
value.................................. .064 .046 (.042)
------- ------- ---------
Net asset value, end of period.......... $1.068 $1.004 $0.958
------- ------- ---------
------- ------- ---------
- ----------------------------------------------------------------------------------------
Total return(1)......................... 11.75% 6.78% 3.31%
------- ------- ---------
------- ------- ---------
Ratio of expenses to average net
assets................................. .50% .50% .10%(a)
------- ------- ---------
------- ------- ---------
Ratio of net income to average net
assets................................. 4.95% 3.72% 1.59%(a)
------- ------- ---------
------- ------- ---------
Increase reflected in net income ratio
due to expense reimbursement........... .30% .82% 1.41%(a)
------- ------- ---------
------- ------- ---------
Portfolio turnover...................... 40% 17% --
------- ------- ---------
------- ------- ---------
Net assets, end of period............... $ 1,293,692 $ 1,022,484 $ 143,745
---------- ---------- -----------
---------- ---------- -----------
Number of shares outstanding at end of
period (in thousands).................. 1,211 1,018 150
------- ------- ---------
------- ------- ---------
- ----------------------------------------------------------------------------------------
<FN>
(a) Annualized
(1) Total return is for the Portfolio only and does not reflect sales
charges and expenses deducted by the Insurance companies. Total
return has not been audited prior to 1989.
</TABLE>
44
<PAGE>
THE FUND
Acacia Capital Corporation (the "Fund"), a Maryland corporation, is an
open-end investment company. The shares of the Fund currently are sold only to
insurance companies (collectively, the "Insurance Companies") for allocation to
their separate accounts (collectively, the "Variable Accounts") to fund the
benefits under certain variable annuity and variable life insurance policies
(collectively, the "Policies") issued by such companies. Accordingly, the
interest of a policy owner in the shares is subject to the terms of the
particular annuity or life insurance policy and is described in the attached
prospectus for one of the Policies, which should be reviewed carefully by a
person considering the purchase of a Policy. The rights of the Insurance
Companies as shareholders should be distinguished from the rights of a policy
owner which are described in the Policies. Policy owners should consider that
the investment return experience of the Portfolio will affect the value of the
policy and the amount of annuity payments or life insurance benefits received
under a policy. See the attached prospectus(es) for the Policies for a
description of the relationship between increases or decreases in the net asset
value of Portfolio shares (and any distributions on such shares) and the
benefits provided under a policy.
INVESTMENT OBJECTIVE AND POLICIES OF THE PORTFOLIO
The investment objective of the Portfolio discussed below is not fundamental
and may be changed upon 60 days' written notice to shareholders without a
shareholder vote. There can be no assurance that the investment objective of the
Portfolio will be realized.
The investment objective of the Portfolio is to seek growth of capital
through investment in enterprises that make a significant contribution to
society through their products and services and through the way they do
business. The Portfolio is designed for long-term investment and seeks to
achieve a total return above the rate of inflation through an actively managed
portfolio of stocks, bonds and money market instruments (including repurchase
agreements secured by such instruments) selected with a concern for the social
impact of each investment. It is not the policy of the Portfolio to take great
risks to obtain speculatively or aggressively high returns. There is no
predetermined percentage of assets allocated to either stocks or bonds or money
market instruments, although, as an operating policy, the Portfolio will have at
least 25% of its assets in fixed income senior securities. Equity investments
are selected by the Sub-Advisor, NCM Capital Management Group, Inc., subject to
direction and control by the Fund's Advisor and Board of Directors. Fixed-income
investments are selected by the Advisor. The Investment Advisors determine the
mix for the Portfolio depending upon their view of market conditions and the
economic outlook.
To implement its investment objectives, the Portfolio follows the following
policies which, unless otherwise specified as a fundamental policy, are
operating policies and may be changed without shareholder vote. The Portfolio
may purchase both common and preferred stock. For its fixed-income investments,
the Portfolio normally invests in bonds which are considered investment grade,
including bonds which are direct or indirect obligations of the U.S. Government,
or which at the date of investment are rated AAA, AA, A, or BBB by Standard &
Poor's Corporation or Aaa, Aa, A, or Baa by Moody's Investors Service, Inc.
Bonds rated Baa or BBB are considered medium grade obligations and possess
speculative characteristics. The Portfolio may purchase lower-rated obligations
but no more than 20% of its assets may be invested in obligations rated lower
than B. The Portfolio may purchase without limitation bonds which are unrated
but of comparable quality to bonds rated B or better, as determined by the
Advisors under the supervision of the Board of Directors. See Additional Risk
Factors--Non-Investment Grade Securities, and the Statement of Additional
Information for additional information concerning bond ratings.
The Portfolio may purchase money market instruments, including repurchase
agreements with recognized securities dealers and banks secured by such
instruments, selected in accordance with the Portfolio's social criteria. Such
money market instruments may include: obligations issued or guaranteed as to
principal by the U.S. Government, its agencies and instrumentalities; U.S.
dollar-denominated certificates of deposit,
45
<PAGE>
time deposits and bankers' acceptances of U.S. banks, generally banks with
assets in excess of $1 billion; and commercial paper which at the date of
investment is rated A-1 by Standard and Poor's Corporation or Prime-1 by Moody's
Investors Service, Inc., or if not rated, is of comparable quality.
Due to the particular social objective of the Portfolio, opportunities may
exist to promote promising approaches to social goals through privately placed
instruments. Since private placement investments are restricted securities and
have no readily available market, the Portfolio has a fundamental policy that
such investments in the Portfolio are limited to no more than 10% of the
Portfolio's assets.
All investments for the Portfolio are selected with a concern for the social
impact of each investment. The Portfolio has developed the following criteria
for the selection of organizations in which the Portfolio invests. The Portfolio
seeks to invest in a producer or service provider which:
1. Delivers safe products and services in ways that sustain our natural
environment.
2. Is managed with participation throughout the organization in defining
and achieving objectives.
3. Negotiates fairly with its workers, provides an environment supportive
of their wellness, does not discriminate on the basis of race, gender,
religion, age, disability, ethnic origin or sexual orientation, does not
consistently violate regulations of the Equal Employment Opportunity
Commission, and provides opportunities for women, disadvantaged
minorities and others from whom equal opportunities have often been
denied.
4. Fosters awareness of a commitment to human goals, such as creativity,
productivity, self-respect, and responsibility, within the organization
and the world, and continually recreates a context within which these
goals can be realized.
The Portfolio will not invest in an issuer primarily engaged in the
production of nuclear energy or in the manufacture of equipment to produce
nuclear energy, business activities in support of repressive regimes, or the
manufacture of weapons systems.
Each investment is selected on the basis of its abilities to contribute to
the dual objective of the Portfolio. All potential investments are first
screened for financial soundness and then evaluated according to the Portfolio's
social criteria. To the greatest extent possible, investments are made in
companies exhibiting unusual, positive accomplishment with respect to one or
more of the criteria. All companies must meet the Portfolio's minimum standards
for all the criteria. It should be noted that the Portfolio's social criteria
tend to limit the availability of investment opportunities more than is
customary with other investment companies.
The selection of an organization for investment by the Series does not
constitute endorsement or validation by the Fund, nor does the exclusion of an
organization necessarily reflect failure to satisfy the Series' social criteria.
Policyholders directing investment in the Series are invited to send brief
descriptions of companies they believe might be suitable for investment by the
Series.
RISKS OF FOREIGN SECURITIES
The Portfolio may invest up to 10% of its assets in the securities of
foreign issuers. There are substantial and different risks involved in investing
in foreign securities. You should consider these risks carefully. For example,
there is generally less publicly available information about foreign companies
than is available about companies in the U.S. Foreign companies are generally
not subject to uniform audit and financial reporting standards, practices and
requirements comparable to those in the U.S.
Foreign securities involve currency risks. The U.S. dollar value of a
foreign security tends to decrease when the value of the dollar rises against
the foreign currency in which the security is denominated and tends to increase
when the value of the dollar falls against such currency. Fluctuations in
exchange rates may also affect the earning power and asset value of the foreign
entity issuing the security. Dividend and interest payments may be returned to
the country of origin, based on the exchange rate at the time of disbursement,
and restrictions on capital flows may be imposed. Losses and other expenses may
be incurred in converting between various currencies in connections with
purchases and sales of foreign securities.
46
<PAGE>
Foreign stock markets are generally not as developed or efficient as those
in the U.S. In most foreign markets volume and liquidity are less than in the
U.S. and, at times, volatility of price can be greater than that in the U.S.
Fixed commissions on foreign stock exchanges are generally higher than the
negotiated commissions on U.S. exchanges. There is generally less government
supervision and regulation of foreign stock exchanges, brokers and companies
than in the U.S.
There is also the possibility of adverse changes in investment or exchange
control regulations, expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, political or social instability, or diplomatic
developments which could adversely affect investments, assets or securities
transactions of the Fund in some foreign countries. The Fund is not aware of any
investment or exchange control regulations which might substantially impair the
operations of the Fund as described, although this could change at any time.
Investing in emerging markets in particular, those countries whose economies
and capital markets are not as developed as those of more industrialized
nations, carries its own special risks. Among other risks, the economies of such
countries may be affected to a greater extent than in other countries by price
fluctuations of a single commodity, by severe cyclical climatic conditions, lack
of significant history in operating under a market-oriented economy, or by
political instability, including risk of expropriation.
For many foreign securities, there are U.S. dollar-denominated American
Depositary Receipts ("ADRs"), which are traded in the U.S. on exchanges or over
the counter and are generally sponsored and issued by domestic banks. ADRs
represent the right to receive securities of foreign issuers deposited in a
domestic bank or a correspondent bank. ADRs do not eliminate all the risk
inherent in investing in the securities of foreign issuers. However, by
investing in ADRs rather than directly in foreign issuers' stock, the Fund can
avoid currency risks during the settlement period for either purchases or sales.
In general, there is a large, liquid market in the U.S. for many ADRs. The
information available for ADRs is subject to the accounting, auditing and
financial reporting standards of the domestic market or exchange on which they
are traded, which standards are more uniform and more exacting than those to
which many foreign issuers may be subject. The Fund may also invest in European
Depositary Receipts ("EDRs"), which are receipts evidencing an arrangement with
a European bank similar to that for ADRs and are designed for use in the
European securities markets. EDRs are not necessarily denominated in the
currency of the underlying security.
The dividends and interest payable on certain of the Fund's foreign
securities may be subject to foreign withholding taxes, thus reducing the net
amount available for distribution to the Fund's shareholders. You should
understand that the expense ratio of the Portfolio can be expected to be higher
than those of investment companies investing only in domestic securities since
the costs of operations are higher.
ADDITIONAL NONFUNDAMENTAL INVESTMENT POLICIES
The Portfolio has adopted the following operating (i.e., nonfundamental)
investment policies which may be changed by the Board of Directors without
shareholder approval:
The Portfolio may invest up to less than one percent of its respective
assets in investments in securities that offer a rate of return below the then
prevailing market rate and that present attractive opportunities for furthering
the Portfolio's social criteria. In applying this restriction, the percentage of
a Portfolio's assets in such securities is based on the aggregate cumulative
value at the time of the respective acquisitions of such securities currently
held by the Portfolio. These securities are unrated and are generally considered
non-investment grade debt securities which involve a greater risk of default or
price decline than investment-grade securities. Through diversification and
credit analysis, investment risk can be reduced, although there can be no
assurance that losses will not occur.
47
<PAGE>
ADDITIONAL RISK FACTORS
NONDIVERSIFIED PORTFOLIOS
There may be risks associated with the Portfolio being nondiversified.
Specifically, since a relatively high percentage of the assets of the Portfolio
may be invested in the obligations of a limited number of issuers, the value of
the shares of a nondiversified Portfolio may be more susceptible to any single
economic, political or regulatory event than the shares of a diversified
Portfolio would be.
INTEREST RATE RISK
All fixed income instruments are subject to interest-rate risk: that is, if
market interest rates rise, the current principal value of a bond will decline.
In general, the longer the maturity of the bond, the greater the decline in
value will be.
NON-INVESTMENT GRADE SECURITIES
Noninvestment-grade securities tend to be less sensitive to interest rate
changes than higher-rated investments, but are more sensitive to adverse
economic changes and individual corporate developments. This may affect the
issuer's ability to make principal and interest payments on the debt obligation.
There is also a greater risk of price declines due to changes in the issuer's
creditworthiness. Because the market for lower-rated securities may be less
active ("thinner") than for higher-rated securities, it may be difficult for the
fund to sell the securities. Because of a lack of objective data, a
thinly-traded market may make it difficult to value the securities, so that the
Board of Directors may have to exercise its judgment in assigning a value. See
the Appendix in the Statement of Additional Information for more information on
bond ratings.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction where the Portfolio buys a security
at one price and simultaneously agrees to sell that same security back to the
original owner at a higher price. Under the direction and supervision of the
Fund's Board of Directors, the Investment Advisor and Sub-Advisor review the
creditworthiness of the other party to the agreement and must find it
satisfactory before engaging in a repurchase agreement. In all instances the
Fund holds underlying securities with a value equal to the total repurchase
price the other party has agreed to pay. However, in the event of the bankruptcy
of the other party, the Portfolio could experience delays in recovering its
money, may realize only a partial recovery or even no recovery, and may also
incur disposition costs. The Portfolio is not expected generally to invest more
than a very small portion of its assets in repurchase agreements.
OTHER INFORMATION
In addition to the investment policies described above, the investment
program is subject to further policies and restrictions which are described in
the Statement of Additional Information. The Portfolio may, to a limited extent,
lend its portfolio securities and engage in reverse repurchase agreements.
Unless otherwise specified, the policies and restrictions for the Portfolio are
not fundamental and may be changed without shareholder approval. Policyholder
inquiries should be directed to the Fund at (301) 951-4820 or (800) 368-2750,
4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814.
THE FUND AND ITS MANAGEMENT
The Fund is an open-end management investment company. The Board of
Directors supervises the business affairs and investments of the Fund, which are
managed on a daily basis by the Fund's Investment Advisor. The Fund was
incorporated under the laws of the State of Maryland on September 27, 1982. The
Fund is a series fund which issues classes of stock, one for each Portfolio.
INVESTMENT ADVISOR
The Fund's investment advisor is Calvert Asset Management Company, Inc. (the
"Investment Advisor"), which is located at 4550 Montgomery Avenue, Suite 1000N,
Bethesda, Maryland 20814. Calvert Asset
48
<PAGE>
Management is a wholly-owned subsidiary of Calvert Group, Ltd., which is in turn
an indirect wholly-owned subsidiary of Acacia Mutual Life Insurance Company. As
of December 31, 1994, Calvert Group, Ltd. had assets in excess of $4.2 billion
under management and administration. Pursuant to its investment advisory
agreement with the Fund, the Investment Advisor manages the fixed-income
investments of the Portfolio and is responsible for the overall management of
the business affairs of each Portfolio, subject to the direction and authority
of the Fund's Board of Directors.
The Sub-Advisor to the Portfolio is NCM Capital Management Group, Inc.
(NCM). Pursuant to its Investment Sub-Advisory Agreement with the Investment
Advisor, NCM manages the equity portion of the Portfolio selections for the
Portfolio. NCM was founded by Maceo K. Sloan in 1986 as a subsidiary of North
Carolina Mutual Life Insurance Company, which was established by Mr. Sloan's
ancestors in 1898 and is one of the oldest and largest minority-owned financial
institutions in the country. NCM has been an employee-owned subsidiary of Sloan
Financial Group since 1991. Sloan Financial Group is controlled by Mr. Sloan and
Justin F. Beckett, Executive Vice President and a Director of NCM. NCM is one of
the largest minority-owned investment management firms in the country, and
provides products in equity, fixed-income and balanced portfolio management. It
is also one of the industry leaders in the employment and training of minority
and women investment professionals. NCM has served as sub-advisor to the
Portfolio since February 1995.
Wendell E. Mackey, Vice President of NCM, is the portfolio manager with
respect to the Portfolio's equity investments. Mr. Mackey earned his B.B.A.
degree from Howard University, and his M.M degree from Kellogg Graduate School
of Management at Northwestern University. He subsequently worked with several
securities firms before joining NCM as an equity portfolio manager in 1993. He
has managed the Portfolio since February 1995.
Ms. Denzler manages the Portfolio's fixed-income investments. She has been
managing funds for the Advisor since 1988. She holds a B.S. degree from Radford
University and is a Chartered Financial Analyst.
ADVISORY FEE
The Investment Advisor is receives from the Portfolio a monthly base fee,
computed on a daily basis at an annual rate of 0.70% of the average daily net
assets of the Portfolio.
The Advisor pays the Sub-advisor a base fee of 0.25% of one-half of the
Portfolio's average net assets. In addition, under the circumstances described
below, the Advisor and Sub-advisor may earn (or have their fees reduced by)
performance fee adjustments based on the extent to which performance of the
Portfolio exceeds or trails the Lipper Balanced Funds Index. Payment of the
performance fee adjustment begins July 1, 1996. The specific adjustments are as
follows:
ADVISOR'S PERFORMANCE FEE ADJUSTMENT
<TABLE>
<CAPTION>
PERFORMANCE VERSUS THE PERFORMANCE
LIPPER BALANCED FUNDS INDEX FEE ADJUSTMENT
- ----------------------------- -------------------
<S> <C>
6% to < 12% 0.05%
12% to < 18% 0.10%
18% or more 0.15%
</TABLE>
SUB-ADVISOR'S PERFORMANCE FEE ADJUSTMENT
<TABLE>
<CAPTION>
PERFORMANCE VERSUS THE PERFORMANCE
LIPPER BALANCED FUNDS INDEX FEE ADJUSTMENT
- ----------------------------- -------------------
<S> <C>
6% to < 12% 0.05%
12% to < 18% 0.10%
18% or more 0.15%
</TABLE>
The performance fee adjustment to the Sub-advisor is paid out of the fee the
Advisor receives from the Portfolio. The initial performance period will be the
twelve month period between July 1, 1995, and July 1, 1996. Each month an
additional month's performance will be factored into the calculation until a
total of 36 months comprises the performance computation period. Payment by the
Portfolio of the performance
49
<PAGE>
adjustment will be conditioned on: (1) the performance of the Portfolio as a
whole having exceeded the Lipper Balanced Funds Index; and (1) payment of the
performance adjustment not causing the Portfolio's performance to fall below the
Lipper Balanced Funds Index.
EXPENSES
The Fund's expenses, which are accrued daily, include: the fee of the
Investment Advisor; costs of executing portfolio transactions; pricing costs;
interest; taxes; custodian and transfer agent fees; legal and auditing fees;
bookkeeping and dividend disbursing expenses; and certain other expenses
relating to the Fund's operations. The Fund's organizational expenses were paid
by the Investment Advisor, and other expenses that the investment advisory
agreement does not state are payable by the Fund will be assumed by the
Investment Advisor. Certain expenses are paid by the Portfolio that incurs them,
while other expenses are allocated among each Series on the basis of its
relative size (that is, the amount of its net assets), or by the Board of
Directors as appropriate.
The Investment Advisor has agreed to reimburse the Fund for the amount, if
any, by which the aggregate expenses of the Portfolio (including the investment
advisory fee but excluding brokerage commissions, interest, taxes, and
extraordinary expenses) exceed the limit of any state in which the Portfolios'
shares are qualified for sale. Expenses constituted 0.80% of the average net
assets of the Portfolio for 1994.
CAPITAL STOCK
The Fund issues separate shares of stock for each of its Portfolios. Shares
of each of the series have equal rights with regard to voting, redemptions,
dividends, distributions, and liquidations with respect to that series. No
series has preference over another series. When issued, shares are fully paid
and nonassessable and do not have preemptive or conversion rights or cumulative
voting rights. The Fund's shareholders, the Insurance Companies, will vote Fund
shares allocated to the Variable Accounts in accordance with instructions
received from policy owners. Under certain circumstances, which are described in
the accompanying prospectus of the variable life policy, the voting instructions
received from variable life insurance policy owners may be disregarded.
PURCHASE AND REDEMPTION OF SHARES
The Fund offers its shares, without sales charge, only for purchase by the
Insurance Companies for allocation to their Variable Accounts. Shares are
purchased by the Variable Accounts at the net asset value of the Portfolio next
determined after the Insurance Company receives the premium payment. The Fund
continuously offers its shares in the Portfolio at a price equal to the net
asset value per share. Initial and subsequent payments allocated to the Fund are
subject to the limits applicable in the Policies issued by the Insurance
Companies.
It is conceivable that in the future it may be disadvantageous for both
annuity Variable Accounts and life insurance Variable Accounts, or for Variable
Accounts of different Insurance Companies, to invest simultaneously in the Fund,
although currently neither the Insurance Companies nor the Fund foresee any such
disadvantages to either variable annuity or variable life insurance policy
owners of any Insurance Company. The Fund's Board of Directors intends to
monitor events in order to identify any material conflicts between such policy
owners and to determine what action, if any, should be taken in response
thereto.
The Insurance Companies redeem shares of the Fund to make benefit and
surrender payments under the terms of its Policies. Redemptions are processed on
any day on which the Fund is open for business (each day the New York Stock
Exchange is open), and are effected at the Fund's net asset value next
determined after the appropriate Insurance Company receives a surrender request
in acceptable form.
Payment for redeemed shares will be made promptly, but in no event later
than seven days. However, the right of redemption may be suspended or the date
of payment postponed in accordance with the Rules under the 1940 Act. The amount
received upon redemption of the shares of the Fund may be more or less than the
50
<PAGE>
amount paid for the shares, depending upon the fluctuations in the market value
of the assets owned by the Fund. The Fund redeems all full and fractional shares
of the Portfolio for cash. The redemption price is the net asset value per
share. Payment for shares redeemed will generally be made within seven days
after receipt of a proper notice of redemption.
The net asset value of the shares of the Portfolio is determined once daily
as of the close of business of the New York Stock Exchange, on days when the
Exchange is open for business, or for any other day when there is a sufficient
degree of trading in the investments of the Portfolio to affect materially its
net asset value per share (except on days when no orders to purchase or redeem
shares of the Portfolio have been received). The net asset value is determined
by adding the values of all securities and other assets of the Portfolio,
subtracting liabilities and expenses, and dividing by the number of outstanding
shares of the Portfolio.
Except for money market instruments maturing in 60 days or less, securities
held by the Portfolio are valued at their market value if market quotations are
readily available. Otherwise, such securities are valued at fair value as
determined in good faith by the Board of Directors, although the actual
calculations may be made by persons acting pursuant to the direction of the
Board. All money market instruments with a remaining maturity of 60 days or less
are valued on an amortized cost basis.
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's intention to distribute substantially all of the net
investment income, if any, of the Portfolio. For dividend purposes, net
investment income of the Portfolio consists of all payments of dividends or
interest received by such Portfolio less estimated expenses (including the
investment advisory fee). All net realized capital gains, if any, of each
Portfolio are declared and distributed periodically, no less frequently than
annually. All dividends and distributions are reinvested in additional shares of
the Portfolio at net asset value.
TOTAL RETURN AND YIELD INFORMATION
The Portfolio may advertise its "total return" from time to time. Total
return refers to the total change in value of an investment in the Portfolio
over a specified period. It differs from yield in that yield figures measure
only the income component of the Portfolio's portfolio investments, while total
return includes not only the effect of income dividends but also any change in
net asset value, or principal amount, during the stated period. The total return
of the Portfolio is the ratio of the increase (or decrease) in value of a
hypothetical investment in the Portfolio at the end of a measuring period to the
amount initially invested in the Portfolio. Total return is computed by taking
the total number of shares purchased by a hypothetical $1,000 investment, adding
all additional shares purchased within the period with reinvested dividends and
distributions, calculating the value of those shares at the end of the period,
and dividing the result by the initial $1,000 investment. For periods of more
than one year, the cumulative total return is then adjusted for the number of
years, taking compounding into account, to calculate average annual total return
during that period.
Total return is historical in nature and is not intended to indicate future
performance. Total return will be quoted for the most recent one-year period,
and the average annual total return will be quoted for the most recent five- and
ten-year periods, or the period from the commencement of the public offering of
the Portfolio, if shorter.
Actual total return quotations may also be advertised for other specified
periods, such as calendar years and calendar quarters. Cumulative total return
for periods of more than one year may also be quoted. These figures will be
accompanied by the standard, average annual total return quotations. The total
return of the Portfolio does not include the effect of paying the sales charges
on the particular insurance policy or annuity contract for which the Portfolio
serves as the investment vehicle.
51
<PAGE>
TAXES
As a "regulated investment company" under the provisions of Subchapter M of
the Internal Revenue Code, as amended, the Fund is not subject to federal income
tax, nor to the federal excise tax imposed by the Tax Reform Act of 1986, to the
extent that it distributes its net investment income and realized capital gains.
Since the only shareholders of the Fund are the Insurance Companies, no
discussion is included herein as to the federal income tax consequences at the
shareholder level. For information concerning the federal tax consequences to
purchasers of the annuity or life insurance policies, see the prospectuses for
the Policies.
TRANSFER AND DIVIDEND DISBURSING AGENT
Calvert Shareholder Services, Inc., having its principal place of business
at 4550 Montgomery Avenue, Bethesda, Maryland 20814, is the Fund's transfer
agent and dividend disbursing agent.
52
<PAGE>
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 Contract Owner/Participant: ____________________________________________
Address: _______________________________________________________________________
City or Plan/School District: __________________________________________________
Date: __________________________________________________________________________
Participant No: ________________________________________________________________
Signature: _____________________________________________________________________
<PAGE>
To obtain a Statement of Additional
Information, complete the form below and mail to:
Attn: RPVA Administration
Hartford Life Insurance Companies
P.O. Box 2999
Hartford, CT 06104-2999
Please send a Statement of Additional
Information for Separate Account DC-I and Separate
Account Two (DC-II)(Form HV-1879-9) to me at the
following address.
_________________________________________
(name)
_________________________________________
(street)
_________________________________________
(city/state) (zip code)
<PAGE>
PRINCIPAL UNDERWRITER
Hartford Equity Sales Company, Inc. (HESCO)
Hartford Securities Distribution Company, Inc. (HSD)
Hartford Plaza, Hartford, CT 06115
HARTFORD
INDEPENDENT AUDITORS FOR HARTFORD
LIFE INSURANCE COMPANY AND
THE GENERAL ACCOUNT OPTION
LIFE INSURANCE
Arthur Andersen & Co.
Hartford, Connecticut 06103
COMPANY
INSURER
Hartford Life Insurance Company
Executive Offices: P.O. Box 2999
Hartford, CT 06104-2999
SEPARATE ACCOUNT TWO (DC-II)
PROSPECTUS
INCLUDING THE PROSPECTUS OF
THE FUNDS
Group Variable Annuity Contracts
HV-2025
[LOGO]
HARTFORD LIFE INSURANCE COMPANY
BULK RATE
P.O. BOX 2999, HARTFORD, CT 06104-2999
U.S. POSTAGE
PAID
PERMIT NO. 1
HARTFORD, CONN.
