<PAGE>
File No. 33-59541
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
-------
Post-Effective Amendment No. 1 [X]
------
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 3 [X]
------
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO (DC VARIABLE ACCOUNT-II)
(Exact Name of Registrant)
HARTFORD LIFE INSURANCE COMPANY
(Name of Depositor)
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Address of Depositor's Principal Offices)
(860) 843-7563
(Depositor's Telephone Number, Including Area Code)
SCOTT K. RICHARDSON, ESQ.
ITT HARTFORD LIFE INSURANCE COMPANIES
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
-----
X on May 1, 1996 pursuant to paragraph (b) of Rule 485
-----
60 days after filing pursuant to paragraph (a)(1) of Rule 485
-----
on May 1, 1996 pursuant to paragraph (a)(1) of Rule 485
-----
this post-effective amendment designates a new effective date for
----- a previously filed post-effective amendment.
<PAGE>
PURSUANT TO RULE 24F-2(a)(1) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES. THE RULE 24F-2
NOTICE FOR THE REGISTRANT'S MOST RECENT FISCAL YEAR WAS FILED ON OR ABOUT
FEBRUARY 29, 1996.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 Item No. Prospectus Heading
------------ ------------------
1. Cover Page Cover Page
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Information Accumulation Unit Values
5. General Description of Registrant, The Contracts and Separate Account Two;
Portfolio Companies Hartford Life Insurance Company and the
Funds; Miscellaneous
6. Deductions Charges Under the Contract
7. General Description of Variable Operation of the Contract; Payment of
Annuity Contracts Benefits; The Contracts and Separate
Account Two
8. Annuity Period Payment of Benefits
9. Death Benefit Payment of Benefits; Operation of the
Contract
10. Purchases and Contract Value Operation of the Contract
11. Redemptions Payment of Benefits
12. Taxes Federal Tax Considerations
13. Legal Proceedings Miscellaneous - Are there any material
legal proceedings affecting the Separate
Account?
14. Table of Contents of the Table of Contents of the
Statement of Additional Statement of Additional Information
Information
<PAGE>
N-4 Item No. Prospectus Heading
------------ ------------------
15. Cover Page Part B; Statement of Additional
Information
16. Table of Contents Tables of Contents
17. General Information and Description of Hartford Life Insurance
History Company
18. Services None
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Calculation of Yield and
Data Return
22. Annuity Payments Annuity Period
23. Financial Statements Financial Statements
24. Financial Statements and Financial Statements and
Exhibits Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Depositor Common Control with the Depositor
or Registrant or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts and Records
31. Management Services Management Services
32. Undertakings Undertakings
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO (DC-II)
[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 Inc. (formerly "Hartford Aggressive Growth Fund,
Sub-Account 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 -- shares of HVA Money Market Fund, Inc. ("Money
Sub-Account Market Fund")
Mortgage Securities Fund -- shares of Hartford Mortgage Securities Fund,
Sub-Account Inc. ("Mortgage Securities Fund")
Calvert Responsibly -- shares of Calvert Responsibly Invested Balanced
Invested Balanced Fund Fund Series of Acacia Capital Corporation.
Sub-Account (formerly Calvert Socially Responsive Fund)
("Calvert 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 -- shares of TCI Portfolios, Inc. TCI Growth
Sub-Account ("AMS/TCI Growth Fund")
AMS/Fidelity VIP II -- shares of Fidelity Investments Variable
Asset Manager Insurance Products II Asset Manager
Fund Sub-Account ("AMS/Fidelity VIP II Asset Manager Fund")
AMS/Fidelity VIP II -- shares of Fidelity Investments Variable
Contrafund Insurance Products II Contrafund Fund ("AMS/
Fund Sub-Account Fidelity VIP II Contrafund Fund")
AMS/Fidelity VIP Growth -- shares of Fidelity Investments Variable
Fund Insurance Products Growth Fund ("AMS/Fidelity
Sub-Account 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 36 of this Prospectus. The Statement of Additional
Information is incorporated by reference to this Prospectus.
- --------------------------------------------------------------------------------
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 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.
- --------------------------------------------------------------------------------
Prospectus Dated: May 1, 1996
Statement of Additional Information Dated: May 1, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- -------------------------------------------------------------------------- ----
<S> <C>
GLOSSARY OF SPECIAL TERMS................................................. 3
FEE TABLES................................................................ 4
SUMMARY................................................................... 6
ACCUMULATION UNIT VALUES.................................................. 8
PERFORMANCE RELATED INFORMATION........................................... 13
INTRODUCTION.............................................................. 13
THE CONTRACTS AND THE SEPARATE ACCOUNT.................................... 14
What are the Contracts?................................................. 14
Who can buy these Contracts?............................................ 14
What is the Separate Account and how does it operate?................... 14
OPERATION OF THE CONTRACT................................................. 15
How are Contributions credited?......................................... 15
May I change the amount of my Contributions?............................ 15
May I make changes in my Sub-Account allocations?....................... 15
May I transfer assets between Sub-Accounts?............................. 15
How do I transfer assets between Sub-Accounts or change my Sub-Account
allocations?.......................................................... 16
What happens if the Contractholder fails to make Contributions?......... 16
May I assign or transfer the Contract?.................................. 16
May I request a loan from my Individual Account?........................ 16
How do I know what my account is worth?................................. 17
How is the Accumulation Unit value determined?.......................... 17
How are the underlying Fund shares valued?.............................. 17
PAYMENT OF BENEFITS....................................................... 18
What would my Beneficiary receive as death proceeds?.................... 18
How can a Contract be redeemed or surrendered?.......................... 17
Can payment of the redemption or surrender value ever be postponed
beyond the seven day period?.......................................... 19
May I surrender once Annuity payments have started?..................... 19
Can a Contract be suspended by a Contractholder?........................ 19
How do I elect an Annuity Commencement Date and Form of Annuity?........ 19
What is the minimum amount that I may select as an Annuity Payment?..... 20
How are Contributions made to establish my Annuity account?............. 20
What are the available Annuity Options under the Contracts?............. 20
Systematic Withdrawal Option............................................ 21
How are Variable Annuity payments determined?........................... 22
Can a Contract be modified?............................................. 23
CHARGES UNDER THE CONTRACT................................................ 23
How are the charges under these Contracts made?......................... 23
What do the sales charges cover?........................................ 24
What is the mortality, expense and administrative risk charge?.......... 24
Are there any other administrative charges?............................. 24
Is there ever a time where the sales charges or Annual Contract Fee does
not apply?............................................................ 25
Experience Rating of Contracts.......................................... 25
How much are the deductions for Premium Taxes on these Contracts?....... 25
What charges are made by the Funds?..................................... 25
Are there any other deductions?......................................... 25
HARTFORD LIFE INSURANCE COMPANY AND THE FUNDS............................. 26
What is Hartford Life?.................................................. 26
What are the Funds?..................................................... 26
Does Hartford Life have any interest in the Funds?...................... 29
FEDERAL TAX CONSIDERATIONS................................................ 30
What are some of the federal tax consequences which affect these
Contracts?............................................................ 30
MISCELLANEOUS............................................................. 34
What are my voting rights?.............................................. 34
Will other Contracts be participating in the Separate Account?.......... 34
How are the Contracts sold?............................................. 34
Who is the custodian of the Separate Account's assets?.................. 35
Are there any material legal proceedings affecting the Separate
Account?.............................................................. 35
Are you relying on any experts as to any portion of this Prospectus?.... 35
How may I get additional information?................................... 35
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION................. 36
</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 26 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 trading. 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
SUMMARY
Contract Owner Transaction Expenses
(All Sub-Accounts)
<TABLE>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of premium
payments)....................................................... None
Transfer Fee...................................................... $ 5
Contingent Deferred Sales Charge (as a percentage of amounts
withdrawn)
First through Fifth Year...................................... 5%
Sixth Year.................................................... 4%
Seventh Year.................................................. 3%
Eighth Year................................................... 2%
Nineth Year................................................... 1%
Tenth Year.................................................... 0%
Annual Contract Fee (1)........................................... $ 30
Annual Expenses-Separate Account (as percentage of average account
value)
Mortality and Expense Risk (DC II)............................ 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
Rating of Contracts" on page 25.
Annual Fund Operating Expenses
(as percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
---------- -------- ----------
<S> <C> <C> <C>
Hartford Bond Fund.............................. 0.497% 0.028% 0.525%
Hartford Stock Fund............................. 0.455% 0.020% 0.475%
HVA Money Market Fund........................... 0.421% 0.025% 0.446%
Hartford Advisers Fund.......................... 0.625% 0.021% 0.646%
Hartford Capital Appreciation Fund.............. 0.655% 0.021% 0.676%
Hartford Mortgage Securities Fund............... 0.425% 0.041% 0.466%
Hartford Index Fund............................. 0.375% 0.014% 0.389%
Hartford International Opportunities Fund....... 0.713% 0.147% 0.860%
Calvert Responsibly Invested Balanced
Portfolio..................................... 0.700% 0.130% 0.830%
Hartford Dividend & Growth Fund................. 0.750% 0.023% 0.773%
TCI Advantage Fund.............................. 1.000% 0.000% 1.000%
TCI Growth Fund................................. 1.000% 0.000% 1.000%
Fidelity VIP Growth Fund........................ 0.610% 0.090% 0.700%
Fidelity VIP Overseas Fund...................... 0.760% 0.150% 0.910%
Fidelity VIP II Contrafund...................... 0.610% 0.120% 0.730%
Fidelity VIP II Asset Manager................... 0.710% 0.100% 0.810%
</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.
Pursuant to requirements of the 1940 Act, the Annual Contract Fee has been
reflected in the Examples by a method intended to show the "average" impact
of the Annual Contract Fee on an investment in the Separate Account. The
Annual Contract Fee is deducted only when the accumulated value is $50,000
or less. In the Example, the Annual Contract Fee is approximated as a 0.11%
annual asset charge based on the experience of the Contracts.
4
<PAGE>
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 investment, assuming a 5%
investment, assuming a 5% assuming a 5% annual return on annual return on assets:
annual return on assets: assets:
SUB-ACCOUNT 1 YR. 3 YRS. 5 YRS. 10 YRS. 1 YR. 3 YRS. 5 YRS. 10 YRS. 1 YR. 3 YRS. 5 YRS. 10 YRS.
------ ------- ------- -------- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hartford Bond Fund....... $ 71 $ 115 $ 161 $ 222 $ 18 $ 59 $ 101 $ 221 $ 19 $ 60 $ 103 $ 222
Hartford Stock Fund(3)... 70 113 158 217 18 57 99 215 19 58 100 217
HVA Money Market Fund.... 70 112 157 214 17 56 97 212 19 57 99 214
Hartford Advisers
Fund(4)................ 72 118 167 235 19 62 108 234 21 64 109 235
Hartford Capital
Appreciation Fund(5)... 72 119 168 238 20 63 109 237 21 64 111 238
Hartford Mortgage
Securities Fund........ 70 113 158 216 18 57 98 214 19 58 100 216
Hartford Index Fund(6)... 70 110 154 207 17 54 94 206 18 56 96 207
Hartford International
Opportunities Fund..... 74 124 177 258 22 69 119 256 23 70 120 258
Calvert Responsibly
Invested Balanced
Portfolio.............. 74 123 176 254 21 68 117 253 22 69 119 254
Hartford Dividend &
Growth Fund............ 73 122 173 248 21 66 115 247 22 67 116 248
TCI Advantage Fund....... 75 128 184 272 23 73 126 271 24 74 127 272
TCI Growth Fund.......... 75 128 184 272 23 73 126 271 24 74 127 272
Fidelity VIP Growth
Fund................... 73 120 170 241 20 64 111 239 21 65 112 241
Fidelity VIP Overseas
Fund................... 75 126 180 263 22 70 122 261 23 72 123 263
Fidelity VIP II
Contrafund............. 73 121 171 244 20 65 112 243 21 66 113 244
Fidelity VIP II Asset
Manager................ 74 123 175 252 21 67 116 251 22 69 118 252
</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 past or future
expenses and actual expenses may be greater or less than those shown.
(3) For this table, the Stock Fund mortality and expense charges are 1.2375%.
(4) For this table, the Advisors Fund mortality and expense charge are 1.199%.
(5) For this table, the Capital Appreciation Fund mortality and expense charges
are 1.21%.
(6) For this table, the Index Fund combined expenses are limited to 1.25%.
5
<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 25). 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 25.)
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 15.)
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
20.) However, Hartford Life will not assume responsibility in determining or
monitoring minimum distributions beginning at age 70 1/2.
F. MINIMUM DEATH BENEFITS
A Minimum Death Benefit is provided in the event of death of the Participant
prior to the earlier of Participant's 65th birthday or the Annuity Commencement
Date (see "What would my Beneficiary receive as death proceeds?" commencing on
page 18).
6
<PAGE>
G. ANNUITY OPTIONS
The Annuity Commencement Date will not be deferred beyond the date
Participants become age 70 1/2 or such earlier date as may be required by
applicable law and/or regulation. If a Participant does not elect otherwise,
Hartford Life reserves the right to begin Annuity payments automatically at age
65 under an option providing for a life Annuity with 120 monthly payments
certain (see "What are the available Annuity options under the Contracts?"
commencing on page 20).
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 23). 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%
(estimated at .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 25) 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 23.)
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 23.)
The Annual Contract Fee may be reduced or waived (see "Experience Rating of
Contracts", page 25).
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 16.) 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.
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 34).
7
<PAGE>
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
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>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DC-I
BOND FUND SUB-ACCOUNT
Accumulation unit value
at beginning of
period................ $3.499 $3.689 $3.388 $3.251 $2.827 $2.640 $2.384 $2.244 $2.273 $2.052 $1.722 $1.541 $1.519 $ 1.318(a)
Accumulation unit value
at end of period...... $4.099 $3.499 $3.689 $3.388 $3.251 $2.827 $2.640 $2.384 $2.244 $2.273 $2.052 $1.722 $1.541 $ 1.519
Number accumulation
units outstanding at
end of period (in
thousands)............ 8,630 9,090 10,092 10,253 10,201 9,871 9,462 9,015 8,461 9,640 8,335 8,464 4,693 187
DC-II
BOND FUND SUB-ACCOUNT
Accumulation unit value
at beginning of
period................ $3.500 $3.689 $3.389 $3.251 $2.827 $2.641 $2.385 $2.244 $2.273 $2.052 $1.723 $1.541 $1.519 $ 1.366(b)
Accumulation unit value
at end of period...... $4.095 $3.500 $3.689 $3.389 $3.251 $2.827 $2.641 $2.385 $2.244 $2.273 $2.052 $1.723 $1.541 $ 1.519
Number accumulation
units outstanding at
end of period (in
thousands)............ 1,368 1,123 992 816 732 724 594 433 320 224 145 113 88 28
DC-I
STOCK FUND SUB-ACCOUNT
Accumulation unit value
at beginning of
period................ $6.773 $6.990 $6.190 $5.695 $4.628 $4.875 $3.916 $3.332 $3.201 $2.886 $2.222 $2.238 $1.989 $ 1.548(a)
Accumulation unit value
at end of period...... $8.979 $6.773 $6.990 $6.190 $5.695 $4.628 $4.875 $3.916 $3.332 $3.201 $2.886 $2.222 $2.238 $ 1.989
Number accumulation
units outstanding at
end of period (in
thousands)............ 39,271 39,551 37,542 34,861 32,700 29,962 28,198 25,658 25,694 21,622 19,566 17,831 10,598 332
DC-II
STOCK FUND SUB-ACCOUNT
Accumulation unit value
at beginning of
period................ $6.771 $6.988 $6.188 $5.694 $4.627 $4.874 $3.915 $3.331 $3.200 $2.885 $2.222 $2.238 $1.989 $ 1.551(c)
Accumulation unit value
at end of period...... $8.968 $6.771 $6.988 $6.188 $5.694 $4.627 $4.874 $3.915 $3.331 $3.200 $2.885 $2.222 $2.238 $ 1.989
Number accumulation
units outstanding at
end of period (in
thousands)............ 4,413 3,885 3,181 2,517 1,885 1,467 1,156 1,011 951 772 437 253 141 26
DC-I
MONEY MARKET FUND
SUB-ACCOUNT
Accumulation unit value
at beginning of
period................ $2.515 $2.450 $2.410 $2.354 $2.248 $2.106 $1.954 $1.842 $1.752 $1.661 $1.550 $1.417 $1.312 $ 1.258(d)
Accumulation unit value
at end of period...... $2.629 $2.515 $2.450 $2.410 $2.354 $2.248 $2.106 $1.954 $1.842 $1.752 $1.661 $1.550 $1.417 $ 1.312
Number accumulation
units outstanding at
end of period (in
thousands)............ 7,884 9,548 9,298 9,999 10,936 11,181 8,871 8,703 7,521 6,321 7,068 8,416 2,654 2,007
DC-II
MONEY MARKET FUND
SUB-ACCOUNT
Accumulation unit value
at beginning of
period................ $2.512 $2.447 $2.407 $2.351 $2.245 $2.103 $1.951 $1.840 $1.749 $1.659 $1.548 $1.415 $1.310 $ 1.235(c)
Accumulation unit value
at end of period...... $2.624 $2.512 $2.447 $2.407 $2.351 $2.245 $2.103 $1.951 $1.840 $1.749 $1.659 $1.548 $1.415 $ 1.310
Number accumulation
units outstanding at
end of period (in
thousands)............ 989 905 886 884 929 881 718 628 389 351 235 349 67 66
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DC-I
ADVISERS FUND
SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $2.876 $2.993 $2.700 $2.524 $2.123 $2.123 $1.766 $1.566 $1.497 $1.345 $ 1.074 $ 1.013 $ 1.000(e) --
Accumulation unit value
at end of period..... $3.649 $2.876 $2.993 $2.700 $2.524 $2.123 $2.123 $1.766 $1.566 $1.497 $ 1.345 $ 1.074 $ 1.013 --
Number accumulation
units outstanding at
end of period (in
thousands)........... 128,415 126,437 119,064 105,648 93,981 84,223 74,660 62,335 56,502 36,266 22,051 14,035 7,971 --
DC-II
ADVISERS FUND
SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $2.876 $2.993 $2.700 $2.524 $2.123 $2.123 $1.766 $1.566 $1.497 $1.345 $ 1.074 $ 1.013 $ 1.000(e) --
Accumulation unit value
at end of period..... $3.647 $2.876 $2.993 $2.700 $2.524 $2.123 $2.123 $1.766 $1.566 $1.497 $ 1.345 $ 1.074 $ 1.013 --
Number accumulation
units outstanding at
end of period (in
thousands)........... 9,212 8,279 7,023 7,323 6,220 5,565 5,227 4,631 4,283 3,357 2,429 2,266 837 --
DC-I
CAPITAL APPRECIATION
FUND SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $4.257 $4.204 $3.524 $3.050 $2.004 $2.278 $1.858 $1.490 $1.579 $1.467 $ 1.092 $ 1.000(f) -- --
Accumulation unit value
at end of period..... $5.482 $4.257 $4.204 $3.524 $3.050 $2.004 $2.278 $1.858 $1.490 $1.579 $ 1.467 $ 1.092 -- --
Number accumulation
units outstanding at
end of period (in
thousands)........... 52,278 46,086 36,598 25,900 19,437 15,293 13,508 9,970 8,485 6,552 2,485 113 -- --
DC-II
CAPITAL APPRECIATION
FUND SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $4.257 $4.204 $3.524 $3.050 $2.004 $2.278 $1.858 $1.490 $1.579 $1.467 $ 1.092 $ 1.000(f) -- --
Accumulation unit value
at end of period..... $5.478 $4.257 $4.204 $3.524 $3.050 $2.004 $2.278 $1.858 $1.490 $1.579 $ 1.467 $ 1.092 -- --
Number accumulation
units outstanding at
end of period (in
thousands)........... 9,081 6,923 4,940 3,276 2,113 1,455 1,037 787 664 462 117 5 -- --
DC-I
MORTGAGE SECURITIES
FUND SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $2.034 $2.093 $1.993 $1.929 $1.702 $1.571 $1.406 $1.313 $1.296 $1.181 $ 1.000(g) -- -- --
Accumulation unit value
at end of period..... $2.335 $2.034 $2.093 $1.993 $1.929 $1.702 $1.571 $1.406 $1.313 $1.296 $ 1.181 -- -- --
Number accumulation
units outstanding at
end of period (in
thousands)........... 11,067 10,782 11,722 12,046 11,855 10,291 8,919 9,005 8,139 7,902 5,130
DC-II
MORTGAGE SECURITIES
FUND SUB-ACCOUNT
Accumulation unit at
beginning of
period............... $2.034 $2.093 $1.993 $1.929 $1.702 $1.571 $1.406 $1.313 $1.296 $1.181 $ 1.000(g) -- -- --
Accumulation unit value
at end of period..... $2.333 $2.034 $2.093 $1.993 $1.929 $1.702 $1.571 $1.406 $1.313 $1.296 $ 1.181 -- -- --
Number accumulation
units outstanding at
end of period (in
thousands)........... 1,149 994 942 802 736 582 845 764 598 431 247 -- -- --
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982
------ ------ ------ ------ ------ ------- ------- ----- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DC-I
INDEX FUND SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $1.738 $1.735 $1.605 $1.522 $1.190 $ 1.255 $ 0.975 $0.850 $ 1.000(h) -- -- -- -- --
Accumulation unit value
at end of period..... $2.353 $1.738 $1.735 $1.605 $1.522 $ 1.190 $ 1.255 $0.975 $ 0.850 -- -- -- -- --
Number accumulation
units outstanding at
end of period (in
thousands)........... 19,816 15,356 13,489 11,720 8,519 6,350 3,639 1,946 1,323 -- -- -- -- --
DC-II
INDEX FUND SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $1.738 $1.735 $1.605 $1.522 $1.190 $ 1.255 $ 0.975 $0.850 $ 1.000(h) -- -- -- -- --
Accumulation unit value
at end of period..... $2.353 $1.738 $1.735 $1.605 $1.522 $ 1.190 $ 1.255 $0.975 $ 0.850 -- -- -- -- --
Number accumulation
units outstanding at
end of period (in
thousands)........... 3,153 2,376 1,862 1,437 871 595 275 116 49 -- -- -- -- --
DC-I
CALVERT RESPONSIBLY INVESTED BALANCED
FUND PORTFOLIO SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $1.504 $1.573 $1.475 $1.388 $1.207 $ 1.173 $ 1.000(i) -- -- -- -- -- -- --
Accumulation unit value
at end of period..... $1.929 $1.504 $1.573 $1.475 $1.388 $ 1.207 $ 1.173 -- -- -- -- -- -- --
Number of accumulation
units outstanding at
end of period (in
thousands)........... 9,009 7,899 7,199 5,215 3,508 2,036 629 -- -- -- -- -- -- --
DC-II
CALVERT RESPONSIBLY INVESTED BALANCED
PORTFOLIO SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $1.417 $1.483 $1.391 $1.308 $1.138 $ 1.106 $ 1.000(i) -- -- -- -- -- -- --
Accumulation unit value
at end of period..... $1.817 $1.417 $1.483 $1.391 $1.308 $ 1.138 $ 1.106 -- -- -- -- -- -- --
Number of accumulation
units outstanding at
end of period (in
thousands)........... 923 693 498 317 187 94 18 -- -- -- -- -- -- --
DC-I
INTERNATIONAL
OPPORTUNITIES FUND
SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $1.181 $1.220 $0.924 $0.979 $0.877 $ 1.000(j) -- -- -- -- -- -- -- --
Accumulation unit value
at end of period..... $1.330 $1.181 $1.220 $0.924 $0.979 $ 0.877 -- -- -- -- -- -- -- --
Number accumulation
units outstanding at
end of period (in
thousands)........... 35,671 38,270 19,894 8,061 4,663 2,564 -- -- -- -- -- -- -- --
DC-II
INTERNATIONAL
OPPORTUNITIES FUND
SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $1.181 $1.220 $0.924 $0.979 $0.877 $ 1.000(j) -- -- -- -- -- -- -- --
Accumulation unit value
at end of period..... $1.329 $1.181 $1.220 $0.924 $0.979 $ 0.877 -- -- -- -- -- -- -- --
Number accumulation
units outstanding at
end of period (in
thousands)........... 4,520 3,640 1,495 553 220 52 -- -- -- -- -- -- -- --
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982
-------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DC-II
TCI ADVANTAGE FUND
SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $ 1.000(k)
Accumulation unit value
at end of period..... $ 1.051
Number accumulation
units outstanding at
end of period (in
thousands)........... 36
DC-II
TCI GROWTH FUND
SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $ 1.000(k)
Accumulation unit value
at end of period..... $ 1.081
Number accumulation
units outstanding at
end of period (in
thousands)........... 634
DC-II
FIDELITY VIP OVERSEAS
FUND SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $ 1.000(k)
Accumulation unit value
at end of period..... $ 1.030
Number accumulation
units outstanding at
end of period (in
thousands)........... 181
DC-II
FIDELITY VIP II ASSET
MANAGER FUND
SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $ 1.000(k)
Accumulation unit value
at end of period..... $ 1.087
Number accumulation
units outstanding at
end of period (in
thousands)........... 312
DC-II
FIDELITY VIP II
CONTRAFUND FUND
SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $ 1.000(k)
Accumulation unit value
at end of period..... $ 1.099
Number accumulation
units outstanding at
end of period (in
thousands)........... 1,808
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982
-------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DC-II
FIDELITY VIP GROWTH
FUND SUB-ACCOUNT
Accumulation unit value
at beginning of
period............... $ 1.000(k)
Accumulation unit value
at end of period..... $ 1.073
Number accumulation
units outstanding at
end of period (in
thousands)........... 2,055
</TABLE>
- ---------
(a) Inception date, August 3, (f) Inception date, April 2, 1984.
1982.
(b) Inception date, August 25, (g) Inception date, January 15,
1982. 1985.
(c) Inception date, June 29, 1982. (h) Inception date, June 3, 1987.
(d) Inception date, June 14, 1982. (i) Inception date, January 25,
1989.
(e) Inception date, May 2, 1983. (j) Inception date, July 2, 1990.
(k) Inception date, July 1, 1995.
12
<PAGE>
PERFORMANCE RELATED INFORMATION
DC-II may advertise certain performance related information concerning its
Sub-Accounts. Performance information about the Sub-Account is based on the
Sub-Account's past performance only and is no indication of future performance.
The Advisers Fund, Bond Fund, Calvert Responsibly Invested Balanced Fund,
Capital Appreciation Fund, Dividend and Growth Fund, Index Fund, International
Opportunities Fund, Money Market Fund, Mortgage Securities Fund, Stock Fund,
AMS/TCI Advantage Fund, AMS/TCI Growth 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 contingent deferred 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.
13
<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.
14
<PAGE>
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.
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
15
<PAGE>
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 18).
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.
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
16
<PAGE>
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 30 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.
17
<PAGE>
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 20).
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 20.) 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.
18
<PAGE>
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 20).
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 23).
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
23). If the contingent deferred sales charge has been experience rated
(see "Experience Rating of Contracts", page 25), 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 21 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 23) which modifications would have
become effective on or before that anniversary. Upon suspension, Contributions
to Participant's Individual Accounts will continue to be accepted on behalf of
existing Participants, subject to the Contract terms in effect prior to
suspension. Contributions will not be accepted on behalf of any new
Participants. Annuitants at the time of any suspension will continue to receive
their Annuity payments. The suspension of a Contract will not preclude a
Participant from applying an existing Participant's Individual Accounts under
DC-II to the purchase of Fixed or Variable Annuity benefits.
HOW DO I ELECT AN ANNUITY COMMENCEMENT DATE AND FORM OF ANNUITY?
Participants select an Annuity Commencement Date, usually between their 50th
birthday and the date they become age 70 1/2, and an Annuity option. The Annuity
Commencement Date may not be deferred
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<PAGE>
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 assure 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.
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,
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<PAGE>
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 23).
Other Annuity options may be made available from time to time.
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.
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
* 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.
- --------------------------------------------------------------------------------
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<PAGE>
amount of their SWO payments meet IRS Minimum Distribution Requirements. See
"Federal Tax Considerations" commencing on page 30 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 17) 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.
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.
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<PAGE>
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 25). 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>
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).
23
<PAGE>
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.
For assuming these risks Hartford Life presently charges 1.25% (estimated at
.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 25) 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 25).
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.
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<PAGE>
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 some or all of the following
factors: the total number of Participants, the sum of all Participants'
Individual Account values, the sum of all Participants' Individual Account
values which are allocated to funds managed by affiliates of Hartford Life,
anticipated present or future expense levels, anticipated present or future
commission levels, and whether or not Hartford Life is an exclusive annuity
Contract provider. Experience rating of a contract may be discontinued in the
event of a change in the applicable factors, 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 amount of, or waiving, the Transfer Fee, (4) reducing the mortality, expense
and administrative risk charge, 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 the
Separate Account. Experience rating credits have been given on certain cases.
Participants in contracts receiving experience rating credits will receive
notification regarding any reduction in charges or fees.
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.
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.
25
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
AND THE FUNDS
WHAT IS HARTFORD LIFE?
Hartford Life Insurance Company ("Hartford Life") was originally
incorporated under the laws of Massachusetts on June 5, 1902. It was
subsequently redomiciled to Connecticut. It is a stock life insurance company
engaged in the business of writing health and life insurance, both individual
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 5085, Hartford, CT 06102-5085.
Hartford Life is ultimately 100% owned by Hartford Fire Insurance Company,
one of the largest multiple lines insurance carriers in the United States. On
December 20, 1995, Hartford Fire Insurance Company became an independent,
publicly traded 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 is
rated AA+ by both Standard & 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 Calvert
Responsibly Invested Balanced Fund (Calvert Responsibly Invested Balanced
Portfolio) 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 above funds were incorporated
under the laws of the State of Maryland and are collectively referred to as the
"Hartford 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:
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.
26
<PAGE>
HARTFORD BOND FUND, INC.
To achieve maximum current income consistent with preservation of capital by
investing primarily in fixed-income securities.
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 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").*
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").
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.
CALVERT RESPONSIBLY INVESTED BALANCED FUND (CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO 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.
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.
* "STANDARD & POOR'S-REGISTERED TRADEMARK-", "S&P-REGISTERED TRADEMARK-", "S&P
500-REGISTERED TRADEMARK-", "STANDARD & POOR'S 500", AND "500" ARE TRADEMARKS
OF THE MCGRAW-HILL COMPANIES, INC. AND HAVE BEEN LICENSED FOR USE BY HARTFORD
LIFE INSURANCE COMPANY AND AFFILIATES. THE HARTFORD INDEX FUND, INC. ("INDEX
FUND") IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S
("S&P") AND S&P MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF
INVESTING IN THE INDEX FUND.
27
<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 Calvert 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.
28
<PAGE>
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 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 Calvert
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 64111. 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, 1995, certain HL group pension contracts held direct
interest in shares as follows:
<TABLE>
<CAPTION>
PERCENT OF
SHARES TOTAL SHARES
------------- ---------------
<S> <C> <C>
Hartford Advisers Fund, Inc................................. 11,995,216 0.55%
Hartford Capital Appreciation Fund, Inc..................... 9,760,293 1.58%
Hartford Index Fund, Inc.................................... 12,029,208 7.67%
Hartford International Opportunities Fund, Inc.............. 5,629,699 1.07%
Hartford Mortgage Securities Fund, Inc...................... 15,512,929 5.07%
Hartford Stock Fund, Inc.................................... 70,084 0.01%
</TABLE>
29
<PAGE>
FEDERAL TAX CONSIDERATIONS
WHAT ARE SOME OF THE FEDERAL TAX CONSEQUENCES WHICH AFFECT THESE CONTRACTS?
A. GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED AND THE TYPE OF PLAN UNDER
WHICH THE CONTRACT IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A PERSON,
EMPLOYER OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A CONTRACT DESCRIBED
HEREIN.
It should be understood that any detailed description of the federal income
tax consequences regarding the purchase of these Contracts cannot be made in
this Prospectus and that special tax rules may be applicable with respect to
certain purchase situations not discussed herein. For detailed information, a
qualified tax adviser should always be consulted. This discussion is based on
Hartford Life's understanding of current federal income tax laws as they are
currently interpreted.
B. HARTFORD LIFE AND SEPARATE ACCOUNT TWO
Separate Account Two is taxed as part of Hartford Life which is taxed as a
life insurance company in accordance with the Internal Revenue Code ("Code").
Accordingly, Separate Account Two will not be taxed as a "regulated investment
company" under Subchapter M of the Code. Investment income and any realized
capital gains on the assets of Separate Account Two are reinvested and are taken
into account in determining the value of the Accumulation and Annuity Units.
(See "How is the Accumulation Unit value determined?" commencing on page 17.) As
a result, such investment income and realized capital gains are automatically
applied to increase reserves under the contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by Separate Account Two with respect to qualified or non-qualified
contracts.
C. INFORMATION REGARDING TAX QUALIFIED PLANS
The tax rules applicable to tax qualified contract owners, including
restrictions on contributions and distributions, taxation of distributions and
tax penalties, vary according to the type of plan as well as the terms and
conditions of the plan itself. Various tax penalties may apply to contributions
in excess of specified limits, to distributions in excess of specified limits,
distributions which do not satisfy certain requirements and certain other
transactions with respect to qualified plans. Accordingly, this summary provides
only general information about the tax rules associated with use of the Contract
by a qualified plan. Contract owners, plan participants and beneficiaries are
cautioned that the rights and benefits of any person to benefits are controlled
by the terms and conditions of the plan regardless of the terms and conditions
of the Contract. Some qualified plans are subject to distribution and other
requirements which are not incorporated into Hartford Life's administrative
procedures. Owners, participants and beneficiaries are responsible for
determining that contributions, distributions and other transactions comply with
applicable law. Because of the complexity of these rules, owners, participants
and beneficiaries are encouraged to consult their own tax advisors as to
specific tax consequences.
1. QUALIFIED PENSION PLANS
Provisions of the Code permit eligible employers to establish pension or
profit sharing plans (described in Section 401(a) and 401(k), if applicable, and
exempt from taxation under Section 501(a) of the Code), and Simplified Employee
Pension Plans (described in Section 408(k)). Such plans are subject to
limitations on the amount that may be contributed, the persons who may be
eligible and the time when distributions must commence. Corporate employers
intending to use these contracts in connection with such plans should seek
competent advice.
2. TAX SHELTERED ANNUITIES UNDER SECTION 403(B)
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations specified
in Section 501(c)(3) of the Code to purchase annuity contracts, and, subject to
certain limitations, exclude such contributions from gross income. Generally,
such
30
<PAGE>
contributions may not exceed the lesser of $9,500 or 20% of the employees
"includable compensation" for his most recent full year of employment, subject
to other adjustments. Special provisions may allow some employees to elect a
different overall limitation.
Tax-sheltered annuity programs under Section 403(b) are subject to a
PROHIBITION AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO
CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT unless such
distribution is made:
(a) after the participating employee attains age 59 1/2;
(b) upon separation from service;
(c) upon death or disability, or
(d) in the case of hardship.
The above restrictions apply to distributions of employee contributions made
after December 31, 1988, earnings on those contributions, and earnings on
amounts attributable to employee contributions held as of December 31, 1988.
They do not apply to distributions of any employer or other after-tax
contributions, employee contributions made on or before December 31, 1988, and
earnings credited to employee contributions before December 31, 1988.
3. DEFERRED COMPENSATION PLANS UNDER SECTION 457
Employees and independent contractors performing services for such employers
may contribute on a before tax basis to the Deferred Compensation Plan of their
employer in accordance with the employer's plan and Section 457 of the Code.
Section 457 places limitations on contributions to Deferred Compensation Plans
maintained by a State ("State" means a State, a political sub-division of a
State, and an agency or instrumentality of a State or political sub-division of
a State) or other tax-exempt organization. Generally, the limitation is 33 1/3%
of includable compensation (25% of gross compensation) or $7,500, whichever is
less. The plan may also provide for additional "catch-up" deferrals during the
three taxable years ending before a Participant attains normal retirement age.
An employee electing to participate in a plan should understand that his
rights and benefits are governed strictly by the terms of the plan, that the
employer is legal owner of any contract issued with respect to the plan and that
deferred amounts will be subject to the claims of the employer's creditors. The
employer as owner of the contract(s) retains all voting and redemption rights
which may accrue to the contract(s) issued with respect to the plan. The
participating employee should look to the terms of his plan for any charges in
regard to participating therein other than those disclosed in this Prospectus.
Distributions from a Section 457 Deferred Compensation Plan are prohibited
unless made after the participating employee attains the age specified in the
plan, separates from service, dies, becomes permanently and totally disabled or
suffers an unforeseeable financial emergency. Present federal tax law does not
allow tax-free transfers or rollovers for amounts accumulated in a Section 457
plan except for transfers to other Section 457 plans in limited cases.
4. INDIVIDUAL RETIREMENT ANNUITIES UNDER SECTION 408
Section 408 of the Code permits eligible individuals to establish individual
retirement programs through the purchase of Individual Retirement Annuities
("IRAs"). IRAs are subject to limitations on the amount that may be contributed,
the contributions that may be deducted from taxable income, the persons who may
be eligible and the time when distributions may commence. Also, distributions
from certain qualified plans may be "rolled-over" on a tax-deferred basis into
an IRA.
5. TAX PENALTIES
Distributions from retirement plans are generally taxed under Section 72 of
the Code. Under these rules, a portion of each distribution may be excludable
from income. The excludable amount is the portion of the distribution which
bears the same ratio as the after-tax contributions bear to the expected return.
A. PREMATURE DISTRIBUTION
Distributions from a qualified plan before the Participant attains age
59 1/2 are generally subject to an additional tax equal to 10% of the taxable
portion of the distribution. The 10% penalty does not apply to distributions
made after the employee's death, on account of disability and distributions in
the form of a life annuity and, except in the case of an IRA, certain
distributions after separation from service at or after age 55
31
<PAGE>
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).
B. MINIMUM DISTRIBUTION TAX
If the amount distributed is less than the minimum required distribution for
the year, the Participant is subject to a 50% tax on the amount that was not
properly distributed.
An individual's interest in a retirement plan must generally be distributed
or begin to be distributed not later than April 1 of the calendar year in which
the individual attains age 70 1/2 ("required beginning date"). The required
beginning date with respect to certain government plans may be further deferred.
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 life expectancy 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. In
addition, minimum distribution incidental benefit rules may require a larger
annual distribution.
If an individual dies before reaching his or her required beginning date,
the individual's entire interest must generally be distributed within five years
of the individuals death. However, this rule will be deemed satisfied, if
distributions begin before the close of the calendar year following the
individual's death to a designated Beneficiary (or over a period not extending
beyond the life expectancy of the beneficiary). If the Beneficiary is the
individual's surviving spouse, distributions may be delayed until the individual
would have attained age 70 1/2.
If an individual dies after reaching his or her required beginning date or
after distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect at
the time of the individual's death.
C. EXCESS DISTRIBUTION TAX
If the aggregate distributions from all IRAs and certain other qualified
plans in a calendar year exceed the greater of (i) $150,000, or (ii) $112,500 as
indexed for inflation ($155,000 as of January 1, 1996), a penalty tax of 15% is
generally imposed on the excess portion of the distribution.
D. WITHHOLDING
Periodic distributions from a qualified plan lasting for a period of 10 or
more years are generally subject to voluntary income tax withholding. The
recipient of periodic distributions may generally elect not to have withholding
apply or to have income taxes withheld at a different rate by providing a
completed election form. Otherwise, the amount withheld on such distributions is
determined at the rate applicable to wages as if the recipient were married
claiming three exemptions.
Nonperiodic distributions from an IRA are subject to income tax withholding
at a flat 10% rate. The recipient may elect not to have withholding apply.
Nonperiodic distributions from other qualified plans are generally subject
to mandatory income tax withholding at the flat rate of 20% unless such
distributions are:
(1) the non-taxable portion of the distribution;
(2) required minimum distributions;
(3) eligible rollover distributions.
Eligible rollover distributions are direct payments to an IRA or to another
qualified employer plan.
Any distribution from plans described in Section 457 of the Code is subject
to regular wage withholding rules.
D. DIVERSIFICATION REQUIREMENTS
Section 817 of the Code provides that a variable annuity contract will not
be treated as an annuity contract for any period during which the investments
made by the separate account or underlying fund are not
32
<PAGE>
adequately diversified in accordance with regulations prescribed by the Treasury
Department. If a Contract is not treated as an annuity contract, the Contract
Owner will be subject to income tax on the annual increases in cash value.
The Treasury Department has issued diversification regulations which
generally require, among other things, that no more than 55% of the value of the
total assets of the segregated assets account underlying a variable contract is
represented by any one investment, no more than 70% is represented by any two
investment, 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.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may comply within a reasonable period and avoid the
taxation of contract income on an ongoing basis. However, either the company
or the Contract Owner must agree to pay the tax due for the period during
which the diversification requirements were not met.
Hartford Life monitors the diversification of investments in the separate
accounts and tests for diversification as required by the Code. Hartford Life
intends to administer all contracts subject to the diversification requirements
in a manner that will maintain adequate diversification.
E. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT
In order for a variable annuity contract to qualify for tax deferral, assets
in the segregated asset accounts supporting the variable contract must be
considered to be owned by the insurance company and not by the variable contract
owner. The Internal Revenue Service ("IRS") has issued several rulings which
discuss investor control. The IRS has ruled that incidents of ownership by the
contract owner, such as the ability to select and control investments in a
separate account, will cause the contract owner to be treated as the owner of
the assets for tax purposes.
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted that the temporary regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary regulations
provide that in appropriate cases a segregated asset account may include
multiple sub-accounts, but do not specify the extent to which policyholders may
direct their investments to particular sub-accounts without being treated as the
owners of the underlying assets. Guidance on this and other issues will be
provided in regulations or revenue rulings under Section 817(d), relating to the
definition of variable contract." The final regulations issued under Section 817
did not provide guidance regarding investor control, and as of the date of this
prospectus, no other such guidance has been issued. Further, Hartford Life does
not know if or in what form such guidance will be issued. In addition, although
regulations are generally issued with prospective effect, it is possible that
regulations may be issued with retroactive effect. Due to the lack of specific
guidance regarding the issue of investor control, there is necessarily some
uncertainty regarding whether a Contract Owner could be considered the owner of
the assets for tax purposes. Hartford Life reserves the right to modify the
contracts, as necessary, to prevent Contract Owners from being considered the
owners of the assets in the separate accounts.
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.
G. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to annuity purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will generally be
subject to U.S. federal income tax and withholding on annuity distributions at a
30% rate, unless a
33
<PAGE>
lower treaty rate applies. In addition, purchasers may be subject to state
premium tax, other state and/or municipal taxes, and taxes that may be imposed
by the purchaser's country of citizenship or residence. Prospective purchasers
are advised to consult with a qualified tax advisor regarding U.S., state, and
foreign taxation with respect to an annuity purchase.
MISCELLANEOUS
WHAT ARE MY VOTING RIGHTS?
Hartford Life shall notify the Contractholder of any Fund shareholders'
meeting if the shares held for the Contractholder's accounts may be voted at
such meetings. Hartford Life shall also send proxy materials and a form of
instruction by means of which the Contractholder can instruct Hartford Life with
respect to the voting of the Fund shares held for the Contractholder's account.
In connection with the voting of Fund shares held by it, Hartford Life shall
arrange for the handling and tallying of proxies received from Contractholders.
Hartford Life as such, shall have no right, except as hereinafter provided, to
vote any Fund shares held by it hereunder which may be registered in its name or
the names of its nominees. Hartford Life will, however, vote the Fund shares
held by it in accordance with the instructions received from the Contractholders
for whose accounts the Fund shares are held. If a Contractholder desires to
attend any meeting at which shares held for the Contractholder's benefit may be
voted, the Contractholder may request Hartford Life to furnish a proxy or
otherwise arrange for the exercise of voting rights with respect to the Fund
shares held for such Contractholder's account. In the event that the
Contractholder gives no instructions or leaves the manner of voting
discretionary, Hartford Life will vote such shares of the appropriate Fund,
including any of its own shares, in the same proportion as shares of that Fund
for which instructions have been received.
Every Participant under a Contract issued with respect to DC-II who has a
full (100%) vested interest under a group Contract, shall receive proxy material
and a form of instruction by which Participants may instruct the Contractholder
with respect to the number of votes attributable to his individual participation
under a group Contract.
A Contractholder or Participant, as appropriate, is entitled to one full or
fractional vote for each full or fractional Accumulation or Annuity Unit owned.
The Contractholder has voting rights throughout the life of the Contract. The
vested Participant has voting rights for as long as participation in the
Contract continues. Voting rights attach only to interests under DC-II.
During the Annuity period under a Contract the number of votes will decrease
as the assets held to fund Annuity benefits decrease.
WILL OTHER CONTRACTS BE PARTICIPATING IN THE SEPARATE ACCOUNT?
In addition to the Contracts described in this Prospectus, other forms of
group annuities are sold providing benefits which vary in accordance with the
investment experience of the Separate Account.
HOW ARE THE CONTRACTS SOLD?
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account.
HSD is a wholly-owned subsidiary of Hartford Life. The principal business
address of HSD is the same as Hartford Life.
The securities will be sold by salespersons of 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 HSD.
HSD is registered with the Commission under the Securities Exchange Act of
1934 as a Broker-Dealer and is 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% of initial Contributions and .50% of
all subsequent Contributions. Sales compensation may be reduced.
34
<PAGE>
WHO IS THE CUSTODIAN OF THE SEPARATE ACCOUNTS' ASSETS?
Hartford Life is the custodian of the Separate Accounts' assets.
ARE THERE ANY MATERIAL LEGAL PROCEEDINGS AFFECTING THE SEPARATE ACCOUNTS?
Counsel with respect to Federal laws and regulations applicable to the issue
and sale of the contracts and with respect to Connecticut law is Lynda Godkin,
Esquire, Associate General Counsel and Secretary, Hartford Life Insurance
Companies, P.O. Box 2999, Hartford, CT 06104-2999.
ARE YOU RELYING ON ANY EXPERTS AS TO ANY PORTION OF THIS PROSPECTUS?
The financial statements and schedules included in this Prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance 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 the adoption of new accounting
standards changing the methods of accounting for debt and equity securities. The
principal business address of Arthur Andersen LLP is One Financial Plaza,
Hartford, CT 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
35
<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>
36
<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: __________________________________________________________________________
37
<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)
38
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO (DC VARIABLE ACCOUNT II)
Group Variable Annuity Contracts Issued by
Hartford Life Insurance Company
With Respect to DC-II
This Statement of Additional Information is not a Prospectus. The information
contained herein should be read in conjunction with the Prospectus.
To obtain a Prospectus, send a written request to Hartford Life Insurance
Company, Attn: RPVA Administration, P.O. Box 2999, Hartford, CT 06104-2999.
Date of Prospectus: May 1, 1996
Date of Statement of Additional Information: May 1, 1996
33-59541
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY . . . . . . . . . . .
SAFEKEEPING OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . .
DISTRIBUTION OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . .
ANNUITY PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Annuity Payments. . . . . . . . . . . . . . . . . . . . . .
B. Electing the Annuity Commencement Date and Form of Annuity.
C. Optional Annuity Forms. . . . . . . . . . . . . . . . . . .
OPTION 1: Life Annuity . . . . . . . . . . . . . . . . . .
OPTION 2: Life Annuity With 120, 180 or 240 Monthly
Payments Certain . . . . . . . . . . . . . . . .
OPTION 3: Unit Refund Life Annuity . . . . . . . . . . . .
OPTION 4: Joint and Last Survivor Annuity. . . . . . . . .
OPTION 5: Payments for a Designated Period . . . . . . . .
CALCULATION OF YIELD AND RETURN. . . . . . . . . . . . . . . . . . .
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company ("Hartford Life") was originally incorporated
under the laws of Massachusetts on June 5, 1902. It was subsequently
redomiciled to Connecticut. It is a stock life insurance company engaged in the
business of writing health and life insurance, both individual 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. On
December 20, 1995, Hartford Fire Insurance Company became an independent,
publicly traded 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 is
rated AA+ by both Standard & Poor's and Duff and Phelps on the basis of its
claims paying ability.
As of December 31, 1995, certain Hartford Life group pension contracts held
direct interest in shares as follows:
Percent of
Shares Total Shares
Hartford Advisers Fund, Inc........................ 11,995,216 0.55%
Hartford Capital Appreciation Fund, Inc............ 9,760,293 1.58%
Hartford Index Fund, Inc........................... 12,029,208 7.67%
Hartford International Opportunities Fund, Inc..... 5,629,699 1.07%
Hartford Mortgage Securities Fund, Inc............. 15,512,929 5.07%
Hartford Stock Fund, Inc........................... 70,084 0.01%
SAFEKEEPING OF ASSETS
Hartford Life holds the assets of the Separate Account in its custody for
safekeeping and performs those services normally performed by a custodian.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, One Financial Plaza, Hartford, Connecticut 06103,
independent public accountants, will perform an annual audit of the Separate
Account. 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 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 report. Reference is made to
said report of Hartford Life Insurance Company (the depositor), which
includes an explanatory paragraph with respect to the adoption of new
accounting standards changing the methods of accounting for debt and equity
securities.
<PAGE>
-2-
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is a wholly-owned subsidiary of Hartford Life. The principal business address
of HSD is the same as Hartford Life.
The securities will be sold by salespersons of 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 HSD.
HSD is registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as a Broker-Dealer and is a member of the
National Association of Securities Dealers, Inc. ("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.
Prior to June 26, 1995, the Principal Underwriter for the Separate Account was
Hartford Equity Sales Company, Inc., an NASD member Broker-Dealer.
The offering of the Separate Account contracts is continuous.
ANNUITY PERIOD
A. Annuity Payments
Variable Annuity payments are determined on the basis of (1) a mortality
table set forth in the contracts which reflects the age of the Annuitant
and the type of Annuity payment option selected, and (2) the investment
performance of the investment medium selected. Fixed Annuity payments will
be no less than those calculated at rates based on the annuity tables
contained in the contracts.
The amount of the Annuity payments will not be affected by adverse
mortality experience or by an increase in expenses in excess of the expense
deduction for which provision has been made (see "Charges Under the
Contracts," in the Prospectus).
The Annuitant will be paid the value of a fixed number of Annuity Units
each month. The value of such units and the amounts of the monthly
Variable Annuity payments will, however, reflect investment income
occurring after retirement, and thus the payments will vary with the
investment experience of the Fund shares selected.
<PAGE>
-3-
Illustration of Calculation of Annuity Unit Value
-------------------------------------------------
1. Net Investment Factor for period .000498
2. Adjustment for 4% Assumed Rate of Net Investment Return .999892
3. 2x(1+1.000000) 1.000390
4. Annuity Unit value, beginning of period .995995
5. Annuity Unit value, end of period (3x4) .996383
B. Electing the Annuity Commencement Date and Form of Annuity
Depending on the Contract involved, the Contract Owner or Participant
selects an Annuity Commencement Date, usually between a Participant's 50th
and 75th birthdays, and an Annuity option. The Annuity Commencement Date
may not be deferred beyond the Participant's 75th birthday. The Annuity
Commencement Date and/or the Annuity option may be changed from time to
time, but any such change must be made at least 30 days prior to the date
on which Annuity payments are scheduled to begin. Annuity payments will be
made on the first business day of each month.
The contracts contain the five optional Annuity forms described below,
which may be selected on either a Fixed or Variable Annuity basis, or a
combination thereof. If a Contract Owner does not elect otherwise,
Hartford Life reserves the right to begin Annuity payments at age 65 under
Option 2 with 120 monthly payments certain.
When an Annuity is purchased for an Annuitant, unless otherwise specified,
DC-II Accumulation Unit values will be applied to provide a Variable
Annuity under DC-II.
The minimum Annuity payment is $20. No election may be made which results
in a first payment of less than $20. If at any time Annuity payments are
or become less than $20, Hartford Life has the right to change the
frequency of payment to such intervals as will result in payments of at
least $20.
C. Optional Annuity Forms
OPTION 1: Life Annuity
A life Annuity is an Annuity payable during the lifetime of the Annuitant
and terminating with the last monthly payment preceding the death of the
Annuitant. Life Annuity Options (Options 1-4) 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 died prior to the due date of the second Annuity
payment, two if he died before the due date of the third Annuity payment,
etc.
<PAGE>
-4-
* OPTION 2: Life Annuity with 120, 180 or 240 Monthly Payments Certain
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that if, at the death of the Annuitant,
payments have been made for less than 120, 180 or 240 months, as elected,
then the present value as of the date of the Participant's death at the
current dollar amount at the date of death of any remaining guaranteed
monthly payments will be paid in one sum to the Beneficiary or
Beneficiaries designated unless other provisions will have been made and
approved by Hartford Life.
Illustration of Annuity Payments
Individual Age 65, Life Annuity
With 120 Payments Certain
-------------------------
1. Net amount applied 13,978.25
2. Initial monthly income per $1,000 of payment applied 5.93
3. Initial monthly payment (1x2/1,000) 82.89
4. Annuity Unit value .953217
5. Number of monthly Annuity Units (3DIVIDED BY4) 86.959
6. Assume Annuity Unit value for second month equal to .963723
7. Second monthly payment (6x5) 83.80
8. Assume Annuity Unit value for third month equal to .964917
9. Third month payment (8x5) 83.91
For the purpose of this illustration, purchase is assumed to have been made
on the 5th business day preceding the first payment date. In determining
the second and subsequent payments the annuity unit value of the 5th
business day preceding the annuity due date is used.
* OPTION 3: Unit Refund Life Annuity
This Annuity option is an Annuity payable monthly during the lifetime of
the Annuitant terminating with the last payment due prior to the death of
the Annuitant except that an additional payment will be made to the
Beneficiary or Beneficiaries if (a) below exceeds (b) below:
total amount applied under the option
at the Annuity Commencement Date
(a) = _________________________________________
Annuity Unit value at the Annuity
Commencement Date
(b) = number of Annuity Units represented number of monthly
by monthly Annuity payment made X Annuity payments made
<PAGE>
-5-
The amount of the additional payments will be determined by multiplying
such excess by the Annuity Unit value as of the date that proof of death is
received by Hartford Life.
For example, if $20,000 were applied to the purchase of an Annuity under
this option, the value of an Annuity Unit was $1.25 on the Annuity
Commencement Date, the number of Annuity Units represented by each monthly
payment was 91.68 (the number applicable to an individual electing this
option to commence at age 65), 60 monthly Annuity payments were made prior
to the date of death, and the value of an Annuity Unit on the date of
receipt of proof of an Annuitant's death was $1.50, the amount paid to the
Beneficiary would be $15,748.80, computed as follows:
$20,000 (91.68 x 60) = 10,499.200
------- -
$1.25
or
16,000.000 - 5,500.800 = 10,499.200
10,499.200 x $1.50 = $15,748.80
OPTION 4: Joint and Last Survivor Annuity
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of
the survivor, ceasing with the last payment prior to the death of the
survivor.
It would be possible under this Option for an Annuitant and designated
second person in the event of the common or simultaneous death of the
parties to receive only one payment in the event of death prior to the due
date for the second payment and so on.
* OPTION 5: Payments for a Designated Period
An amount payable monthly for the number of years. Under most group
contracts, the minimum number of years is three.
In the event of the Annuitant's death prior to the end of the designated
period, any then remaining balance of proceeds will be paid in one sum to
the Beneficiary or Beneficiaries designated unless other provisions will
have been made and approved by Hartford Life.
Option 5 is an option that does not involve life contingencies and thus no
mortality guarantee.
Surrenders under Option 5 will be subject to the limitations set forth in
the Contract and any applicable contingent deferred sales charges (see "How
do I select an Annuity Commencement Date and Form of Annuity?" in the
Prospectus.)
<PAGE>
-6-
* On Qualified Plans, Options 2, 3 and 5 are available only if the guaranteed
payment period is less than the life expectancy of the Annuitant at the
time the option becomes effective. Such life expectancy shall be computed
on the basis of the mortality table prescribed by the Internal Revenue
Service, or if none is prescribed, the mortality table then in use by
Hartford Life.
CALCULATION OF YIELD AND RETURN
YIELD OF THE HVA MONEY MARKET FUND SUB-ACCOUNT. As summarized in the Prospectus
under the heading "Performance Related Information," the yield of the Money
Market Fund Sub-Account for a seven-day period (the "base period") will be
computed by determining the "net change in value" (calculated as set forth
below) of a hypothetical account having a balance of one share at the beginning
of the period, dividing the net change in account value by the value of the
account at the beginning of the base period to obtain the base period return,
and multiplying the base period return by 365/7 with the resulting yield figure
carried to the nearest hundredth of one percent. Net changes in value of a
hypothetical account will include net investment income of the account (accrued
daily dividends as declared by the underlying funds, less daily expense and
contract charges of the account) for the period, but will not include realized
gains or losses or unrealized appreciation or depreciation on the underlying
fund shares.
The Money Market Fund Sub-Account yield and effective yield will vary in
response to fluctuations in interest rates and in the expenses of the
Sub-Account.
The current yield and effective yield reflect recurring charges on the Separate
Account level, including the maximum Annual Contract Fee.
Money Market Fund Sub-Account
The yield and effective yield for the seven day period ending December 31, 1995
is as follows:
($30 Annual Contract Fee)
Yield 3.89%
Effective Yield 3.97%
YIELDS OF HARTFORD BOND FUND AND HARTFORD MORTGAGE SECURITIES FUND SUB-ACCOUNTS.
As summarized in the Prospectus under the heading "Performance Related
Information," yields of these two Sub-Accounts will be computed by annualizing a
recent month's net investment income, divided by a Fund share's net asset value
on the last trading day of that month. Net changes in the value of a
hypothetical account will assume the change in the underlying mutual funds "net
asset value per share" for the same period in addition to the daily expense
charged assessed, at the sub-account level for the respective period. The Bond
Fund and Mortgage Securities Fund Sub-Accounts' yields will vary from time to
time depending upon market conditions and, the composition of the underlying
funds' portfolios. Yield should also be considered relative to
<PAGE>
-7-
changes in the value of the Sub-Accounts' shares and to the relative risks
associated with the investment objectives and policies of the Bond Fund and
Mortgage Securities Fund.
The yield reflects recurring charges on the Separate Account level, including
the Annual Contract Fee.
The Bond Fund and Mortgage Securities Fund Sub-Accounts' yield will vary from
time to time depending upon market conditions and, the composition of the
underlying funds' portfolios. Yield should also be considered relative to
changes in the value of the Sub-Accounts' shares and to the relative risks
associated with the investment objectives and policies of the Funds.
Bond Fund Sub-Account
Yield calculations of the Sub-Account used for illustration purposes reflect the
interest earned by the Sub-Account, less applicable asset charges assessed
against a Contract Owner's contract over the base period. The following is the
method used to determine the yield for the 30 day period ended December 31,
1995.
Example:
Current Yield Formula for the Sub-Account 2*[((A-B)/(C*D) + 1)6 - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the period
that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the period.
Yield = 5.15%
Mortgage Securities Fund Sub-Account
Yield calculations of the Sub-Account used for illustration purposes reflect the
interest earned by the Sub-Account, less applicable asset charges assessed
against a Contract Owner's account over the base period. The following is the
method used to determine the yield for the 30 days period ended December 31,
1995.
Example:
Current Yield Formula for the Sub-Account 2*[((A-B)/(C*D) + 1)6 - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the period
that were
<PAGE>
-8-
entitled to receive dividends.
D = The maximum offering price per unit on the last day of the period.
Yield = 5.58%
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
The method of calculating yields described above for these Sub-Accounts differs
from the method used by the Sub-Accounts prior to May 1, 1988. The denominator
of the fraction used to calculate yield was previously the average unit value
for the period calculated. That denominator will hereafter be the unit value of
the Sub-Accounts on the last trading day of the period calculated.
CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the heading
"Performance Related Information", total return is a measure of the change in
value of an investment in a Sub-Account over the period covered. The formula
for total return used herein includes three steps: (1) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of units owned at the end of the period by the unit
value per unit on the last trading day of the period; (2) assuming redemption at
the end of the period and deducting any applicable contingent deferred sales
charge and (3) dividing this account value for the hypothetical investor by the
initial $1,000 investment and annualizing the result for periods of less than
one year. Total return will be calculated for one year, five years and ten
years or some other relevant periods if a Sub-Account has not been in existence
for at least ten years.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. Each Sub-Account may from time to time include its
total return in advertisements or in information furnished to present or
prospective shareholders. Each Sub-Account may from time to time include its
yield and total return in advertisements or information furnished to present or
prospective shareholders. Each Sub-Account may from time to time include in
advertisements its total return (and yield in the case of certain Sub-Accounts)
the ranking of those performance figures relative to such figures for groups of
other annuities analyzed by Lipper Analytical Services as having the same
investment objectives.
The total return and yield may also be used to compare the performance of the
Sub-Accounts against certain widely acknowledged outside standards or indices
for stock and bond market performance. The Standard & Poor's Composite Index of
500 Stocks (the "S&P 500") is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of common stocks
of companies listed on the New York Stock Exchange, although the common stocks
of a few companies listed on the American Stock Exchange or traded
over-the-counter are included. The 500 companies represented include 400
industrial, 60 transportation and 40 financial services concerns. The S&P 500
represents about 80% of the market value of all issues
<PAGE>
-9-
traded on the New York Stock Exchange.
The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market value-weighted and
unmanaged index showing the changes in the aggregate market value of
approximately 3,500 stocks relative to the base measure of 100.00 on February 5,
1971. The NASDAQ Index is composed entirely of common stocks of companies
traded over-the-counter and often through the National Association of Securities
Dealers Automated Quotations ("NASDAQ") system. Only those over-the-counter
stocks having only one market maker or traded on exchanges are excluded.
The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency.
The manner in which total return and yield will be calculated for public use is
described above. The following table summarizes the calculation of total return
and yield for each Sub-Account, where applicable, through December 31, 1995.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO AND TO THE
OWNERS OF UNITS OF INTEREST THEREIN:
We have audited the accompanying statement of assets & liabilities of Hartford
Life Insurance Company Separate Account Two (the Account) as of December 31,
1995, and the related statement of operations for the year then ended and
statements of changes in net assets for each of the two years in the period
then ended. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hartford Life Insurance
Company Separate Account Two as of December 31, 1995, the results of its
operations for the year then ended and the changes in its net assets for each
of the two years in the period then ended in conformity with generally accepted
accounting principles.
Hartford, Connecticut
February 19, 1996 Arthur Andersen LLP
<PAGE>
Separate Account Two
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 205,553,955
Cost $ 209,932,335
Market Value......... $ 211,362,910 -- --
Hartford Stock Fund,
Inc.
Shares 273,568,580
Cost $ 749,838,526
Market Value......... -- $ 964,881,850 --
HVA Money Market Fund,
Inc.
Shares 188,634,435
Cost $ 188,634,435
Market Value......... -- -- $188,634,435
Hartford Advisers Fund,
Inc.
Shares 1,203,621,268
Cost $1,966,152,609
Market Value......... -- -- --
Hartford U.S.
Government Money
Market Fund, Inc.
Shares 1,541,454
Cost $ 1,541,454
Market Value......... -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 308,044,714
Cost $ 855,351,988
Market Value......... -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 206,683,299
Cost $ 222,736,253
Market Value......... -- -- --
Hartford Index Fund,
Inc.
Shares 81,559,076
Cost $ 121,425,129
Market Value......... -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 251,443,857
Cost $ 282,513,031
Market Value......... -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 87,758,037
Cost $ 98,018,237
Market Value......... -- -- --
Dividends receivable... -- -- --
Due from Hartford Life
Insurance Company..... 14,147,225 3,717,563 28,444
Receivable from fund
shares sold........... 32,125 23,525 26,370,639
--------------- ------------- ------------
Total Assets........... 225,542,260 968,622,938 215,033,518
--------------- ------------- ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 32,227 23,557 26,365,647
Payable for fund shares
purchased............. 14,147,211 3,717,611 28,449
--------------- ------------- ------------
Total Liabilities...... 14,179,438 3,741,168 26,394,096
--------------- ------------- ------------
Net Assets (variable
annuity contract
liabilities).......... $ 211,362,822 $ 964,881,770 $188,639,422
--------------- ------------- ------------
--------------- ------------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
1
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT CAPITAL MORTGAGE
ADVISERS FUND MONEY MARKET FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- -------------------- ------------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 205,553,955
Cost $ 209,932,335
Market Value......... -- -- -- -- --
Hartford Stock Fund,
Inc.
Shares 273,568,580
Cost $ 749,838,526
Market Value......... -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 188,634,435
Cost $ 188,634,435
Market Value......... -- -- -- -- --
Hartford Advisers Fund,
Inc.
Shares 1,203,621,268
Cost $1,966,152,609
Market Value......... $2,357,220,033 -- -- -- --
Hartford U.S.
Government Money
Market Fund, Inc.
Shares 1,541,454
Cost $ 1,541,454
Market Value......... -- $1,541,454 -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 308,044,714
Cost $ 855,351,988
Market Value......... -- -- $1,074,971,315 -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 206,683,299
Cost $ 222,736,253
Market Value......... -- -- -- $221,411,551 --
Hartford Index Fund,
Inc.
Shares 81,559,076
Cost $ 121,425,129
Market Value......... -- -- -- -- $165,395,281
Hartford International
Opportunities Fund,
Inc.
Shares 251,443,857
Cost $ 282,513,031
Market Value......... -- -- -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 87,758,037
Cost $ 98,018,237
Market Value......... -- -- -- -- --
Dividends receivable... -- -- -- -- --
Due from Hartford Life
Insurance Company..... 2,347,036 71,753 11,230,672 51,950 101,649
Receivable from fund
shares sold........... 4,055 1,399 -- 29,773 324
--------------- ----------- ------------------ --------------- ------------
Total Assets........... 2,359,571,124 1,614,606 1,086,201,987 221,493,274 165,497,254
--------------- ----------- ------------------ --------------- ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 4,060 1,110 -- 31,313 280
Payable for fund shares
purchased............. 2,349,274 71,620 11,230,335 46,223 101,602
--------------- ----------- ------------------ --------------- ------------
Total Liabilities...... 2,353,334 72,730 11,230,335 77,536 101,882
--------------- ----------- ------------------ --------------- ------------
Net Assets (variable
annuity contract
liabilities).......... $2,357,217,790 $1,541,876 $1,074,971,652 $221,415,738 $165,395,372
--------------- ----------- ------------------ --------------- ------------
--------------- ----------- ------------------ --------------- ------------
<CAPTION>
INTERNATIONAL
OPPORTUNITIES DIVIDEND AND
FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
----------------- -------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Stock Fund,
Inc.
Shares
Cost
Market Value......... -- --
HVA Money Market Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Advisers Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford U.S.
Government Money
Market Fund, Inc.
Shares
Cost
Market Value......... -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Mortgage
Securities Fund, Inc.
Shares
Cost
Market Value......... -- --
Hartford Index Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford International
Opportunities Fund,
Inc.
Shares
Cost
Market Value......... $328,307,731 --
Hartford Dividend and
Growth Fund, Inc.
Shares
Cost
Market Value......... -- $115,579,090
Dividends receivable... -- --
Due from Hartford Life
Insurance Company..... 35,397 217,629
Receivable from fund
shares sold........... 75,096 108
----------------- -------------
Total Assets........... 328,418,224 115,796,827
----------------- -------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 74,853 104
Payable for fund shares
purchased............. 35,406 217,519
----------------- -------------
Total Liabilities...... 110,259 217,623
----------------- -------------
Net Assets (variable
annuity contract
liabilities).......... $328,307,965 $115,579,204
----------------- -------------
----------------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
CALVERT
RESPONSIBLY SMITH BARNEY
INVESTED DAILY
BALANCED INTERNATIONAL DIVIDEND
PORTFOLIO ADVISERS FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments:
Calvert Responsibly
Invested Balanced
Portfolio
Shares 1,035,297
Cost $1,571,868
Market Value......... $ 1,763,111 -- --
Hartford International
Advisers Fund, Inc.
Shares 6,850,619
Cost $7,419,698
Market Value......... -- $ 7,597,541 --
Smith Barney Daily
Dividend Fund, Inc.
Shares 568,219
Cost $ 568,219
Market Value......... -- -- $ 568,219
Smith Barney
Appreciation Fund,
Inc.
Shares 12,475
Cost $ 85,820
Market Value......... -- -- --
Smith Barney Government
and Agencies Fund
Shares 42,393
Cost $ 42,393
Market Value......... -- -- --
TCI Advantage Fund
Shares 7,580
Cost $ 45,726
Market Value......... -- -- --
TCI Growth Fund
Shares 57,488
Cost $ 686,665
Market Value......... -- -- --
Fidelity VIP Overseas
Fund
Shares 10,961
Cost $ 183,433
Market Value......... -- -- --
Fidelity VIP Asset
Manager
Shares 21,487
Cost $ 320,417
Market Value......... -- -- --
Fidelity VIP II
Contrafund Fund
Shares 144,097
Cost $1,968,435
Market Value......... -- -- --
Fidelity VIP Growth
Fund
Shares 75,494
Cost $2,238,863
Market Value......... -- -- --
Dividends receivable... 31,889 126,971 1,128
Receivable from fund
shares sold........... -- 5 1,398
--------------- ------------- ------------
Total Assets........... 1,795,000 7,724,517 570,745
--------------- ------------- ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- 5 1,398
Payable for fund shares
purchased............. 31,497 126,974 --
--------------- ------------- ------------
Total Liabilities...... 31,497 126,979 1,398
--------------- ------------- ------------
Net Assets (variable
annuity contract
liabilities).......... $ 1,763,503 $ 7,597,538 $ 569,347
--------------- ------------- ------------
--------------- ------------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
<PAGE>
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY FIDELITY VIP
APPRECIATION GOVERNMENT AND TCI TCI OVERSEAS
FUND AGENCIES FUND ADVANTAGE FUND GROWTH FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- -------------------- ------------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Calvert Responsibly
Invested Balanced
Portfolio
Shares 1,035,297
Cost $1,571,868
Market Value......... -- -- -- -- --
Hartford International
Advisers Fund, Inc.
Shares 6,850,619
Cost $7,419,698
Market Value......... -- -- -- -- --
Smith Barney Daily
Dividend Fund, Inc.
Shares 568,219
Cost $ 568,219
Market Value......... -- -- -- -- --
Smith Barney
Appreciation Fund,
Inc.
Shares 12,475
Cost $ 85,820
Market Value......... $ 148,420 -- -- -- --
Smith Barney Government
and Agencies Fund
Shares 42,393
Cost $ 42,393
Market Value......... -- $ 42,393 -- -- --
TCI Advantage Fund
Shares 7,580
Cost $ 45,726
Market Value......... -- -- $ 46,921 -- --
TCI Growth Fund
Shares 57,488
Cost $ 686,665
Market Value......... -- -- -- $ 693,311 --
Fidelity VIP Overseas
Fund
Shares 10,961
Cost $ 183,433
Market Value......... -- -- -- -- $ 186,893
Fidelity VIP Asset
Manager
Shares 21,487
Cost $ 320,417
Market Value......... -- -- -- -- --
Fidelity VIP II
Contrafund Fund
Shares 144,097
Cost $1,968,435
Market Value......... -- -- -- -- --
Fidelity VIP Growth
Fund
Shares 75,494
Cost $2,238,863
Market Value......... -- -- -- -- --
Dividends receivable... -- 91 5 4,810 20,273
Receivable from fund
shares sold........... 632 85 -- -- --
--------------- ------- ------- --------------- ------------
Total Assets........... 149,052 42,569 46,926 698,121 207,166
--------------- ------- ------- --------------- ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 618 100 -- -- --
Payable for fund shares
purchased............. -- -- 5 4,699 20,273
--------------- ------- ------- --------------- ------------
Total Liabilities...... 618 100 5 4,699 20,273
--------------- ------- ------- --------------- ------------
Net Assets (variable
annuity contract
liabilities).......... $ 148,434 $ 42,469 $ 46,921 $ 693,422 $ 186,893
--------------- ------- ------- --------------- ------------
--------------- ------- ------- --------------- ------------
<CAPTION>
FIDELITY VIP
FIDELITY VIP II II
ASSET MANAGER CONTRAFUND FIDELITY VIP
FUND FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ------------- -------------
<S> <C> <C> <C>
ASSETS:
Investments:
Calvert Responsibly
Invested Balanced
Portfolio
Shares
Cost
Market Value......... -- -- --
Hartford International
Advisers Fund, Inc.
Shares
Cost
Market Value......... -- -- --
Smith Barney Daily
Dividend Fund, Inc.
Shares
Cost
Market Value......... -- -- --
Smith Barney
Appreciation Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Smith Barney Government
and Agencies Fund
Shares
Cost
Market Value......... -- -- --
TCI Advantage Fund
Shares
Cost
Market Value......... -- -- --
TCI Growth Fund
Shares
Cost
Market Value......... -- -- --
Fidelity VIP Overseas
Fund
Shares
Cost
Market Value......... -- -- --
Fidelity VIP Asset
Manager
Shares
Cost
Market Value......... $ 339,277 -- --
Fidelity VIP II
Contrafund Fund
Shares
Cost
Market Value......... -- $ 1,985,660 --
Fidelity VIP Growth
Fund
Shares
Cost
Market Value......... -- -- $ 2,204,418
Dividends receivable... 323 5,820 14,634
Receivable from fund
shares sold........... -- -- --
-------- ------------- -------------
Total Assets........... 339,600 1,991,480 2,219,052
-------- ------------- -------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- --
Payable for fund shares
purchased............. 322 5,787 14,566
-------- ------------- -------------
Total Liabilities...... 322 5,787 14,566
-------- ------------- -------------
Net Assets (variable
annuity contract
liabilities).......... $ 339,278 $ 1,985,693 $ 2,204,486
-------- ------------- -------------
-------- ------------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ --------- --------------
DEFERRED ANNUITY CONTRACTS IN THE ACCUMULATION
PERIOD:
<S> <C> <C> <C>
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Qualified 1.00%....................... 330,535 $3.614932 $ 1,194,862
Bond Fund Non-Qualified 1.00%................... 2,376,794 3.559970 8,461,314
Bond Fund 1.25%................................. 99,377,458 1.880012 186,830,814
Bond Fund .25%.................................. 166,334 1.239350 206,147
Stock Fund Qualified 1.00%...................... 939,764 5.545871 5,211,810
Stock Fund Non-Qualified 1.00%.................. 4,081,077 5.303060 21,642,195
Stock Fund 1.25%................................ 285,640,499 2.887494 824,785,225
Stock Fund .25%................................. 1,618,784 1.502213 2,431,758
Money Market Fund Qualified 1.00%............... 1,177,896 2.367583 2,788,767
Money Market Fund Non-Qualified 1.00%........... 10,104,811 2.368697 23,935,237
Money Market Fund 1.25%......................... 102,634,648 1.527530 156,777,504
Money Market Fund .25%.......................... 456,402 1.122937 512,510
Advisers Fund Qualified 1.00%................... 4,044,765 3.760737 15,211,298
Advisers Fund Non-Qualified 1.00%............... 13,795,777 3.760737 51,882,290
Advisers Fund 1.25%............................. 888,803,486 2.523174 2,242,605,847
Advisers Fund .25%.............................. 1,771,831 1.393346 2,468,774
U.S. Government Money Market Fund Qualified
1.00%.......................................... 19,616 1.892119 37,114
U.S. Government Money Market Fund 1.25%......... 47,846 1.468327 70,254
Capital Appreciation Fund Qualified 1.00%....... 891,369 5.633469 5,021,500
Capital Appreciation Fund Non-Qualified 1.00%... 3,858,935 5.630910 21,729,315
Capital Appreciation Fund 1.25%................. 292,670,757 3.364100 984,573,694
Capital Appreciation Fund .25%.................. 3,995,733 1.602738 6,404,113
Mortgage Securities Fund Qualified 1.00%........ 1,001,153 2.398054 2,400,819
Mortgage Securities Fund Non-Qualified 1.00%.... 9,957,413 2.398054 23,878,416
Mortgage Securities Fund 1.25%.................. 101,881,342 1.877823 191,315,127
Mortgage Securities Fund .25%................... 135,236 1.202163 162,576
Index Fund 1.25%................................ 65,954,010 2.359499 155,618,421
Index Fund .25%................................. 353,859 1.497118 529,769
International Opportunities Fund Qualified
1.00%.......................................... 403,256 1.347555 543,410
International Opportunities Fund Non-Qualified
1.00%.......................................... 1,764,588 1.347508 2,377,796
International Opportunities Fund 1.25%.......... 238,085,775 1.329133 316,447,660
International Opportunities Fund .25%........... 1,377,623 1.472543 2,028,610
Dividend and Growth Fund Qualified 1.00%........ 61,189 1.365504 83,554
Dividend and Growth Fund Non-Qualified 1.00%.... 665,428 1.365504 908,645
Dividend and Growth Fund 1.25%.................. 83,505,795 1.359330 113,511,933
Dividend and Growth Fund .25%................... 220,038 1.384195 304,576
International Advisers Fund Qualified 1.00%..... 10,000 1.148740 11,487
International Advisers Fund Non-Qualified
1.00%.......................................... 29,725 1.148740 34,146
International Advisers Fund 1.25%............... 6,577,380 1.146332 7,539,861
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
<PAGE>
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ --------- --------------
INDIVIDUAL SUB-ACCOUNTS -- (CONTINUED)
<S> <C> <C> <C>
International Advisers Fund .25%................ 10,419 $1.155977 $ 12,044
Smith Barney Daily Dividend, Inc. Qualified
1.00%.......................................... 81,953 2.568390 210,487
Smith Barney Daily Dividend, Inc. Non-Qualified
1.00%.......................................... 135,021 2.657806 358,860
Smith Barney Appreciation Fund, Inc. Qualified
1.00%.......................................... 23,659 6.273870 148,434
Smith Barney Government and Agencies, Inc.
Qualified 1.0%................................. 18,334 2.316404 42,469
--------------
Sub-total Individual Sub-Accounts............... 5,383,251,442
--------------
GROUP SUB-ACCOUNTS:
Bond Fund Qualified 1.00% QP.................... 1,430,095 4.233986 6,055,001
Bond Fund 1.25% DCII............................ 1,368,191 4.095031 5,602,785
Bond Fund .15% DCII............................. 282,400 3.858322 1,089,592
Stock Fund Qualified 1.00% QP................... 3,836,835 9.274144 35,583,358
Stock Fund Qualified .825% QP................... 1,348,097 7.448476 10,041,270
Stock Fund Non-Qualified 1.00% NQ............... 88,666 7.276670 645,195
Stock Fund Non-Qualified .825% NQ............... 834,235 7.461553 6,224,688
Stock Fund 1.25% DCII........................... 4,412,560 8.968113 39,572,332
Stock Fund .15% DCII............................ 824,645 6.963929 5,742,769
Money Market Fund Qualified .375% QP............ 2,294 2.953210 6,776
Money Market Fund 1.25% DCII.................... 988,763 2.623540 2,594,060
Money Market Fund .15% DCII..................... 266,532 2.551494 680,054
Advisers Fund 1.25% DCII........................ 9,212,081 3.646658 33,593,308
Advisers Fund .15% DCII......................... 645,782 4.188043 2,704,563
U.S. Government Money Market Fund 1.25% DCII.... 585,783 1.832902 1,073,683
U.S. Government Money Market Fund .15% DCII..... 42,168 2.111581 89,042
Capital Appreciation Fund 1.25% DCII............ 9,081,481 5.477917 49,747,602
Capital Appreciation Fund .15% DCII............. 737,352 6.223880 4,589,189
Mortgage Securities Fund 1.25% DCII............. 1,149,499 2.333132 2,681,933
Mortgage Securities Fund .15% DCII.............. 76,381 2.631908 201,028
Index Fund 1.25% DCII........................... 3,153,427 2.352860 7,419,573
Index Fund .15% DCII............................ 281,881 2.557622 720,946
International Opportunities Fund 1.25% DCII..... 4,520,023 1.329322 6,008,567
International Opportunities Fund .15% DCII...... 328,735 1.411986 464,169
Dividend and Growth Fund 1.25% DCII............. 557,608 1.222612 681,738
Calvert Responsibly Invested Balanced Portfolio
1.25% DCII..................................... 922,893 1.816735 1,676,653
TCI Advantage Fund 1.25% DCII................... 36,249 1.051440 38,113
TCI Growth Fund 1.25% DCII...................... 633,767 1.080853 685,009
Fidelity VIP Overseas Fund 1.25% DCII........... 181,421 1.030158 186,893
Fidelity VIP II Asset Manager Fund 1.25% DCII... 312,179 1.086805 339,278
Fidelity VIP II Contrafund Fund 1.25% DCII...... 1,807,601 1.098524 1,985,693
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
6
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ --------- --------------
GROUP SUB-ACCOUNTS -- (CONTINUED)
<S> <C> <C> <C>
Fidelity VIP Growth Fund 1.25% DCII............. 2,054,903 $1.072793 $ 2,204,486
--------------
Sub-total Group Sub-Accounts.................... 230,929,346
--------------
TOTAL ACCUMULATION PERIOD......................... 5,614,180,788
--------------
ANNUITY CONTRACTS IN THE ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Non-Qualified 1.00%................... 360 3.559970 1,281
Bond Fund 1.25%................................. 146,793 1.880012 275,972
Stock Fund Non-Qualified 1.00%.................. 6,396 5.303060 33,918
Stock Fund 1.25%................................ 338,160 2.887494 976,434
Money Market Fund Qualified 1.00%............... 15,106 2.367583 35,766
Money Market Fund Non-Qualified 1.00%........... 102,049 2.368697 241,724
Money Market Fund 1.25%......................... 384,819 1.527530 587,823
Advisers Fund Qualified 1.00%................... 4,802 3.760737 18,058
Advisers Fund Non-Qualified 1.00%............... 63,789 3.760737 239,894
Advisers Fund 1.25%............................. 864,266 2.523174 2,180,695
U.S. Government Money Market Fund Qualified
1.00%.......................................... 17,575 1.892119 33,254
Capital Appreciation Fund Non-Qualified 1.00%... 4,341 5.630910 24,443
Capital Appreciation Fund 1.25%................. 102,482 3.364100 344,759
Mortgage Securities Fund Non-Qualified 1.00%.... 102,291 2.398054 245,299
Mortgage Securities Fund 1.25%.................. 89,747 1.877823 168,529
Index Fund 1.25%................................ 65,687 2.359499 154,988
International Opportunities Fund 1.25%.......... 177,975 1.329133 236,552
Dividend and Growth Fund 1.25%.................. 17,276 1.359330 23,484
--------------
Sub-total Individual Sub-Accounts............... 5,822,873
--------------
GROUP SUB-ACCOUNTS:
Bond Fund Qualified 1.00% QP.................... 81,632 4.233986 345,630
Bond Fund 1.25% DCII............................ 303,107 4.095031 1,241,231
Bond Fund 1.00% DCII............................ 12,827 4.217255 54,094
Bond Fund .15% DCII............................. 1,062 3.858322 4,099
Stock Fund Qualified 1.00% QP................... 238,834 9.274144 2,214,981
Stock Fund Qualified .825% QP................... 56,135 7.448476 418,124
Stock Fund Non-Qualified 1.00% NQ............... 632 7.276670 4,596
Stock Fund Non-Qualified .825% NQ............... 58,469 7.461553 436,273
Stock Fund 1.25% DCII........................... 985,111 8.968113 8,834,590
Stock Fund 1.00% DCII........................... 4,395 9.245123 40,630
Stock Fund .15% DCII............................ 5,977 6.963929 41,624
Money Market Fund 1.25% DCII.................... 182,654 2.623540 479,201
Advisers Fund 1.25% DCII........................ 1,704,451 3.646658 6,215,551
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
7
<PAGE>
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ --------- --------------
GROUP SUB-ACCOUNTS -- (CONTINUED)
<S> <C> <C> <C>
Advisers Fund .15% DCII......................... 23,283 $4.188043 $ 97,512
U.S. Government Money Market Fund 1.25% DCII.... 130,137 1.832902 238,529
Capital Appreciation Fund 1.25% DCII............ 462,860 5.477917 2,535,508
Capital Appreciation Fund .15% DCII............. 246 6.223880 1,529
Mortgage Securities Fund 1.25% DCII............. 155,161 2.333132 362,011
Index Fund 1.25% DCII........................... 404,476 2.352860 951,675
International Opportunities Fund 1.25% DCII..... 151,356 1.329322 201,201
Dividend and Growth Fund Sub-Account............ 53,389 1.222612 65,274
Calvert Responsibly Invested Balanced Portfolio
1.25% DCII..................................... 47,806 1.816735 86,850
TCI Advantage Fund Sub-Account.................. 8,377 1.051440 8,808
TCI Growth Fund Sub-Account..................... 7,783 1.080853 8,413
--------------
Sub-total Group Sub-Accounts.................... 24,887,934
--------------
TOTAL ANNUITY PERIOD.............................. 30,710,807
--------------
GRAND TOTAL....................................... $5,644,891,595
--------------
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
8
<PAGE>
Separate Account Two
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $11,511,264 $ 17,813,206 $12,163,281
EXPENSES:
Mortality and expense
undertakings.......... (2,154,558) (9,711,073) (2,622,588)
-------------- ------------- ------------
Net investment income
(loss).............. 9,356,706 8,102,133 9,540,693
-------------- ------------- ------------
Capital gains income... -- 26,305,598 --
-------------- ------------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 117,877 2,168,121 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 18,122,724 184,154,644 --
-------------- ------------- ------------
Net gains (losses) on
investments......... 18,240,601 186,322,765 --
-------------- ------------- ------------
Net increase
(decrease) in net
assets resulting
from operations..... $27,597,307 $ 220,730,496 $ 9,540,693
-------------- ------------- ------------
-------------- ------------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
9
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT CAPITAL MORTGAGE
ADVISERS FUND MONEY MARKET FUND APPRECIATION FUND SECURITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 73,528,138 $72,752 $ 8,061,601 $14,206,415
EXPENSES:
Mortality and expense
undertakings.......... (25,531,142) (15,807) (10,434,564) (2,658,370)
-------------- -------- ----------------- ---------------
Net investment income
(loss).............. 47,996,996 56,945 (2,372,963) 11,548,045
-------------- -------- ----------------- ---------------
Capital gains income... 21,614,744 -- 34,687,769 --
-------------- -------- ----------------- ---------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 1,643,658 -- 2,276,572 (490,628)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 410,209,012 -- 168,562,628 18,815,991
-------------- -------- ----------------- ---------------
Net gains (losses) on
investments......... 411,852,670 -- 170,839,200 18,325,363
-------------- -------- ----------------- ---------------
Net increase
(decrease) in net
assets resulting
from operations..... $481,464,410 $56,945 $203,154,006 $29,873,408
-------------- -------- ----------------- ---------------
-------------- -------- ----------------- ---------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------------ -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 3,104,555 $ 4,858,678 $ 1,834,675
EXPENSES:
Mortality and expense
undertakings.......... (1,562,001) (3,752,084) (789,977)
------------- ------------------ -------------
Net investment income
(loss).............. 1,542,554 1,106,594 1,044,698
------------- ------------------ -------------
Capital gains income... 38,706 2,695,768 --
------------- ------------------ -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 969,630 (488,089) 4,933
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 34,721,169 32,521,726 18,047,295
------------- ------------------ -------------
Net gains (losses) on
investments......... 35,690,799 32,033,637 18,052,228
------------- ------------------ -------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 37,272,059 $35,835,999 $19,096,926
------------- ------------------ -------------
------------- ------------------ -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
10
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
CALVERT
RESPONSIBLY SMITH BARNEY
INVESTED DAILY
BALANCED INTERNATIONAL DIVIDEND
PORTFOLIO ADVISERS FUND FUND
SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT
--------------- ------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 104,255 $ 193,566 $ 32,338
EXPENSES:
Mortality and expense
undertakings.......... (16,809) (29,492) (5,998)
--------------- ------------- ------------
Net investment income
(loss).............. 87,446 164,074 26,340
--------------- ------------- ------------
Capital gains income... 50,438 -- --
--------------- ------------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 1,044 6,279 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 184,034 177,844 --
--------------- ------------- ------------
Net gains (losses) on
investments......... 185,078 184,123 --
--------------- ------------- ------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 322,962 $ 348,197 $ 26,340
--------------- ------------- ------------
--------------- ------------- ------------
</TABLE>
* From Inception, March 1, 1995 to December 31, 1995.
** From Inception, July 1, 1995 to December 31, 1995.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
11
<PAGE>
<TABLE>
<CAPTION>
SMITH BARNEY
SMITH BARNEY GOVERNMENT AND TCI TCI FIDELITY VIP
APPRECIATION FUND AGENCIES FUND ADVANTAGE FUND GROWTH FUND OVERSEAS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT** SUB-ACCOUNT** SUB-ACCOUNT**
----------------- -------------------- ------------------ --------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 2,392 $ 2,387 $ 757 $ -- $--
EXPENSES:
Mortality and expense
undertakings.......... (1,351) (449) (208) (2,133) (491)
------- ------ ------ ------- ------
Net investment income
(loss).............. 1,041 1,938 549 (2,133) (491)
------- ------ ------ ------- ------
Capital gains income... 11,468 -- -- -- --
------- ------ ------ ------- ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 148 -- (90) 938 (240)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 20,104 -- 1,195 6,645 3,459
------- ------ ------ ------- ------
Net gains (losses) on
investments......... 20,252 -- 1,105 7,583 3,219
------- ------ ------ ------- ------
Net increase
(decrease) in net
assets resulting
from operations..... $32,761 $ 1,938 $ 1,654 $ 5,450 $2,728
------- ------ ------ ------- ------
------- ------ ------ ------- ------
<CAPTION>
FIDELITY VIP II
ASSET MANAGER FIDELITY VIP II FIDELITY VIP
FUND CONTRAFUND FUND GROWTH FUND
SUB-ACCOUNT** SUB-ACCOUNT** SUB-ACCOUNT**
----------------- ----------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ -- $ 25,425 $ --
EXPENSES:
Mortality and expense
undertakings.......... (1,491) (6,192) (6,603)
------- ------- -------------
Net investment income
(loss).............. (1,491) 19,233 (6,603)
------- ------- -------------
Capital gains income... -- -- --
------- ------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 456 (577) (2,056)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 18,860 17,225 (34,445)
------- ------- -------------
Net gains (losses) on
investments......... 19,316 16,648 (36,501)
------- ------- -------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 17,825 $ 35,881 $ (43,104)
------- ------- -------------
------- ------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
12
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ -----------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 9,356,706 $ 8,102,133 $9,540,693
Capital gains income... -- 26,305,598 --
Net realized gain
(loss) on security
transactions.......... 117,877 2,168,121 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 18,122,724 184,154,644 --
------------ ------------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ 27,597,307 220,730,496 9,540,693
------------ ------------ -----------
UNIT TRANSACTIONS:
Purchases.............. 18,860,293 101,236,958 48,515,026
Net transfers.......... 17,461,966 34,337,542 (83,703,644)
Surrenders............. (12,010,919) (38,089,217) (27,263,647)
Net annuity
transactions.......... (33,972) 563,526 (138,249 )
------------ ------------ -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 24,277,368 98,048,809 (62,590,514)
------------ ------------ -----------
Total increase
(decrease) in net
assets................ 51,874,675 318,779,305 (53,049,821)
NET ASSETS:
Beginning of period.... 159,488,147 646,102,465 241,689,243
------------ ------------ -----------
End of period.......... $211,362,822 $964,881,770 $188,639,422
------------ ------------ -----------
------------ ------------ -----------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ -----------
OPERATIONS:
Net investment income
(loss)................ $ 8,147,222 $ 5,872,155 $6,069,008
Capital gains income... 3,020,067 34,722,942 --
Net realized gain
(loss) on security
transactions.......... (421,917) (203,916) --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (19,519,205) (59,765,259) --
------------ ------------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ (8,773,833) (19,374,078) 6,069,008
------------ ------------ -----------
UNIT TRANSACTIONS:
Purchases.............. 29,721,918 105,127,448 72,433,601
Net transfers.......... (10,176,062) 20,445,965 10,951,538
Surrenders............. (11,477,200) (25,527,779) (33,930,464)
Net annuity
transactions.......... 284,001 1,000,538 596,459
------------ ------------ -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 8,352,657 101,046,172 50,051,134
------------ ------------ -----------
Total increase
(decrease) in net
assets................ (421,176) 81,672,094 56,120,142
NET ASSETS:
Beginning of period.... 159,909,323 564,430,371 185,569,101
------------ ------------ -----------
End of period.......... $159,488,147 $646,102,465 $241,689,243
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
* From inception, March 8, 1994, to December 31, 1994.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
13
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT CAPITAL MORTGAGE INTERNATIONAL
ADVISERS FUND MONEY MARKET FUND APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------------------------- ----------------- --------------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 47,996,996 $ 56,945 $ (2,372,963) $ 11,548,045 $ 1,542,554 $ 1,106,594
Capital gains income... 21,614,744 -- 34,687,769 -- 38,706 2,695,768
Net realized gain
(loss) on security
transactions.......... 1,643,658 -- 2,276,572 (490,628) 969,630 (488,089)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 410,209,012 -- 168,562,628 18,815,991 34,721,169 32,521,726
-------------- ----------- ----------------- --------------- ------------- ------------------
Net increase (decrease)
in net assets
resulting from
operations............ 481,464,410 56,945 203,154,006 29,873,408 37,272,059 35,835,999
-------------- ----------- ----------------- --------------- ------------- ------------------
UNIT TRANSACTIONS:
Purchases.............. 189,985,618 247,760 164,142,420 9,787,879 22,856,837 27,669,493
Net transfers.......... (5,608,414 ) 17,612 104,275,366 (15,085,789) 14,885,934 (24,115,834)
Surrenders............. (110,192,361 ) (76,250) (29,551,158) (16,689,694) (4,088,509) (12,086,298)
Net annuity
transactions.......... 487,625 84,208 482,089 13,331 84,999 124,982
-------------- ----------- ----------------- --------------- ------------- ------------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 74,672,468 273,330 239,348,717 (21,974,273) 33,739,261 (8,407,657)
-------------- ----------- ----------------- --------------- ------------- ------------------
Total increase
(decrease) in net
assets................ 556,136,878 330,275 442,502,723 7,899,135 71,011,320 27,428,342
NET ASSETS:
Beginning of period.... 1,801,080,912 1,211,601 632,468,929 213,516,603 94,384,052 300,879,623
-------------- ----------- ----------------- --------------- ------------- ------------------
End of period.......... $2,357,217,790 $1,541,876 $1,074,971,652 $221,415,738 $ 165,395,372 $328,307,965
-------------- ----------- ----------------- --------------- ------------- ------------------
-------------- ----------- ----------------- --------------- ------------- ------------------
U.S. GOVERNMENT CAPITAL MORTGAGE INTERNATIONAL
ADVISERS FUND MONEY MARKET FUND APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------------------------- ----------------- --------------- ------------- ------------------
OPERATIONS:
Net investment income
(loss)................ $ 36,400,916 $ 28,918 $ (4,596,707) $ 12,903,970 $ 1,155,546 $ 415,635
Capital gains income... 47,447,226 -- 42,093,901 1,176,728 -- --
Net realized gain
(loss) on security
transactions.......... 414,315 -- 316,913 (2,117,604) 177,595 (38,119)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (154,737,742 ) -- (28,599,970) (19,218,450) (1,319,890) (9,418,006)
-------------- ----------- ----------------- --------------- ------------- ------------------
Net increase (decrease)
in net assets
resulting from
operations............ (70,475,285 ) 28,918 9,214,137 (7,255,356) 13,251 (9,040,490)
-------------- ----------- ----------------- --------------- ------------- ------------------
UNIT TRANSACTIONS:
Purchases.............. 419,190,064 205,153 147,740,784 19,118,960 11,954,835 93,762,262
Net transfers.......... 14,104,761 (151,291) 33,684,129 (49,453,490) (438,563) 55,977,196
Surrenders............. (88,886,489 ) (65,287) (18,517,067) (20,146,010) (3,246,522) (7,306,583)
Net annuity
transactions.......... 2,114,613 (29,641) 396,915 137,102 59,473 (104,557)
-------------- ----------- ----------------- --------------- ------------- ------------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 346,522,949 (41,066) 163,304,761 (50,343,438) 8,329,223 142,328,318
-------------- ----------- ----------------- --------------- ------------- ------------------
Total increase
(decrease) in net
assets................ 276,047,664 (12,148) 172,518,898 (57,598,794) 8,342,474 133,287,828
NET ASSETS:
Beginning of period.... 1,525,033,248 1,223,749 459,950,031 271,115,397 86,041,578 167,591,795
-------------- ----------- ----------------- --------------- ------------- ------------------
End of period.......... $1,801,080,912 $1,211,601 $ 632,468,929 $213,516,603 $ 94,384,052 $300,879,623
-------------- ----------- ----------------- --------------- ------------- ------------------
-------------- ----------- ----------------- --------------- ------------- ------------------
<CAPTION>
DIVIDEND AND
GROWTH FUND
SUB-ACCOUNT
-------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ 1,044,698
Capital gains income... --
Net realized gain
(loss) on security
transactions.......... 4,933
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 18,047,295
-------------
Net increase (decrease)
in net assets
resulting from
operations............ 19,096,926
-------------
UNIT TRANSACTIONS:
Purchases.............. 37,005,986
Net transfers.......... 31,702,670
Surrenders............. (2,159,189)
Net annuity
transactions.......... 77,507
-------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 66,626,974
-------------
Total increase
(decrease) in net
assets................ 85,723,900
NET ASSETS:
Beginning of period.... 29,855,304
-------------
End of period.......... $115,579,204
-------------
-------------
DIVIDEND AND
GROWTH FUND
SUB-ACCOUNT*
-------------
OPERATIONS:
Net investment income
(loss)................ $ 284,164
Capital gains income... --
Net realized gain
(loss) on security
transactions.......... 1,622
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (486,442)
-------------
Net increase (decrease)
in net assets
resulting from
operations............ (200,656)
-------------
UNIT TRANSACTIONS:
Purchases.............. 13,185,613
Net transfers.......... 17,422,326
Surrenders............. (551,979)
Net annuity
transactions.......... --
-------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 30,055,960
-------------
Total increase
(decrease) in net
assets................ 29,855,304
NET ASSETS:
Beginning of period.... --
-------------
End of period.......... $ 29,855,304
-------------
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
14
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
CALVERT
RESPONSIBLY SMITH BARNEY
INVESTED DAILY
BALANCED INTERNATIONAL DIVIDEND
PORTFOLIO ADVISERS FUND FUND
SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT
--------------- ------------- ------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 87,446 $ 164,074 $ 26,340
Capital gains income... 50,438 -- --
Net realized gain
(loss) on security
transactions.......... 1,044 6,279 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 184,034 177,844 --
--------------- ------------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 322,962 348,197 26,340
--------------- ------------- ------------
UNIT TRANSACTIONS:
Purchases.............. 394,157 2,632,312 --
Net transfers.......... 19,199 4,663,681 (10,709)
Surrenders............. (28,010) (46,652) (92,200)
Net annuity
transactions.......... 30,857 -- --
--------------- ------------- ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 416,203 7,249,341 (102,909)
--------------- ------------- ------------
Total increase
(decrease) in net
assets................ 739,165 7,597,538 (76,569)
NET ASSETS:
Beginning of period.... 1,024,338 -- 645,916
--------------- ------------- ------------
End of period.......... $ 1,763,503 $ 7,597,538 $ 569,347
--------------- ------------- ------------
--------------- ------------- ------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1994
CALVERT
RESPONSIBLY
INVESTED SMITH BARNEY SMITH BARNEY
BALANCED DAILY APPRECIATION
PORTFOLIO DIVIDEND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------- ------------
OPERATIONS:
Net investment income
(loss)................ $ 20,465 $ 17,386 $ 743
Capital gains income... -- -- 6,550
Net realized gain
(loss) on security
transactions.......... (180) -- (476)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (59,462) -- (9,210)
--------------- ------------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ (39,177) 17,386 (2,393)
--------------- ------------- ------------
UNIT TRANSACTIONS:
Purchases.............. 376,701 -- 50
Net transfers.......... (75,712) (18,624) 2,681
Surrenders............. (19,945) (84,827) (2,515)
Net annuity
transactions.......... 4,610 -- --
--------------- ------------- ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 285,654 (103,451) 216
--------------- ------------- ------------
Total increase
(decrease) in net
assets................ 246,477 (86,065) (2,177)
NET ASSETS:
Beginning of period.... 777,861 731,981 119,398
--------------- ------------- ------------
End of period.......... $ 1,024,338 $ 645,916 $ 117,221
--------------- ------------- ------------
--------------- ------------- ------------
</TABLE>
* From inception, March 1, 1995, to December 31, 1995.
** From inception, July 1, 1995, to December 31, 1995.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
15
<PAGE>
<TABLE>
<CAPTION>
SMITH BARNEY
SMITH BARNEY GOVERNMENT AND TCI TCI FIDELITY VIP
APPRECIATION FUND AGENCIES FUND ADVANTAGE FUND GROWTH FUND OVERSEAS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT** SUB-ACCOUNT** SUB-ACCOUNT**
----------------- -------------------- ------------------ --------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 1,041 $ 1,938 $ 549 $ (2,133) $ (491)
Capital gains income... 11,468 -- -- -- --
Net realized gain
(loss) on security
transactions.......... 148 -- (90) 938 (240)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 20,104 -- 1,195 6,645 3,459
-------- ------- -------- --------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 32,761 1,938 1,654 5,450 2,728
-------- ------- -------- --------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 50 -- 15,135 30,024 21,829
Net transfers.......... -- -- 40,646 669,352 172,761
Surrenders............. (1,598) (7,562) (19,236) (20,127) (10,425)
Net annuity
transactions.......... -- -- 8,722 8,723 --
-------- ------- -------- --------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (1,548) (7,562) 45,267 687,972 184,165
-------- ------- -------- --------------- --------------
Total increase
(decrease) in net
assets................ 31,213 (5,624) 46,921 693,422 186,893
NET ASSETS:
Beginning of period.... 117,221 48,093 -- -- --
-------- ------- -------- --------------- --------------
End of period.......... $ 148,434 $ 42,469 $ 46,921 $ 693,422 $186,893
-------- ------- -------- --------------- --------------
-------- ------- -------- --------------- --------------
SMITH BARNEY
GOVERNMENT AND
AGENCIES FUND
SUB-ACCOUNT
-----------------
OPERATIONS:
Net investment income
(loss)................ $ 1,269
Capital gains income... --
Net realized gain
(loss) on security
transactions.......... --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ --
--------
Net increase (decrease)
in net assets
resulting from
operations............ 1,269
--------
UNIT TRANSACTIONS:
Purchases.............. --
Net transfers.......... --
Surrenders............. (6,354)
Net annuity
transactions.......... --
--------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (6,354)
--------
Total increase
(decrease) in net
assets................ (5,085)
NET ASSETS:
Beginning of period.... 53,178
--------
End of period.......... $ 48,093
--------
--------
<CAPTION>
FIDELITY VIP
II
FIDELITY VIP II CONTRAFUND FIDELITY VIP
ASSET MANAGER FUND FUND GROWTH FUND
SUB-ACCOUNT** SUB-ACCOUNT** SUB-ACCOUNT**
------------------ -------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ (1,491) $ 19,233 $ (6,603)
Capital gains income... -- -- --
Net realized gain
(loss) on security
transactions.......... 456 (577) (2,056)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 18,860 17,225 (34,445)
-------- -------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 17,825 35,881 (43,104)
-------- -------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 32,160 89,641 120,267
Net transfers.......... 300,031 1,871,915 2,148,417
Surrenders............. (10,738) (11,744) (21,094)
Net annuity
transactions.......... -- -- --
-------- -------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 321,453 1,949,812 2,247,590
-------- -------------- -------------
Total increase
(decrease) in net
assets................ 339,278 1,985,693 2,204,486
NET ASSETS:
Beginning of period.... -- -- --
-------- -------------- -------------
End of period.......... $ 339,278 $ 1,985,693 $ 2,204,486
-------- -------------- -------------
-------- -------------- -------------
OPERATIONS:
Net investment income
(loss)................
Capital gains income...
Net realized gain
(loss) on security
transactions..........
Net unrealized
appreciation
(depreciation) of
investments during the
period................
Net increase (decrease)
in net assets
resulting from
operations............
UNIT TRANSACTIONS:
Purchases..............
Net transfers..........
Surrenders.............
Net annuity
transactions..........
Net increase (decrease)
in net assets
resulting from unit
transactions..........
Total increase
(decrease) in net
assets................
NET ASSETS:
Beginning of period....
End of period..........
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
16
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION:
Separate Account Two (the Account) is a separate investment account within
Hartford Life Insurance Company (the Company) and is registered with the
Securities and Exchange Commission (SEC) as a unit investment trust under
the Investment Company Act of 1940, as amended. Both the Company and the
Account are subject to supervision and regulation by the Department of
Insurance of the State of Connecticut and the SEC. The Account invests
deposits by variable annuity contractholders of the Company in various
mutual funds (the Funds) as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date. Capital gains income
represents dividends from the Funds which are characterized as capital
gains under tax regulations.
b) SECURITY VALUATION--The investment in shares of the Hartford, Smith
Barney, TCI, Fidelity and Calvert Responsibily Invested Series mutual
funds are valued at the closing net asset value per share as determined
by the appropriate Fund as of December 31, 1995.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no
federal income taxes are payable with respect to the operations of the
Account.
d) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the period. Operating results in
the future could vary from the amounts derived from management's
estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS--The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives a maximum annual fee of up to 1.25%
of the Account's average daily net assets.
b) DEDUCTION OF ANNUAL MAINTENANCE FEE--Annual maintenance fees are deducted
through termination of units of interest from applicable contract owners'
accounts, in accordance with the terms of the contracts.
17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Hartford Life
Insurance Company (a Connecticut corporation and wholly-owned subsidiary of
Hartford Life and Accident Insurance Company) and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1995. These consolidated financial statements and the
schedules referred to below are the responsibility of Hartford Life Insurance
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Hartford Life Insurance Company and subsidiaries as of December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
As discussed in Note 1 in Notes to Consolidated Financial Statements, Hartford
Life Insurance Company adopted new accounting standards promulgated by the
Financial Accounting Standards Board, changing its methods of accounting, as of
January 1, 1994, for debt and equity securities.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules listed in
the Index to Consolidated Financial Statements and Schedules are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not a required part of the basic consolidated financial statements. These
schedules have been subjected to the auditing procedures applied in the audits
of the basic consolidated financial statements and, in our opinion, fairly
state in all material respects the financial data required to be set forth
therein in relation to the basic consolidated financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 24, 1996
F-1
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
------- ------- ------
<S> <C> <C> <C>
REVENUES
Premiums and other considerations $1,487 $1,100 $747
Net investment income 1,328 1,292 1,051
Net realized (losses) gains (11) 7 16
------ ------ -----
TOTAL REVENUES 2,804 2,399 1,814
------ ------ -----
BENEFITS, CLAIMS AND EXPENSES
Benefits, claims and claim
adjustment expenses 1,422 1,405 1,046
Dividends to policyholders 675 419 227
Amortization of deferred policy
acquisition costs 199 145 113
Other insurance expense 317 227 210
------ ------ -----
TOTAL BENEFITS, CLAIMS AND EXPENSES 2,613 2,196 1,596
------ ------ -----
INCOME BEFORE INCOME TAX EXPENSE 191 203 218
Income tax expense 62 65 75
------ ------ -----
NET INCOME $129 $138 $143
------ ------ -----
------ ------ -----
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
AS OF DECEMBER 31,
------------------
1995 1994
------- --------
ASSETS
<S> <C> <C>
Investments
Fixed maturities
available for sale, at market value
(amortized cost of $14,440 and $14,464) $14,400 $13,429
Equity securities, at market value
(cost of $61 and $76) 63 68
Mortgage loans, at outstanding balance 265 316
Policy loans, at outstanding balance 3,381 2,614
Other investments, at cost 156 107
------- -------
TOTAL INVESTMENTS 18,265 16,534
Cash 46 20
Premiums and amounts receivable 165 160
Reinsurance recoverable 6,221 5,466
Accrued investment income 394 378
Deferred policy acquisition costs 2,188 1,809
Deferred income tax 420 590
Other assets 234 83
Separate account assets 36,264 22,809
------- -------
TOTAL ASSETS $64,197 $47,849
------- -------
------- -------
LIABILITIES
Future policy benefits $2,373 $1,890
Other policyholder funds 22,598 21,328
Other liabilities 1,233 1,000
Separate account liabilities 36,264 22,809
------- -------
TOTAL LIABILITIES 62,468 47,027
------- -------
Commitments and contingencies (Note 9)
STOCKHOLDER'S EQUITY
Common stock
Authorized 1,000 shares, $5,690 par value
Issued and outstanding 1,000 shares 6 6
Additional paid-in capital 1,007 826
Retained earnings 773 644
Unrealized loss on investments, net of tax (57) (654)
------- -------
TOTAL STOCKHOLDER'S EQUITY 1,729 822
------- -------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $64,197 $47,849
------- -------
------- -------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-3
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
UNREALIZED LOSS TOTAL
COMMON ADDITIONAL RETAINED ON INVESTMENTS, STOCKHOLDER'S
STOCK PAID-IN-CAPITAL EARNINGS NET OF TAX EQUITY
------ --------------- -------- --------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 $6 $498 $373 $0 $877
Net income - - 143 - 143
Capital contribution - 180 - - 180
Excess of assets over liabilities
on reinsurance assumed from affiliate - (2) - - (2)
Change in unrealized loss on investments, net of tax - - - (5) (5)
------ --------------- -------- --------------- -------------
BALANCE, DECEMBER 31, 1993 6 676 516 (5) 1,193
------ --------------- -------- --------------- -------------
Net income - - 138 - 138
Capital contribution - 150 - - 150
Dividend paid - - (10) - (10)
Change in unrealized loss on investments, net of tax* - - - (649) (649)
------ --------------- -------- --------------- -------------
BALANCE, DECEMBER 31, 1994 6 826 644 (654) 822
------ --------------- -------- --------------- -------------
Net income - - 129 - 129
Capital contribution - 181 - - 181
Change in unrealized loss on investments, net of tax - - - 597 597
------ --------------- -------- --------------- -------------
BALANCE, DECEMBER 31, 1995 $6 $1,007 $773 ($57) $1,729
------ --------------- -------- --------------- -------------
------ --------------- -------- --------------- -------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(*) The 1994 change in unrealized loss on investments, net of tax, included an
unrealized gain of $91 due to adoption of SFAS No. 115 as discussed in Note 1(b)
of Notes to Consolidated Financial Statements.
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-4
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------
1995 1994 1993
------------- -------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $129 $138 $143
Adjustments to net income:
Net realized (losses) gains 11 (7) (16)
(Decrease) increase in liability to policyholders for realized gains (3) 5 (15)
Net amortization of premium on fixed maturities 21 41 2
Provision for deferred income taxes (172) (128) (121)
Increase in deferred policy acquisition costs (379) (441) (292)
(Increase) decrease in premiums and amounts receivable (81) 10 (28)
Increase in accrued investment income (16) (106) (4)
(Increase) decrease in other assets (177) 101 (36)
(Increase) decrease in reinsurance recoverable (35) 75 (121)
Increase in liability for future policy benefits 483 224 360
Increase in other liabilities 281 191 176
------------- -------------- -------------
CASH PROVIDED BY OPERATING ACTIVITIES 62 103 48
------------- -------------- -------------
INVESTING ACTIVITIES
Purchases of fixed maturities investments (6,228) (9,127) (12,406)
Proceeds from sales of fixed maturities investments 4,848 5,708 8,813
Maturities and principal paydowns of fixed maturities investments 1,741 1,931 2,596
Net purchases of other investments (871) (1,338) (206)
Net (purchases)/sales of short-term investments (24) 135 (564)
------------- -------------- -------------
CASH USED FOR INVESTING ACTIVITIES (534) (2,691) (1,767)
------------- -------------- -------------
FINANCING ACTIVITIES
Net receipts from investment and UL-type contracts credited to
policyholder account balances 498 2,467 1,513
Capital contribution 0 150 180
Dividends paid 0 (10) 0
------------- -------------- -------------
CASH PROVIDED BY FINANCING ACTIVITIES 498 2,607 1,693
------------- -------------- -------------
NET INCREASE (DECREASE) IN CASH 26 19 (26)
Cash at beginning of year 20 1 27
------------- -------------- -------------
CASH AT END OF YEAR $46 $20 $1
------------- -------------- -------------
------------- -------------- -------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-5
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS)
1. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
These consolidated financial statements include Hartford Life Insurance Company
and its wholly-owned subsidiaries ("Hartford Life" or the "Company"), ITT
Hartford Life and Annuity Insurance Company ("ILA") and ITT Hartford
International Life Reassurance Corporation ("HLRe"), formerly American Skandia
Life Reinsurance Corporation. Hartford Life is a wholly-owned subsidiary of
Hartford Life and Accident Insurance Company ("HLA"). Hartford Life is
ultimately owned by Hartford Fire Insurance Company ("Hartford Fire"), which is
ultimately owned by ITT Hartford Group, Inc. ("ITT Hartford"), formerly a
subsidiary of ITT Corporation ("ITT"). On December 19, 1995, ITT Corporation
distributed all of the outstanding shares of ITT Hartford Group to ITT
Corporation Shareholders of record in an action known herein as the
"Distribution". As a result of the Distribution, ITT Hartford became an
independent publicly traded company.
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
Company offers life, annuity, pension, and disability insurance products.
These products are distributed and marketed by multiple distribution channels
which include broker-dealers, agents and banks, as well as a captive sales
force. Hartford Life conducts business primarily in the United States and is
licensed to write business in all 50 states. The Company is headquartered in
Simsbury, Connecticut and has 3,045 direct employees.
The consolidated financial statements are prepared in conformity with generally
accepted accounting principles which differ in certain material respects from
the accounting practices prescribed or permitted by various insurance
regulatory authorities.
(B) CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1994, Hartford Life adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". The new standard requires, among other things,
that securities be classified as "held-to-maturity", "available-for-sale" or
"trading" based on Hartford Life's intentions with respect to the ultimate
disposition of the security and its ability to effect those intentions. The
classification determines the appropriate accounting carrying value (cost basis
or fair value) and, in the case of fair value, whether the adjustment impacts
Stockholder's Equity directly or is reflected in the Consolidated Statements of
Income. Investments in equity securities had previously been and continue to
be recorded at fair value with the corresponding impact included in
Stockholder's Equity. Under SFAS No. 115, Hartford Life's fixed maturities
are classified as "available-for-sale" and accordingly, these investments are
reflected at fair value with the corresponding impact included as a component
of Stockholder's Equity designated as "Unrealized loss on investments, net of
tax." As with the underlying investment security, unrealized gains and losses
on derivative financial instruments are considered in determining the fair
value of the portfolios. The impact of adoption was an increase to
Stockholder's Equity of $91. Hartford Life's cash flows were not impacted by
this change in accounting principle.
(C) REVENUE RECOGNITION
Revenues for universal life policies and investment products consist of policy
charges for the cost of insurance, policy administration and surrender charges
assessed to policy account balances. Premiums for traditional life insurance
policies are recognized as revenues when they are due from policyholders.
Deferred acquisition costs are amortized using the retrospective deposit method
for universal life and other types of contracts where the payment pattern is
irregular or surrender charges are a significant source of profit and the
prospective deposit method is used where investment margins are the primary
source of profit.
F-6
<PAGE>
(D) FUTURE POLICY BENEFITS AND OTHER POLICYHOLDER FUNDS
Liabilities for future policy benefits are computed by the net level premium
method using interest rate assumptions varying from 3% to 11% and withdrawal,
mortality and morbidity assumptions which vary by plan, year of issue and
policy durations and include a provision for adverse deviation. Other
policyholder funds which represent liabilities for universal life insurance and
investment products reflect policy account balances before applicable surrender
charges.
(E) POLICYHOLDER REALIZED GAINS AND LOSSES
Realized gains and losses on security transactions associated with Hartford
Life's immediate participation guaranteed contracts are excluded from
revenues, since under the terms of the contracts the realized gains and losses
will be credited to policyholders in future years as they are entitled to
receive them.
(F) DEFERRED POLICY ACQUISITION COSTS
Policy acquisition costs, including commissions and certain underwriting
expenses associated with acquiring traditional life insurance products, are
deferred and amortized over the lesser of the estimated or actual contract
life. For universal life insurance and investment products, acquisition costs
are being amortized generally in proportion to the present value of expected
gross profits from surrender charges, investment, mortality and expense
margins.
(G) INVESTMENTS
Hartford Life's investments in fixed maturities include bonds, redeemable
preferred stock and commercial paper which are classified as "available-for-
sale" and accordingly are carried at market value with the after-tax difference
from cost reflected as a component of Stockholder's Equity designated
"Unrealized loss on investments, net of tax". Equity securities, which include
common and non-redeemable preferred stocks, are carried at market value with
the after-tax difference from cost reflected in Stockholder's Equity. Realized
investment gains and losses, after deducting life and pension policyholders'
share, are reported as a component of revenue and are determined on a specific
identification basis.
(H) DERIVATIVE FINANCIAL INSTRUMENTS
Hartford Life uses a variety of derivative financial instruments including,
swaps, caps, floors, options, forwards and exchange traded financial futures as
part of an overall risk management strategy. These instruments, are used as a
means of hedging exposure to price, foreign currency and/or interest rate risk
on planned investment purchases or existing assets and liabilities. Hartford
Life does not hold or issue derivative financial instruments for trading
purposes. Hartford Life's accounting for derivative financial instruments used
to manage risk is in accordance with the concepts established in SFAS No. 80,
"Accounting for Futures Contracts," SFAS No. 52 , "Foreign Currency
Translation", American Institute of Certified Public Accountants Statement of
Position 86-2, "Accounting for Options" and various Emerging Issues Task Force
pronouncements. Written options are in all cases used in conjunction with other
assets and derivatives as part of an overall risk management strategy.
Derivative instruments are carried at values consistent with the asset or
liability being hedged. Derivatives used to hedge fixed maturities or equities
are carried at fair value with the after-tax difference from cost reflected in
Stockholder's Equity. Derivatives used to hedge other invested assets or
liabilities are carried at cost.
Derivatives, used as part of a risk management strategy, must be designated at
inception as a hedge and measured for effectiveness both at inception and on an
ongoing basis. Hartford Life's minimum correlation threshold for hedge
designation is 80%. If correlation, which is assessed monthly and measured
based on a rolling three month average, falls below 80%, hedge accounting will
be terminated. Derivatives used to create a synthetic asset must meet synthetic
accounting criteria including designation at inception and consistency of terms
between the synthetic and the instrument being replicated. Synthetic
instrument accounting, consistent with industry practice, provides that the
synthetic asset is accounted for like the financial instrument it is intended
to replicate. Derivatives which fail to meet risk management criteria are
marked to market with the impact reflected in the Consolidated Statements
of Income.
Gains or losses on financial futures contracts entered into in anticipation
of the future receipt of product cash flows are deferred and, at the time of
the ultimate purchase, reflected as a basis adjustment to the purchased
asset. Gains or losses on futures used in invested asset risk management are
deferred and adjusted into the basis of the hedged asset when the contract
futures are closed, except for futures used in duration hedging which are
deferred and basis adjusted on a quarterly basis. The basis adjustments are
amortized into investment income over the remaining asset life.
F-7
<PAGE>
Open forward commitment contracts are marked to market through Stockholder's
Equity. Such contracts are recorded at settlement by recording the purchase of
the specified securities at the previously committed price. Gains or losses
resulting from the termination of the forward commitment contracts before the
delivery of the securities are recognized immediately in the Consolidated
Statements of Income as a component of net investment income.
The cost of options entered into as part of a risk management strategy are
basis adjusted to the underlying asset or liability and amortized over the
remaining life of the hedge. Gains or losses on expiration or termination are
adjusted into the basis of the underlying asset or liability and amortized over
the remaining asset life.
Interest rate swaps involve the periodic exchange of payments without the
exchange of underlying principal or notional amounts. Net receipts or payments
are accrued and recognized over the life of the swap agreement as an
adjustment to income. Should the swap be terminated, the gain or loss is
adjusted into the basis of the asset or liability and amortized over the
remaining life. Should the hedged asset be sold or liability terminated without
terminating the swap position, any swap gains or losses are immediately
recognized in earnings. Interest rate swaps purchased in anticipation of an
asset purchase ("anticipatory transaction") are recognized consistent with the
underlying asset components such that the settlement component is recognized in
the Consolidated Statements of Income while the change in market value is
recognized as an unrealized gain or loss.
Premiums paid on purchased floor or cap agreements and the premium received on
issued floor or cap agreements (used for risk management), are adjusted into
the basis of the applicable asset and amortized over the asset life. Gains or
losses on termination of such positions are adjusted into the basis of the
asset or liability and amortized over the remaining asset life. Net payments
are recognized as an adjustment to income or basis adjusted and amortized
depending on the specific hedge strategy.
Forward exchange contracts and foreign currency swaps are accounted for in
accordance with SFAS No. 52.
(I) RELATED PARTY TRANSACTIONS
Transactions of Hartford Life with its parent and affiliates relate principally
to tax settlements, insurance coverage, rental and service fees and payment of
dividends and capital contributions. In addition, certain affiliated insurance
companies purchased group annuity contracts from Hartford Life to fund pension
costs and claim annuities to settle casualty claims.
On June 30, 1995, the assets of Lyndon Insurance Company ("Lyndon") were
contributed to ILA. As a result, ILA received approximately $365 in fixed
maturities, equity securities and cash, $26 in receivables, $187 of current
tax liability, $20 in deferred tax liability, and $3 of other liabilities.
The excess of assets over liabilities of $181 were recorded as an increase to
paid-in capital.
Substantially all general insurance expenses related to Hartford Life,
including rent expenses, are initially paid by Hartford Fire. Direct expenses
are allocated to Hartford Life using specific identification and indirect
expenses are allocated using other applicable methods.
The rent paid to Hartford Fire for the space occupied by Hartford Life was $3
in 1995, 1994, and 1993 respectively. Hartford Life expects to pay rent of $3
in 1996, 1997, 1998, 1999, and 2000, respectively and $57 thereafter, over the
contract life of the lease.
(J) DIVIDEND TO POLICYHOLDERS
Dividends to policyholders primarily represent those amounts paid to corporate
owned life insurance ("COLI") policyholders. These dividend liabilities, which
appear as other policyholder funds on the Consolidated Balance Sheets, are
recorded when approved by the board of directors.
See Note (4) for the related party coinsurance agreements.
F-8
<PAGE>
2. INVESTMENTS
(a) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
<S> <C> <C> <C>
1995 1994 1993
------ ------ ------
Interest income $1,338 $1,247 $1,007
Income from other investments 1 54 53
------ ------ ------
GROSS INVESTMENT INCOME 1,339 1,301 1,060
Less: Investment expenses 11 9 9
------ ------ ------
NET INVESTMENT INCOME $1,328 $1,292 $1,051
------ ------ ------
------ ------ ------
(b) UNREALIZED GAINS/(LOSSES) ON EQUITY SECURITIES
As of December 31,
--------------------------
1995 1994 1993
------ ------ ------
Gross unrealized gains $4 $2 $3
Gross unrealized losses (2) (11) (11)
Deferred income tax expenses/(benefit) 1 (3) (3)
------ ------ ------
NET UNREALIZED GAINS (LOSSES) AFTER TAX 1 (6) (5)
Balance at the beginning of the year (6) (5) (0)
------ ------ ------
CHANGE IN NET UNREALIZED GAINS (LOSSES) ON EQUITY SECURITIES $7 ($1) ($5)
------ ------ ------
------ ------ ------
(c) UNREALIZED GAINS/(LOSSES) IN FIXED SECURITIES
As of December 31,
--------------------------
1995 1994 1993
------ ------ ------
Gross unrealized gains $529 $150 $538
Gross unrealized losses (569) (1,185) (290)
Unrealized (losses)/gains credited to policyholder (52) 37 0
Deferred income tax (benefit)/expense (34) (350) 87
------ ------ ------
NET UNREALIZED (LOSSES) GAINS AFTER TAX (58) (648) 161
Balance at the beginning of the year (648) 161 144
------ ------ ------
CHANGE IN NET UNREALIZED GAINS(LOSES)
ON FIXED MATURITIES $590 ($809) $17
------ ------ ------
------ ------ ------
(d) COMPONENTS OF NET REALIZED GAINS/(LOSSES)
Year ended December 31,
--------------------------
1995 1994 1993
------ ------ ------
Fixed maturities $23 ($34) ($12)
Equity securities (6) (11) 0
Real estate and other (25) 47 43
Less: (decrease)/increase in liability to policyholders
for realized gains (3) 5 (15)
------ ------ ------
NET REALIZED (LOSSES) GAINS ($11) $7 $16
------ ------ ------
------ ------ ------
</TABLE>
F-9
<PAGE>
(e) DERIVATIVE INVESTMENTS
A summary of investments, segregated by major category along with the types of
derivatives and their respective notional amounts, are as follows as of
December 31, 1995 :
<TABLE>
<CAPTION>
SUMMARY OF INVESTMENTS
AS OF DECEMBER 31, 1995
(CARRYING AMOUNT)
Caps, Floors & Options Foreign
Carrying ----------------------- Currency
Value Non-Derivative Issued(b) Purchased(c) Futures(d) Swaps(f) Swaps
-------- ----------- -------- ----------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset-backed securities $5,764 $5,752 ($1) $30 $0 ($17) $0
Inverse floaters(a) 711 794 (30) 16 0 (69) 0
Anticipatory(e) 0 0 0 0 0 0 0
-------- ----------- -------- ----------- --------- -------- -------
TOTAL ASSET-BACKED SECURITIES 6,475 6,546 (31) 46 0 (86) 0
Other bonds and notes 7,118 7,165 (1) 0 0 (22) (24)
Short-term investments 807 807 0 0 0 0 0
-------- ----------- -------- ----------- --------- -------- -------
TOTAL FIXED MATURITIES 14,400 14,518 (32) 46 0 (108) (24)
Other investments 3,865 3,865 0 0 0 0 0
-------- ----------- -------- ----------- --------- -------- -------
TOTAL INVESTMENTS $18,265 $18,383 ($32) $46 $0 ($108) ($24)
-------- ----------- -------- ----------- --------- -------- -------
-------- ----------- -------- ----------- --------- -------- -------
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF INVESTMENTS
AS OF DECEMBER 31, 1995
(NOTIONAL AMOUNT)
(EXCLUDING LIABILITY HEDGES)
Caps, Floors & Options Foreign
Notional ---------------------- Currency
Amount Issued(b) Purchased(c) Futures(d) Swaps(f) Swaps
-------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Asset-backed securities $3,863 $118 $3,133 $322 $290 $0
Inverse floaters(a) 1,601 560 354 6 681 0
Anticipatory(e) 238 0 0 213 25 0
-------- --------- --------- ---------- --------- ---------
TOTAL ASSET-BACKED SECURITIES 5,702 678 3,487 541 996 0
Other bonds and notes 1,365 33 66 322 757 187
Short-term investments 0 0 0 0 0 0
-------- --------- --------- ---------- --------- ---------
TOTAL FIXED MATURITIES 7,067 711 3,553 863 1,753 187
Other investments 18 0 0 0 18 0
-------- --------- --------- ---------- --------- ---------
TOTAL INVESTMENTS $7,085 $711 $3,553 $863 $1,771 $187
-------- --------- --------- ---------- --------- ---------
-------- --------- --------- ---------- --------- ---------
</TABLE>
(a) Inverse floaters are variations of CMO's for which the coupon rates
move inversely with an index rate (e.g. LIBOR). The risk to principal is
considered negligible as the underlying collateral for the securities is
guaranteed or sponsored by government agencies. To address the volatility
risk created by the coupon variability, Hartford Life uses a variety of
derivative instruments, primarily interest rate swaps and issued floors.
(b) Includes issued caps $475 with a weighted average strike rate of 8.5%
(ranging from 7.0% to 10.4%) and over 85% mature in 2000 through 2004. Issued
floors totaled $236, have a weighted average strike rate of 8.1% (ranging
from 5.3% to 10.9%) and mature through 2007 with 76% maturing by 2004.
(c) Comprised of purchased floors of $1.8 billion and purchased caps of $1.7
billion. The floors have a weighted average strike price of 5.8% (ranging from
3.7% to 6.8%) and over 85% mature in 1997 through 1999. The caps have a
weighted average strike price of 7.5% (ranging from 4.5% and 10.1%) and over
82% mature in 1997 through 1999.
(d) Over 95% of futures contracts expire before December 31, 1996.
(e) Deferred gains and losses on anticipatory transactions are included in the
carrying value of bond investments in the consolidated balance sheets. At the
time of the ultimate purchase, they are reflected as a basis adjustment to the
purchased asset. At December 31, 1995, there were $5.3 in net deferred losses
for futures, interest rate swaps and purchased options.
(f) The following table summarizes the maturities by notional value of interest
rate swaps outstanding at December 31, 1995 and the related weighted average
interest pay rate or receive rate assuming current market conditions:
F-10
<PAGE>
<TABLE>
<CAPTION>
MATURITY OF SWAPS ON INVESTMENTS
AS OF DECEMBER 31, 1995
LAST
1996 1997 1998 1999 2000 THEREAFTER TOTAL MATURITY
---- ---- ---- ---- ---- ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST RATE SWAPS
PAY FIXED/RECEIVE VARIABLE
Notional Value $15 $50 $0 $453 $31 $229 $778 2004
Weighted Average Pay Rate 5.0% 7.2% 0.0% 8.1% 7.1% 7.8% 7.8%
Weighted Average Receive Rate 5.8% 5.9% 0.0% 5.8% 5.7% 5.9% 5.9%
PAY VARIABLE/RECEIVE FIXED
Notional Value $100 $68 $25 $25 $35 $190 $443 2007
Weighted Average Pay Rate 5.9% 8.6% 5.9% 0.0% 5.9% 5.4% 5.4%
Weighted Average Receive Rate 2.4% 7.9% 4.0% 0.0% 6.5% 6.9% 6.9%
PAY VARIABLE/RECEIVE DIFFERENT VARIABLE
Notional Value $50 $18 $36 $12 $200 $234 $550 2004
Weighted Average Pay Rate 5.8% 0.0% 3.7% 3.5% 4.5% 16.3% 5.7%
Weighted Average Receive Rate 5.4% 0.0% 5.6% 5.2% 6.8% 5.9% 6.4%
TOTAL INTEREST RATE SWAPS $165 $136 $61 $490 $266 $653 $1,771 2007
WEIGHTED AVERAGE PAY RATE 5.8% 7.8% 4.6% 7.6% 5.0% 7.3% 6.9%
WEIGHTED AVERAGE RECEIVE RATE 3.6% 7.2% 4.9% 5.4% 6.6% 6.3% 5.8%
</TABLE>
(g) The following table reconciles the derivative notional amounts by derivative
type and by strategy:
<TABLE>
<CAPTION>
BY DERIVATIVE TYPE
----------------------------------------------------------------------
12/31/94 MATURITIES/ 12/31/95
NOTIONAL AMOUNT ADDITIONS TERMINATIONS NOTIONAL AMOUNT
--------------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
Caps $1,861 $2,666 $2,343 $2,184
Floors 2,131 237 188 2,180
Swaps/Collars/Forwards/Options 4,374 1,355 2,163 3,566
Futures 253 6,125 5,515 863
--------------- --------- ------------ ---------------
TOTAL $8,619 $10,383 $10,209 $8,793
--------------- --------- ------------ ---------------
--------------- --------- ------------ ---------------
BY STRATEGY
----------------------------------------------------------------------
12/31/94 MATURITIES/ 12/31/95
NOTIONAL AMOUNT ADDITIONS TERMINATIONS NOTIONAL AMOUNT
--------------- ---------- ------------ ---------------
Liability $1,725 $729 $746 $1,708
Anticipatory 626 1,564 1,952 238
Asset 3,048 3,153 3,217 2,984
Portfolio 3,220 4,937 4,294 3,863
--------------- ---------- ------------ --------------
TOTAL $8,619 $10,383 $10,209 $8,793
--------------- ---------- ------------ --------------
--------------- ---------- ------------ --------------
</TABLE>
In addition to risk management through derivative financial instruments
pertaining to the investment portfolio, interest rate sensitivity related to
certain Company liabilities was altered primarily through interest rate swap
agreements. The notional
F-11
<PAGE>
amount of the liability agreements in which Hartford Life generally pays one
variable rate in exchange for another, was $1.7 billion at December 31, 1995 and
1994 respectively. The weighted average pay rate is 5.9%; the weighted average
receive rate is 6.0% , and these agreements mature at various times through
2001.
(F) CONCENTRATION OF CREDIT RISK
Hartford Life has a reinsurance recoverable of $5.6 billion from Mutual Benefit
Life Assurance Corporation (Mutual Benefit). The risk of Mutual Benefit
becoming insolvent is mitigated by the reinsurance agreement's requirement that
the assets be kept in a security trust with Hartford Life as sole beneficiary.
Excluding investments in U.S. government and agencies, Hartford Life has no
other significant concentrations of credit risk.
Included in fixed maturity investments at December 31, 1995 were $39 of
Orange County, California Pension Obligation Bonds, $17 of which were carried
in the general account and $22 which were included in Hartford Life's
guaranteed separate accounts. During 1995 all interest payments due were
received. While Orange County is currently operating under Protection of
Chapter 9 of the Federal Bankruptcy Laws, Hartford Life believes the bonds
are not impaired other than on a temporary basis.
(G) FIXED MATURITIES
The schedule below details the amortized cost and fair values of Hartford Life's
fixed maturities by component, along with the gross unrealized gains and losses:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,1995
--------------------------------------------------
GROSS UNREALIZED
AMORTIZED --------------------- MARKET
COST GAINS LOSSES VALUE
---------- ------- ------ -----
<S> <C> <C> <C> <C>
U.S. Government and government agencies and
authorities;
Guaranteed and sponsored $502 $4 ($9) $497
Guaranteed and sponsored-asset backed 3,568 210 (387) 3,391
State, municipalities and political subdivisions 201 4 (3) 202
International governments 291 19 (4) 306
Public utilities 949 29 (2) 976
All other corporate-asset backed 3,065 76 (55) 3,086
All other corporate 5,056 187 (109) 5,134
Short-term investments 808 0 0 808
---------- ------- ----- -----
TOTAL INVESTMENTS $14,440 $529 ($569) $14,440
---------- ------- ----- -----
---------- ------- ----- -----
AS OF DECEMBER 31,1994
--------------------------------------------------
GROSS UNREALIZED
AMORTIZED --------------------- MARKET
COST GAINS LOSSES VALUE
---------- ------- ------ -----
U.S. Government and government agencies
and authorities;
Guaranteed and sponsored $1,516 $1 ($87) $1,430
Guaranteed and sponsored-asset backed 4,256 78 (571) 3,763
State, municipalities and political subdivisions 148 1 (12) 137
International governments 189 1 (14) 176
Public utilities 531 1 (32) 500
All other corporate-asset backed 2,442 30 (121) 2,351
All other corporate 3,717 38 (297) 3,458
Short-term investments 1,665 0 (51) 1,614
--------- ------- -------- -------
TOTAL INVESTMENTS $14,464 $150 ($1,185) $13,429
--------- ------- -------- -------
--------- ------- -------- -------
</TABLE>
F-12
<PAGE>
The amortized cost and estimated fair value of fixed maturities at December 31,
1995, by maturity, are shown below. Asset backed securities are distributed to
maturity year based on estimates of the rate of future prepayments of principal
over the remaining life of the securities. Expected maturities differ from
contractual maturities reflecting the borrowers' rights to call or prepay their
obligations.
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
---------- ---------
<S> <C> <C>
Due in one year or less $3,146 $3,133
Due after one year through five years 6,373 6,316
Due after five years through ten years 3,609 3,644
Due after ten years 1,312 1,307
---------- ---------
TOTAL $14,440 $14,400
---------- ---------
---------- ---------
</TABLE>
Sales of fixed maturities excluding short-term fixed maturities for the years
ended December 31, 1995, 1994, and 1993 resulted in proceeds of $4,848, $5,708,
and $8,813, respectively, resulting in gross realized gains of $91, $71, and
$192, respectively, and gross realized losses of $72, $100, and $219,
respectively, not including policyholder gains and losses. Sales of equity
securities and other investments for the years ended December 31, 1995, 1994,
and 1993 resulted in proceeds of $64, $159, and $127, respectively, resulting in
gross realized gains of $28, $3, and $0, respectively, and gross realized losses
of $59, $14, $0, respectively, not including policyholder gains and losses.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995 AS OF DECEMBER 31, 1994
----------------------- -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities $14,400 $14,400 $13,429 $13,429
Equity securities 63 63 68 68
Policy loans 3,381 3,381 2,614 2,614
Mortgage loans 265 265 316 316
Investments in partnerships and trusts 94 97 36 42
Miscellaneous 62 62 67 67
LIABILITIES
Other policy claims and benefits $12,727 $12,767 $13,001 $12,374
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument: fair value for fixed maturities and equity
securities approximate those quotations published by applicable stock exchanges
or are received from other reliable sources; policy and mortgage loan carrying
amounts approximate fair value; investments in partnerships and trusts are based
on external market valuations from partnership and trust management; and other
policy claims and benefits payable are determined by estimating future cash
flows discounted at the current market rate.
3. INCOME TAX
Hartford Life is included in ITT Hartford Group's consolidated U.S. Federal
income tax return and remits to (receives from) ITT Hartford Group, Inc. a
current income tax provision (benefit) computed in accordance with the tax
sharing arrangements between its insurance subsidiaries. The effective tax
rate was 32% in 1995 and 1994, and approximates the U.S. statutory tax rate
of 35% in 1993.
F-13
<PAGE>
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
INCOME TAX EXPENSES
Current $211 $185 $190
Deferred (149) (120) (115)
------- ------- -------
TOTAL $62 $65 $75
------- ------- -------
------- ------- -------
INCOME TAX PROVISION
Tax provision at U.S. statutory rate $67 $71 $76
Tax-exempt income (3) (3) 0
Foreign tax credit (4) (1) 0
Other 2 (2) (1)
------- ------- -------
PROVISION FOR INCOME TAX $62 $65 $75
------- ------- -------
------- ------- -------
</TABLE>
Income taxes paid were $162, $244, and $301 in 1995, 1994, and 1993
respectively. The current taxes due from Hartford Fire were $8 and $46 in 1995
and 1994, respectively.
Deferred tax assets(liabilities) include the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Tax deferred acquisition costs $410 $284
Book deferred acquisition costs and reserves 138 (134)
Employee benefits 8 7
Unrealized net loss on investments 32 353
Investments and other (168) 80
--------- ---------
TOTAL DEFERRED TAX ASSET $420 $590
--------- ---------
--------- ---------
</TABLE>
Prior to the Tax Reform Act of 1984, the Life Insurance Company Income Tax Act
of 1959 permitted the deferral from taxation of a portion of statutory income
under certain circumstances. In these situations, the deferred income was
accumulated in a "Policyholders' Surplus Account" and will be taxable in the
future only under conditions which management considers to be remote; therefore,
no Federal income taxes have been provided on this deferred income. The balance
for tax return purposes of the Policyholders' Surplus Account as of December 31,
1995 was $37.
4. REINSURANCE
Hartford Life cedes insurance to non-affiliated insurers in order to limit its
maximum loss. Such transfer does not relieve Hartford Life of its primary
liability. Hartford Life also assumes insurance from other insurers. Group
life and accident and health insurance business is substantially reinsured to
affiliated companies.
Life insurance net retained premiums were comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Gross premiums $1,545 $1,316 $1,135
Insurance assumed 591 299 93
Insurance ceded 649 515 481
------- ------- -------
NET RETAINED PREMIUMS $1,487 $1,100 $747
------- ------- -------
------- ------- -------
</TABLE>
F-14
<PAGE>
Life reinsurance recoveries, which reduced death and other benefits, for the
years ended December 31, 1995, 1994 and 1993 approximated $220, $164, and $149,
respectively.
In December 1994, Hartford Life assumed from a third party approximately $500
of corporate owned life insurance reserves on a coinsurance basis. In
December 1995, this block of business was reinsured to HLRe utilizing
modified coinsurance, with the assets and policy liabilities placed in a
separate account. In October 1994, HLRe recaptured approximately $500 of
corporate owned life insurance from a third party reinsurer. Subsequent to
this transaction, Hartford Life and HLRe restructured their coinsurance
agreement from coinsurance to modified coinsurance, with the assets and
policy liabilities placed in the separate account. These transactions did not
have a material impact on consolidated net income.
Also in December 1994, ILA ceded to a third party $1.0 billion in individual
fixed and variable annuities on a modified coinsurance basis. In December 1995,
Hartford Life ceded approximately $1.2 billion in individual variable annuities
on a modified coinsurance basis to a third party. These transactions did not
have a material impact on consolidated net income.
In May 1994, Hartford Life assumed the life insurance policies and the
individual annuities of Pacific Standard with reserves and account values of
approximately $400. Hartford Life received cash and investment grade assets
to support the life insurance and individual annuity contract obligations
assumed.
In November 1993, ILA acquired, through an assumption reinsurance
transaction, substantially all of the individual fixed and variable annuity
business of HLA. As a result of this transaction, the assets and liabilities
of Hartford Life increased approximately $1 billion. The excess of
liabilities assumed over assets received, of $2, was recorded as a decrease
to capital surplus. The remaining $41 in assets and liabilities were
transferred in October 1995. The impact on consolidated net income was not
significant.
In August 1993, Hartford Life received assets of $300 for assuming the group
COLI contract obligations of Mutual Benefit Life Insurance Company, through
an assumption reinsurance transaction. Under the terms of the agreement,
Hartford Life coinsured back 75% of the liabilities to Mutual Benefit Life
Insurance Company. All assets supporting Mutual Benefit's reinsurance
liability to Hartford Life are placed in a "security trust", with Hartford
Life as the sole beneficiary. The impact on 1993 consolidated net income was
not significant.
5. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Hartford Life's employees are included in Hartford Fire's noncontributory
defined benefit pension plans. These plans provide pension benefits that are
based on years of service and the employee's compensation during the last ten
years of employment. Hartford Life's funding policy is to contribute annually
an amount between the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974 and the maximum amount that can be
deducted for Federal income tax purposes. Generally, pension costs are funded
through the purchase of Hartford Life's group pension contracts. The cost to
Hartford Life was approximately $2, $2, and $3 in 1995, 1994 and 1993,
respectively.
Hartford Life provides certain health care and life insurance benefits for
eligible retired employees. A substantial portion of Hartford Life's employees
may become eligible for these benefits upon retirement. Hartford Life's
contribution for health care benefits will depend on the retiree's date of
retirement and years of service. In addition, the plan has a defined dollar cap
which limits average company contributions. Hartford Life has prefunded a
portion of the health care and life insurance obligations through trust funds
where such prefunding can be accomplished on a tax effective basis.
Postretirement health care and life insurance benefits expense, allocated by
Hartford Fire were immaterial for 1995, 1994, and 1993 respectively.
The assumed rate of future increases in the per capita cost of health care (the
health care trend rate) was 10.1% for 1995, decreasing ratably to 6.0% in the
year 2001. Increasing the health care trend rates by one percent per year would
have an immaterial impact on the accumulated postretirement benefit obligation
and the annual expense. To the extent that the actual experience differs from
the inherent assumptions, the effect will be amortized over the average future
service of the covered employees.
F-15
<PAGE>
6. BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
REVENUES
Individual Life and Annuity $797 $691 $595
Asset Management Services 734 789 794
Specialty Insurance Operations 1,273 919 425
------ ------ ------
TOTAL REVENUES $2,804 $2,399 $1,814
------ ------- ------
------ ------- ------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
YEAR ENDED DECEMBER 31
------------------------
1995 1994 1993
------ ------- -----
INCOME BEFORE INCOME TAX EXPENSE
Individual Life and Annuity $236 $139 $129
Asset Management Services (79) 38 71
Specialty Insurance Operations 34 26 18
------ ------ ------
TOTAL INCOME BEFORE INCOME
TAX EXPENSE $191 $203 $218
------ ------ ------
------ ------ ------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
YEAR ENDED DECEMBER 31
---------------------------
1995 1994 1993
------- ------- -------
IDENTIFIABLE ASSETS
Individual Life and Annuity $36,741 $26,668 $19,147
Asset Management Services 13,962 13,334 12,416
Specialty Insurance Operations 13,494 7,847 6,723
------- ------- -------
TOTAL IDENTIFIABLE ASSETS $64,197 $47,849 $38,286
------- ------- -------
------- ------- -------
</TABLE>
7. STATUTORY NET INCOME AND SURPLUS
Substantially all of the statutory surplus is permanently reinvested or is
subject to dividend restrictions relating to various state regulations which
limit the payment of dividends without prior approval. Statutory net income
and surplus as of December 31 were:
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Statutory net income $112 $58 $63
Statutory surplus $1,125 $941 $812
</TABLE>
8. SEPARATE ACCOUNTS
Hartford Life maintains separate account assets and liabilities totaling $36.3
billion and $22.8 billion at December 31, 1995 and 1994, respectively which
are reported at fair value. Separate account assets are segregated from other
investments and investment income and gains and losses accrue directly to the
policyholder. Separate accounts reflect two categories of risk assumption:
non-guaranteed separate accounts totaling $25.9 billion and $14.8 billion at
December 31, 1995 and 1994, respectively, wherein the policyholder assumes the
investment risk, and guaranteed separate account assets totaling $10.4 billion
and $8.0 billion at December 31, 1995 and 1994, respectively, wherein Hartford
Life contractually guarantees either a minimum return or account value to the
policyholder. Included in the non-guaranteed category are policy loans
totaling $1.7 billion and $0.5 billion at December 31, 1995 and 1994,
respectively. Investment income (including investment gains and losses) and
interest credited to policyholders on separate account assets are not
reflected in the Consolidated Statements of Income. Separate account
management fees, net of minimum guarantees, were $387, $256, and $189, in
1995, 1994, and 1993, respectively.
F-16
<PAGE>
The guaranteed separate accounts include modified guaranteed individual
annuity, and modified guaranteed life insurance. The average credit interest
rate on these contracts is 6.62%. The assets that support these liabilities
were comprised of $10.4 billion in bonds at December 31, 1995. The portfolios
are segregated from other investments and are managed so as to minimize
liquidity and interest rate risk. In order to minimize the risk of
disintermediation associated with early withdrawals, individual annuity and
modified guaranteed life insurance contracts carry a graded surrender charge
as well as a market value adjustment. Additional investment risk is hedged
using a variety of derivatives which totaled $133 million in carrying value
and $2.7 billion in notional amounts at December 31, 1995.
9. COMMITMENTS AND CONTINGENCIES
In August 1994, Hartford Life renewed a two year note purchase facility
agreement which in certain instances obligates Hartford Life to purchase up to
$100 million in collateralized notes from a third party. Hartford Life is
receiving fees for this commitment. At December 31, 1995, Hartford Life had
not purchased any notes under this agreement.
Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed up to prescribed limits for policyholder losses
incurred by insolvent companies. The amount of any future assessments on
Hartford Life under these laws cannot be reasonably estimated. Most of these
laws do provide, however, that an assessment may be excused or deferred if it
would threaten an insurer's own financial strength. Additionally, guaranty
fund assessments are used to reduce state premium taxes paid by the Company in
certain states. Hartford Life paid guaranty fund assessments of approximately
$10, $8 and $6 in 1995, 1994, and 1993, respectively.
Hartford Life is involved in various legal actions, some of which involve
claims for substantial amounts. In the opinion of management the ultimate
liability with respect to such lawsuits, as well as other contingencies, is
not considered material in relation to the consolidated financial position of
Hartford Life.
F-17
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS (OTHER THAN INVESTMENTS IN AFFILIATES)
AS OF DECEMBER 31, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
FAIR REPORTED ON
COST VALUE BALANCE SHEET
-------------- ------------- -----------------
<S> <C> <C> <C>
FIXED MATURITIES
Bonds
U.S. Government and government agencies and authorities
Guaranteed and sponsored $502 $497 $497
Guaranteed and sponsored - asset backed 3,568 3,391 $3,391
States, municipalities and political subdivisions 201 202 $202
International governments 291 306 $306
Public utilities 949 976 $976
All other corporate 5,056 5,134 $5,134
All other corporate - asset backed 3,065 3,086 $3,086
Short-term investments 808 808 $808
---------- --------- ---------
TOTAL FIXED MATURITIES $14,440 $14,400 $14,400
EQUITY SECURITIES
Common stocks - industrial, miscellaneous and all other 61 63 63
TOTAL FIXED MATURITIES AND EQUITY SECURITIES $14,501 $14,463 $14,463
POLICY LOANS 3,381 3,381 3,381
MORTGAGE LOANS 265 265 265
OTHER INVESTMENTS 156 159 156
--------- -------- -------
TOTAL INVESTMENTS $18,303 $18,268 $18,265
--------- -------- -------
--------- -------- -------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Fair value for stocks and bonds approximate those quotations published by
applicable stock exchanges or are received from other reliable sources. The
fair value for short-term investments approximates cost.
Policy and mortgage loans carrying amounts approximate fair value.
S-1
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE III - SUPPLEMENTAL INSURANCE INFORMATION
(in millions)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Amort. of
Deferred Future Other Premiums and Net Benefits, Claims Deferred Other
Policy Policy Policyholder Other Investment and Claim Adj. Policy Insurance
Acq. Costs Benefits Funds Considerations Income Expenses Acq. Costs Expenses
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
As of December 31, 1995 Year ended December 31, 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Individual Life and Annuity $2,088 $706 $4,371 $514 $283 $277 $176 $108
Asset Management Services 87 1,169 8,942 51 683 722 23 68
Specialty Insurance
Operations 13 498 9,285 922 351 423 0 816
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
TOTAL $2,188 $2,373 $22,598 $1,487 $1,317 $1,422 $199 $992
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
As of December 31, 1994 Year ended December 31, 1994
Individual Life and
Annuity $1,708 $582 $4,257 $492 $199 $334 $137 $80
Asset Management Services 101 845 10,160 39 750 695 8 48
Specialty Insurance
Operations 0 463 6,911 569 350 376 0 518
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
TOTAL $1,809 $1,890 $21,328 $1,100 $1,299 $1,405 $145 $646
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
As of December 31, 1993 Year ended December 31, 1993
Individual life and Annuity $1,237 $428 $3,535 $423 $172 $249 $97 $120
Asset Management Services 97 703 9,026 35 759 662 16 45
Specialty Insurance
Operations 0 528 5,673 289 136 135 0 272
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
TOTAL $1,334 $1,659 $18,234 $747 $1,067 $1,046 $113 $437
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Investment income is allocated to the reportable division based on each
division's share of investable funds or on a direct basis, where applicable,
including realized capital gains and losses.
Benefits, claims and claims adjustment expenses include the increase in
liability for future policy benefits and death, disability and other contract
benefits payments.
Other insurance expenses are allocated to the division based upon specific
identification, where possible.
S-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE IV - REINSURANCE
(in millions)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Percentage of
Gross Ceded to Assumed from Net Amount Assumed
Amount Other Companies Other Companies Amount to Net Amount
-------- ----------------- ----------------- -------- ----------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
LIFE INSURANCE IN FORCE $182,716 $112,774 $26,996 $96,938 27.8%
PREMIUMS AND OTHER CONSIDERATIONS
Individual Life and Annuity $549 $163 $122 $508 24.0%
Asset Management Services 51 0 0 51 0.0%
Specialty Insurance Operations 632 162 452 922 49.0%
313 324 17 6 283.3%
-------- ----------------- ----------------- --------
TOTAL $1,545 $649 $591 $1,487 39.7%
-------- ----------------- ----------------- --------
-------- ----------------- ----------------- --------
YEAR ENDED DECEMBER 31, 1994
LIFE INSURANCE IN FORCE $136,929 $87,553 $35,016 $84,392 41.5%
PREMIUMS AND OTHER CONSIDERATIONS
Individual Life and Annuity $448 $71 $106 $483 21.9%
Asset Management Services 39 0 0 39 0.0%
Specialty Insurance Operations 521 140 188 569 33.0%
Accident and Health 308 304 5 9 55.6%
-------- ----------------- ----------------- --------
TOTAL $1,316 $515 $299 $1,100 27.2%
-------- ----------------- ----------------- --------
-------- ----------------- ----------------- --------
YEAR ENDED DECEMBER 31, 1993
LIFE INSURANCE IN FORCE $93,099 $71,415 $27,067 $48,751 55.5%
PREMIUMS AND OTHER CONSIDERATIONS
Individual Life and Annuity $417 $85 $91 $423 21.5%
Asset Management Services 25 0 0 25 0.0%
Specialty Insurance Operations 386 97 0 289 0.0%
Accident and Health 307 299 2 10 20.0%
-------- ----------------- ----------------- --------
TOTAL $1,135 $481 $93 $747 12.4%
-------- ----------------- ----------------- --------
-------- ----------------- ----------------- --------
</TABLE>
S-3
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
(b) (1) The resolution authorizing the Separate Account is
incorporated by reference to Pre-Effective Amendment No. 2,
to the Registration Statement File No. 33-59541, dated
December 29, 1995.
(2) Not applicable. Hartford Life maintains custody of all assets.
(3) (a) Principal Underwriting Agreement is incorporated herein.
(3) (b) Form of Sales Agreement is incorporated herein.
(4) Form of Group Variable Annuity Contract is incorporated by
reference as stated above.
(5) Form of the Application is incorporated by reference as stated
above.
(6) (a) Restated Certificate of Incorporation of Hartford Life
Insurance Company is incorporated by reference as stated
above.
Bylaws of Hartford Life Insurance Company are incorporated
by reference as stated above.
(7) Not applicable.
(8) Participation Agreement is incorporated by reference as stated
above.
(9) Legal Opinion and consent of counsel is incorporated herein.
(10) Consent of Arthur Andersen LLP is incorporated herein.
(11) No financial statements are omitted.
(12) Not applicable.
<PAGE>
-2-
(13) Not applicable.
(14) A financial data schedule is incorporated herein.
Item 25. Directors and Officers of the Depositor
Louis J. Abdou Vice President
Wendell J. Bossen Vice President
Gregory A. Boyko Vice President
Peter W. Cummins Vice President
Ann M. deRaismes Vice President
Timothy M. Fitch Vice President
Donald R. Frahm Chairman & CEO, Director
Bruce D. Gardner Vice President, Director
Joseph H. Gareau Executive Vice President & Chief
Investment Officer, Director
J. Richard Garrett Vice President & Treasurer
John P. Ginnetti Executive Vice President
Lynda Godkin Associate General Counsel & Corporate
Secretary
Lois W. Grady Vice President
David A. Hall Senior Vice President & Actuary
Joseph Kanarek Vice President
Robert A. Kerzner Vice President
<PAGE>
-3-
Kevin J. Kirk Vice President
Andrew W. Kohnke Vice President
Stephen M. Maher Vice President & Actuary
William B. Malchodi, Jr. Vice President & Director of Taxes
Thomas M. Marra Executive Vice President, Director
Robert F. Nolan Vice President
Joseph J. Noto Vice President
Leonard E. Odell, Jr. Senior Vice President, Director
Michael C. O'Halloran Vice President & Associate General Counsel
Craig R. Raymond Vice President & Chief Actuary
Lowndes A. Smith President & Chief Operating Officer,
Director
Edward J. Sweeney Vice President
James E. Trimble Vice President & Actuary
Raymond P. Welnicki Senior Vice President, Director
Walter C. Welsh Vice President
James T. Westervelt Senior Vice President & Group Comptroller
Lizabeth H. Zlatkus Vice President
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Exhibit 26 is filed herewith.
<PAGE>
-4-
Item 27. Number of Contract Owners
As of December 31, 1995, there were _____ Contract Owners of qualified
contracts and _____ Contract Owners of non-qualified Contracts.
Item 28. Indemnification
Under Section 33-320a of the Connecticut General Statutes, the
Registrant must indemnify a director or officer against judgments,
fines, penalties, amounts paid in settlement and reasonable
expenses, including attorneys' fees, for actions brought or
threatened to be brought against him in his capacity as a director
or officer when it is determined by certain disinterested parties
that he acted in good faith and in a manner he reasonably believed
to be in the best interests of the Registrant. In any criminal
action or proceeding, it also must be determined that the director
or officer had no reason to believe his conduct was unlawful. The
director or officer must also be indemnified when he is successful
on the merits in the defense of a proceeding or in circumstances
where a court determines that he is fairly and reasonably entitled
to be indemnified, and the court approves the amount. In
shareholder derivative suits, the director or officer must be
finally adjudged not to have breached his duty to the Registrant
or a court must determine that he is fairly and reasonably
entitled to be indemnified and must approve the amount. In a
claim based upon the director's or officer's purchase or sale of
the Registrant's securities, the director of officer may obtain
indemnification only if a court determines that, in view of all
the circumstances, he is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall determine.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-320a.
The directors and officers of Hartford Life and Hartford
Securities Distribution Company, Inc. ("HSD") are covered under a
directors and officers liability insurance policy issued to ITT
Hartford Insurance Group, Inc. and its subsidiaries. Such policy
will reimburse the Registrant for any payments that it shall make
to directors and officers pursuant to law and will, subject to
certain exclusions contained in the policy, further pay any other
costs, charges and expenses and settlements and judgments arising
from any proceeding involving any director or officer of the
Registrant in his past or present capacity as such, and for which
he may be liable, except as to any liabilities arising from acts
that are deemed to be uninsurable.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant
<PAGE>
-5-
to the foregoing provisions, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriters
(a) HESCO acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company -
Separate Account One
Hartford Life Insurance Company -
Separate Account Two
Hartford Life Insurance Company -
Separate Account Two (DC Variable Account I)
Hartford Life Insurance Company -
Separate Account Two (DC Variable Account II)
Hartford Life Insurance Company -
Separate Account Two (QP Variable Account)
Hartford Life Insurance Company -
Separate Account Two (Variable Account "A")
Hartford Life Insurance Company -
Separate Account Two (NQ Variable Account)
Hartford Life Insurance Company -
Putnam Capital Manager Trust Separate Account
Hartford Life Insurance Company -
<PAGE>
-6-
Separate Account Three
Hartford Life Insurance Company -
Separate Account Five
ITT Hartford Life and Annuity Insurance Company -
Separate Account One
ITT Hartford Life and Annuity Insurance Company -
Putnam Capital Manager Trust Separate Account Two
ITT Hartford Life and Annuity Insurance Company -
Separate Account Three
ITT Hartford Life and Annuity Insurance Company -
Separate Account Five
ITT Hartford Life and Annuity Insurance Company -
Separate Account Six
(b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
------------------ ---------------------
Donald E. Waggaman, Jr. Treasurer
Bruce D. Gardner Secretary
George R. Jay Controller
Lowndes A. Smith President
Item 30. Location of Accounts and Records
Accounts and records are maintained by Hartford Life.
Item 31. Management Services
None
<PAGE>
-7-
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure
that the audited financial statements in the registration statement
are never more than 16 months old so long as payments under the
variable annuity contracts may be accepted.
(b) The Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space
that an applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written communication
affixed to or included in the Prospectus that the applicant can remove
to send for a Statement of Additional Information.
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to be
made available under this Form promptly upon written or oral request.
The Registrant is relying on the no-action letter issued by the Division of
Investment Management to American Council of Life Insurance, Ref. No. IP-6-88,
November 28, 1988. The Registrant has complied with the four provisions of the
no-action letter.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY, INC.
AND
HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY, INC.
POWER OF ATTORNEY
Donald R. Frahm
Bruce D. Gardner
Joseph H. Gareau
John P. Ginnetti
Thomas M. Marra
Leonard E. Odell, Jr.
Lowndes A. Smith
Raymond P. Welnicki
Lizabeth H. Zlatkus
do hereby jointly and severally authorize Lynda Godkin and/or Scott K.
Richardson to sign as their agent, any Registration Statement, pre-effective
amendment, post-effective amendment and any application for exemptive relief of
the Hartford Life Insurance Company, Inc. and Hartford Life and Accident
Insurance Company, Inc. under the Securities Act of 1933 and/or the Investment
Company Act of 1940.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
/s/ Donald R. Frahm Dated: 10/19/95
- ----------------------------------- ---------------------
Donald R. Frahm
/s/ Bruce D. Gardner Dated: 10/19/95
- ----------------------------------- ---------------------
Bruce D. Gardner
/s/ Joseph H. Gareau Dated: 10/19/95
- ----------------------------------- ---------------------
Joseph H. Gareau
/s/ John P. Ginnetti Dated: 10/26/95
- ----------------------------------- ---------------------
John P. Ginnetti
/s/ Thomas M. Marra Dated: 10/19/95
- ----------------------------------- ---------------------
Thomas M. Marra
/s/ Leonard E. Odell, Jr. Dated: 10/20/95
- ----------------------------------- ---------------------
Leonard E. Odell, Jr.
/s/ Lowndes A. Smith Dated: 10/19/95
- ----------------------------------- ---------------------
Lowndes A. Smith
<PAGE>
/s/ Raymond P. Welnicki Dated: 10/24/95
- ----------------------------------- ---------------------
Raymond P. Welnicki
/s/ Lizabeth H. Zlatkus Dated: 10/20/95
- ----------------------------------- ---------------------
Lizabeth H. Zlatkus
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and duly caused this Registration Statement to be
signed on its behalf, in the City of Hartford, and State of Connecticut on
this 15 day of APRIL, 1996.
HARTFORD LIFE INSURANCE COMPANY -
SEPARATE ACCOUNT TWO (DC VARIABLE ACCOUNT II)
(Registrant)
*By: /s/ John P. Ginnetti *By: /s/ Lynda Godkin
-------------------------------------------- --------------------------
John P. Ginnetti, Executive Vice President Lynda Godkin
Attorney-in-Fact
HARTFORD LIFE INSURANCE COMPANY
(Depositor)
*By: /s/ John P. Ginnetti
--------------------------------------------
John P. Ginnetti, Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons and in the
capacity and on the date indicated.
Donald R. Frahm, Chairman and
Chief Executive Officer, Director *
Bruce D. Gardner, Vice President,
Director *
Joseph H. Gareau, Executive Vice
President and Chief Investment
Officer, Director *
John P. Ginnetti, Executive Vice
President, Director *
Thomas M. Marra, Executive Vice *By: /s/ Lynda Godkin
President, Director * --------------------------
Lynda Godkin
Leonard E. Odell, Jr., Senior Attorney-In-Fact
Vice President, Director *
Lowndes A. Smith, President,
Chief Operating Officer, Director * Dated: April 15, 1996
------------------------
Raymond P. Welnicki, Senior Vice
President, Director *
Lizabeth H. Zlatkus, Vice President
Director*
33-59541
<PAGE>
PRINCIPAL UNDERWRITER AGREEMENT
THIS AGREEMENT, dated as of the June 26, 1995, made by and between HARTFORD LIFE
INSURANCE COMPANY ("HLIC" or the "Sponsor"), a corporation organized and
existing under the laws of the State of Connecticut, and HARTFORD SECURITIES
DISTRIBUTION COMPANY, INC. ("HSD"), a corporation organized and existing under
the laws of the State of Connecticut,
WITNESSETH:
WHEREAS, the Board of Directors of HLIC has made provision for the establishment
of separate accounts within HLIC in accordance with the laws of the State of
Connecticut, which separate accounts were organized and are established and
registered as unit investment trust type investment companies with the
Securities and Exchange Commission under the Investment Company Act of 1940
("1940 Act"), as amended, and which are designated Hartford Life Insurance
Company DC Variable Account -I, Hartford Life Insurance Company Separate Account
Two (DC Variable Account-II), Hartford Life Insurance Company Separate Account
Two (Variable Account A), Hartford Life Insurance Company Separate Account Two
(QP Variable Account), and Hartford Life Insurance Company Separate Account Two
(NQ Variable Account), (referred to collectively as the "Separate Accounts");
and
WHEREAS, HSD offers to the public a certain Group Variable Annuity Contracts
(the "Contract") issued by HLIC with respect to the UIT units of interest
thereunder which are registered under the Securities Act of 1933 ("1933 Act"),
as amended; and
WHEREAS, HSD has previously agreed to act as distributor in connection with
offers and sales of the Contract under the terms and conditions set forth in
this Principal Underwriter Agreement.
NOW THEREFORE, in consideration of the mutual agreements made herein, HLIC and
HSD agree as follows:
I.
HSD'S DUTIES
1. HSD, as successor principal underwriter to Hartford Equity Sales Company,
Inc. for the Contract, will use its best efforts to effect offers and sales
of the Contract through broker-dealers that are members of the National
Association of Securities Dealers, Inc. and whose registered
representatives are duly licensed as insurance agents of HLIC. HSD is
responsible for compliance with all applicable requirements of the 1933
Act, as amended, the Securities Exchange Act of 1934 ("1934 Act"), as
amended, and the 1940 Act, as amended, and the rules and regulations
relating to the sales and distribution of the Contract, the need for which
arises out of its duties as principal underwriter of said Contract and
relating to the creation of the UIT.
<PAGE>
2. HSD agrees that it will not use any prospectus, sales literature, or any
other printed matter or material or offer for sale or sell the Contract if
any of the foregoing in any way represent the duties, obligations, or
liabilities of HLIC as being greater than, or different from, such duties,
obligations and liabilities as are set forth in this Agreement, as it may
be amended from time to time.
3. HSD agrees that it will utilize the then currently effective prospectus
relating to the UIT's Contracts in connection with its selling efforts.
As to the other types of sales materials, HSD agrees that it will use only
sales materials which conform to the requirements of federal and state
insurance laws and regulations and which have been filed, where necessary,
with the appropriate regulatory authorities.
4. HSD agrees that it or its duly designated agent shall maintain records of
the name and address of, and the securities issued by the UIT and held by,
every holder of any security issued pursuant to this Agreement, as required
by the Section 26(a)(4) of the 1940 Act, as amended.
5. HSD's services pursuant to this Agreement shall not be deemed to be
exclusive, and it may render similar services and act as an underwriter,
distributor, or dealer for other investment companies in the offering of
their shares.
6. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations and duties hereunder on the part of
HSD, HSD shall not be subject to liability under a Contract for any act or
omission in the course, or connected with, rendering services hereunder.
II.
1. The UIT reserves the right at any time to suspend or limit the public
offering of the Contracts upon 30 days' written notice to HSD, except where
the notice period may be shortened because of legal action taken by any
regulatory agency.
2. The UIT agrees to advice HSD immediately:
(a) Of any request by the Securities and Exchange Commission for amendment
of its 1933 Act registration statement or for additional information;
(b) Of the issuance by the Securities and Exchange Commission of any stop
order suspending the effectiveness of the 1933 Act registration
statement relating to units of interest issued with respect to the UIT
or of the initiation of any proceedings for that purpose;
<PAGE>
(c) Of the happening of any material event, if known, which makes untrue
any statement in said 1933 Act registration statement or which
requires a change therein in order to make any statement therein not
misleading.
HLIC will furnish to HSD such information with respect to the UIT and the
Contracts in such form and signed by such of its officers and directors and
HSD may reasonably request and will warrant that the statements therein
contained when so signed will be true and correct. HLIC will also furnish,
from time to time, such additional information regarding the UIT's
financial condition as HSD may reasonably request.
III.
COMPENSATION
In accordance with an Expense Reimbursement Agreement between HLIC and HSD, HSD
is obligated to reimburse HSD for all operating expenses associated with the
services provided on behalf of the UIT under this Principal Underwriter
Agreement. No additional compensation is payable in excess of that required
under the Expense Reimbursement Agreement.
IV.
RESIGNATION AND REMOVAL OF PRINCIPAL UNDERWRITER
HSD may resign as a Principal Underwriter hereunder, upon 120 days' prior
written notice to HLIC. However, such resignation shall not become effective
until either the UIT has been completely liquidated and the proceeds of the
liquidation distributed through HLIC to the Contract owners or a successor
Principal Underwriter has been designated and has accepted its duties.
V.
MISCELLANEOUS
1. This Agreement may not be assigned by any of the parties hereto without the
written consent of the other party.
2. All notices and other communications provided for hereunder shall be in
writing and shall be delivered by hand or mailed first class, postage
prepaid, addressed as follows:
(a) If to HLIC - Hartford Life Insurance Company, P.O. Box 2999,
Hartford, Connecticut 06104.
(b) If to HSD - Hartford Securities Distribution Company, Inc., P.O. Box
2999, Hartford, Connecticut 06104.
<PAGE>
or to such other address as HSD or HLIC shall designate by written notice
to the other.
3. This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of which shall be deemed one
instrument, and an executed copy of this Agreement and all amendments
hereto shall be kept on file by the Sponsor and shall be open to inspection
any time during the business hours of the Sponsor.
4. This Agreement shall inure to the benefit of and be binding upon the
successor of the parties hereto.
5. This Agreement shall be construed and governed by and according to the laws
of the State of Connecticut.
6. This Agreement may be amended from time to time by the mutual agreement and
consent of the parties hereto.
7. (a) This Agreement shall become effective June 26, 1995 and shall continue
in effect for a period of two years from that date and, unless sooner
terminated in accordance with 7(b) below, shall continue in effect
from year to year thereafter provided that its continuance is
specifically approved at least annually by a majority of the members
of the Board of Directors of HLIC.
(b) This Agreement (1) may be terminated at any time, without the payment
of any penalty, either by a vote of a majority of the members of the
Board of Directors of HLIC on 60 days' prior written notice to HSD;
(2) shall immediately terminate in the event of its assignment and (3)
may be terminated by HSD on 60 days' prior written notice to HLIC, but
such termination will not be effective until HLIC shall have an
agreement with one or more persons to act as successor principal
underwriter of the Contracts. HSD hereby agrees that it will continue
to act as successor principal underwriter until its successor or
successors assume such undertaking.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
(Seal) HARTFORD LIFE INSURANCE COMPANY
BY: /s/ John P. Ginnetti
--------------------
John P. Ginnetti
Executive Vice President
Attest: HARTFORD SECURITIES DISTRIBUTION
COMPANY, INC.
/s/ Lynda Godkin BY: /s/ George Jay
- ---------------- --------------
Lynda Godkin George Jay
Secretary Controller
<PAGE>
BROKER-DEALER SALES AND
SUPERVISION AGREEMENT
This Broker-Dealer Sales and Supervision Agreement ("Agreement")
dated ____________________ is made by and between Hartford Life Insurance
Company and ITT Hartford Life and Annuity Insurance Company (referred to
collectively as "Companies"), Hartford Securities Distribution Company, Inc.
("Distributor"), a broker-dealer registered with the Securities and Exchange
Commission ("SEC") under the Securities and Exchange Act of 1934 ("1934 Act")
and a member of the National Association of Securities Dealers, Inc. ("NASD")
and __________________________________, who is also a broker-dealer registered
with the SEC under the 1934 Act and a member of the NASD ("Broker-Dealer"), and
any and all undersigned insurance agency affiliates ("Affiliates") of Broker-
Dealer.
WHEREAS, Companies offer certain variable life insurance policies and variable
and modified guaranteed annuity contracts which are deemed to be securities
under the Securities Act of 1933 (the "Registered Products"); and
WHEREAS, Companies wish to appoint the Broker-Dealer and Affiliates as agents of
the Companies for the solicitation and procurement of applications for
Registered Products; and
WHEREAS, Distributor is the principal underwriter of the Registered Products;
and
WHEREAS, Distributor anticipates having registered representatives who are
associated with Broker-Dealer ("Registered Representatives"), who are NASD
registered and are duly licensed under applicable state insurance law and
appointed as life insurance agents of Companies solicit and sell the Registered
Products; and
WHEREAS, Distributor acknowledges that the Broker-Dealer will provide certain
supervisory and administrative services to Registered Representatives who are
associated with the Broker-Dealer in connection with the solicitation, service
and sale of the Registered Products; and
WHEREAS, Broker-Dealer agrees to provide the aforementioned supervisory services
to its Registered Representatives who have been appointed by the Companies to
sell the Registered Products.
NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties agree to the following:
I. APPOINTMENT OF THE BROKER-DEALER
The Companies hereby appoint Broker-Dealer as an agent of the Companies for
the solicitation and procurement of applications for the Registered
Products offered by the Companies, as outlined in Exhibit A attached
herein, in all states in which the Companies are authorized to do business
and in which Broker-Dealer or any Affiliates are properly licensed.
Distributor hereby authorizes Broker-Dealer under the securities laws to
supervise Registered Representatives in connection with the solicitation,
service and sale of the Registered Products.
II. AUTHORITY OF THE BROKER-DEALER
<PAGE>
Broker-Dealer has the authority to represent Distributor and Companies only
to the extent expressly granted in this Agreement. Broker-Dealer and any
Registered Representatives shall not hold themselves out to be employees of
Companies or Distributor in any dealings with the public. Broker-Dealer
and any Registered Representatives shall be independent contractors as to
Distributor or Companies. Nothing contained herein is intended to create a
relationship of employer and employee between Broker-Dealer and Distributor
or Companies or between Registered Representatives and Distributor or
Companies.
III. BROKER-DEALER REPRESENTATION
Broker-Dealer represents that it is a registered broker-dealer under the
1934 Act, a member in good standing of the NASD, and is registered as a
broker-dealer under state law to the extent necessary to perform the duties
described in this Agreement. Broker-Dealer represents that its Registered
Representatives, who will be soliciting applications for the Registered
Products, will be duly registered representatives associated with Broker-
Dealer and that they will be representatives in good standing with
accreditation as required by the NASD to sell the Registered Products.
Broker-Dealer agrees to abide by all rules and regulations of the NASD,
including its Rules of Fair Practice, and to comply with all applicable
state and federal laws and the rules and regulations of authorized
regulatory agencies affecting the sale of the Registered Products.
IV. BROKER-DEALER OBLIGATIONS
(a) TRAINING AND SUPERVISION
Broker-Dealer has full responsibility for the training and
supervision of all Registered Representatives associated with
Broker-Dealer and any other persons who are engaged directly or
indirectly in the offer or sale of the Registered Products. Broker-
Dealer shall, during the term of this Agreement, establish and
implement reasonable procedures for periodic inspection and
supervision of sales practices of its Registered Representatives.
If a Registered Representative ceases to be a Registered
Representative of Broker-Dealer, is disqualified for continued
registration or has their registration suspended by the NASD or
otherwise fails to meet the rules and standards imposed by Broker-
Dealer, Broker-Dealer shall immediately notify such Registered
Representative that he or she is no longer authorized to solicit
applications, on behalf of the Companies, for the sale of Registered
Products. Broker-Dealer shall immediately notify Distributor of
such termination or suspension.
(b) SOLICITATION
Broker-Dealer agrees to supervise its Registered Representatives so
that they will only solicit applications in states where the
Registered Products are approved for sale in accordance with
applicable state and federal laws. Broker-Dealer shall be notified
by Companies or Distributor of the availability of the Registered
Products in each state.
(c) NO CHURNING
Broker-Dealer and any Registered Representatives shall not make any
misrepresentation or incomplete comparison of products for the
purpose of inducing a policyholder to lapse, forfeit or surrender
its insurance in favor of purchasing a Registered Product.
(d) PROSPECTUS DELIVERY AND SUITABILITY REQUIREMENTS
Broker-Dealer shall ensure that its Registered Representatives
comply with the prospectus delivery requirements under the
Securities Act of 1933. In addition, Broker-Dealer shall ensure
that its Registered Representatives shall not make recommendations
to an applicant to purchase a Registered Product in the absence of
reasonable grounds to believe that the
2
<PAGE>
purchase is suitable for such applicant, as outlined in the
suitability requirements of the 1934 Act and the NASD Rules of Fair
Practice. Broker-Dealer shall ensure that each application
obtained by its Registered Representatives shall bear evidence of
approval by one of its principals indicating that the application
has been reviewed for suitability.
(e) PROMOTIONAL MATERIAL
Broker-Dealer and its Registered Representatives are not authorized
to provide any information or make any representation in connection
with this Agreement or the solicitation of the Registered Products
other than those contained in the prospectus or other promotional
material produced or authorized by Companies or Distributor.
Broker-Dealer agrees that if it develops any promotional material
for sales, training, explanatory or other purposes in connection
with the solicitation of applications for Registered Products,
including generic advertising and/or training materials which may be
used in connection with the sale of Registered Products, it will
obtain the prior written consent of Distributor, and where
appropriate, approval of Companies, such approval not to be
unreasonably withheld.
(f) RECORD KEEPING
Broker-Dealer is responsible for maintaining the records of its
Registered Representatives. Broker-Dealer shall maintain such other
records as are required of it by applicable laws and regulations.
The books, accounts and records maintained by Broker-Dealer that
relate to the sale of the Registered Products, or dealings with the
Companies, Distributor and/or Broker-Dealer shall be maintained so
as to clearly and accurately disclose the nature and details of each
transaction.
Broker-Dealer acknowledges that all the records maintained by
Broker-Dealer relating to the solicitation, service or sale of the
Registered Products subject to this Agreement, including but not
limited to applications, authorization cards, complaint files and
suitability reviews, shall be available to Companies and Distributor
upon request during normal business hours. Companies and
Distributor may retain copies of any such records which Companies
and Distributor, in their discretion, deems necessary or desirable
to keep.
(g) REFUND OF COMPENSATION
Broker-Dealer agrees to repay Companies the total amount of any
compensation which may have been paid to it within thirty (30)
business days of notice of the request for such refund should
Companies for any reason return any premium on a Registered Product
which was solicited by a Registered Representative of Broker-Dealer.
(h) PREMIUM COLLECTION
Broker-Dealer only has the authority to collect initial premiums
unless specifically set forth in the applicable commission schedule.
Unless previously authorized by Distributor, neither Broker-Dealer
nor any of its Registered Representatives shall have any right to
withhold or deduct any part of any premium it shall receive for
purposes of payment of commission or otherwise.
V. COMPANIES AND/OR DISTRIBUTOR OBLIGATIONS
(a) PROSPECTUS/PROMOTIONAL MATERIAL
Companies and/or Distributor will provide Broker-Dealer with
reasonable quantities of the currently effective prospectus for the
Registered Products and appropriate sales promotional
3
<PAGE>
material which has been filed with the NASD, and applicable state
insurance departments.
(b) COMPENSATION
Distributor will pay Broker-Dealer as full compensation for all
services rendered by Broker-Dealer under this Agreement, commissions
and/or service fees in the amounts, in the manner and for the period
of time as set forth in the Commission Schedules attached to this
Agreement or subsequently made a part hereof, and which are in
effect at the time such Registered Products are sold. The manner of
commission payments (I.E. fronted or trail) is not subject to change
after the effective date of a contract for which the compensation is
payable.
Distributor or Companies may change the Commission Schedules
attached to this Agreement at any time. Such change shall become
effective only when Distributor or Companies provide the Broker-
Dealer with written notice of the change. No such change shall
affect any contracts issued upon applications received by Companies
at Companies' Home Office prior to the effective date of such
change.
Distributor agrees to identify to Broker-Dealer for each such
payment, the name of the Registered Representative of Broker-Dealer
who solicited each contract covered by the payment. Distributor
will not compensate Broker-Dealer for any Registered Product which
is tendered for redemption after acceptance of the application. Any
chargebacks will be assessed against the Broker-Dealer of record at
the time of the redemption.
Distributor will only compensate Broker-Dealer or Affiliates, as
outlined below, for those applications accepted by Companies, and
only after receipt by Companies at Companies' Home Office or at such
other location as Companies may designate from time to time for its
various lines of business, of the required premium and compliance by
Broker-Dealer with any outstanding contract and prospectus delivery
requirements.
In the event that this Agreement terminates for fraudulent
activities or due to a material breach by the Broker-Dealer,
Distributor will only pay to Broker-Dealer or Affiliate commissions
or other compensation earned prior to discovery of events requiring
termination. No further commissions or other compensation shall
thereafter be payable.
(c) COMPENSATION PAYABLE TO AFFILIATES
If Broker-Dealer is unable to comply with state licensing
requirements because of a legal impediment which prohibits a non-
domiciliary corporation from becoming a licensed insurance agency or
prohibits non-resident ownership of a licensed insurance agency,
Distributor agrees to pay compensation to Broker-Dealer's
contractually affiliated insurance agency, a wholly-owned life
agency affiliate of Broker-Dealer, or a Registered Representative or
principal of Broker-Dealer who is properly state licensed. As
appropriate, any reference in this Agreement to Broker-Dealer shall
apply equally to such Affiliate. Distributor agrees to pay
compensation to an Affiliate subject to Affiliates agreement to
comply with the requirements of Exhibit B, attached hereto.
VI. TERMINATION
(a) This Agreement may be terminated by any party by giving thirty (30)
days' notice in writing to the other party.
(b) Such notice of termination shall be mailed to the last known address
of Broker-Dealer appearing on Companies' records, or in the event of
termination by Broker-Dealer, to the Home Office of Companies at
P.O. Box 2999, Hartford, Connecticut 06104-2999.
4
<PAGE>
(c) Such notice shall be an effective notice of termination of this
Agreement as of the time the notice is deposited in the United
States mail or the time of actual receipt of such notice if
delivered by means other than mail.
(d) This Agreement shall automatically terminate without notice upon the
occurrence of any of the events set forth below:
(1) Upon the bankruptcy or dissolution of Broker-Dealer.
(2) When and if Broker-Dealer commits fraud or gross negligence in the
performance of any duties imposed upon Broker-Dealer by this
Agreement or wrongfully withholds or misappropriates, for Broker-
Dealer's own use, funds of Companies, its policyholders or
applicants.
(3) When and if Broker-Dealer materially breaches this Agreement or
materially violates state insurance or Federal securities laws and
administrative regulations of a state in which Broker-Dealer
transacts business.
(4) When and if Broker-Dealer fails to obtain renewal of a necessary
license in any jurisdiction, but only as to that jurisdiction.
(e) The parties agree that on termination of this Agreement, any
outstanding indebtedness to Companies shall become immediately due
and payable.
VII. GENERAL PROVISIONS
(a) COMPLAINTS AND INVESTIGATIONS
Broker-Dealer shall cooperate with Distributor and Companies in the
investigation and settlement of all complaints or claims against
Broker-Dealer and/or Distributor or Companies relating to the
solicitation or sale of the Registered Products under this
Agreement. Broker-Dealer, Distributor and Companies each shall
promptly forward to the other any complaint, notice of claim or
other relevant information which may come into either one's
possession. Broker-Dealer, Distributor and Companies agree to
cooperate fully in any investigation or proceeding in order to
ascertain whether Broker-Dealer's, Distributor's or Companies'
procedures with respect to solicitation or servicing is consistent
with any applicable law or regulation.
In the event any legal process or notice is served on Broker-Dealer
in a suit or proceeding against Distributor or Companies, Broker-
Dealer shall forward forthwith such process or notice to Companies
at its Home Office in Hartford, Connecticut, by certified mail.
(b) WAIVER
The failure of Distributor or Companies to enforce any provisions of
this Agreement shall not constitute a waiver of any such provision.
The past waiver of a provision by Distributor or Companies shall not
constitute a course of conduct or a waiver in the future of that
same provision.
(c) INDEMNIFICATION
Broker-Dealer shall indemnify and hold Distributor and Companies
harmless from any liability, loss or expense sustained by Companies
or the Distributor (including reasonable attorney fees) on account
of any acts or omissions by Broker-Dealer or persons employed or
appointed by Broker-Dealer, except to the extent Companies' or
Distributor's acts or omissions caused such
5
<PAGE>
liability Indemnification by Broker-Dealer is subject to the
conditions that Distributor or Companies promptly notify Broker-
Dealer of any claim or suit made against Distributor or Companies,
and that Distributor or Companies allow Broker-Dealer to make such
investigation, settlement, or defense thereof as Broker-Dealer deems
prudent. Broker-Dealer expressly authorizes Companies to charge
against all compensation due or to become due to Broker-Dealer under
this Agreement any monies paid or liabilities incurred by Companies
under this Indemnification provision.
Distributor and Companies shall indemnify and hold Broker-Dealer
harmless from any liability, loss or expense sustained by the
Broker-Dealer (including reasonable attorney fees) on account of any
acts or omissions by Distributor or Companies, except to the extent
Broker-Dealer's acts or omissions caused such liability.
Indemnification by Distributor or Companies is subject to the
condition that Broker-Dealer promptly notify Distributor or
Companies of any claim or suit made against Broker-Dealer, and that
Broker-Dealer allow Distributor or Companies to make such
investigation, settlement, or defense thereof as Distributor or
Companies deems prudent.
(d) ASSIGNMENT
No assignment of this Agreement, or commissions payable hereunder,
shall be valid unless authorized in writing by Distributor. Every
assignment shall be subject to any indebtedness and obligation of
Broker-Dealer that may be due or become due to Companies and any
applicable state insurance regulations pertaining to such
assignments.
(e) OFFSET
Companies may at any time deduct, from any monies due under this
Agreement, every indebtedness or obligation of Broker-Dealer to
Companies or to any of its affiliates.
(f) CONFIDENTIALITY
Companies, Distributor and Broker-Dealer agree that all facts or
information received by any party related to a contract owner shall
remain confidential, unless such facts or information is required to
be disclosed by any regulatory authority or court of competent
jurisdiction.
(g) PRIOR AGREEMENTS
This Agreement terminates all previous agreements, if any, between
Companies, Distributor and Broker-Dealer. However, the execution of
this Agreement shall not affect any obligations which have already
accrued under any prior agreement.
(h) CHOICE OF LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut.
By executing this Broker-Dealer Sales and Supervision Agreement Specifications
Page, Broker-Dealer acknowledges that it has read this Agreement in its entirety
and is in agreement with the terms and conditions outlining the rights of
Distributor, Companies and Broker-Dealer and Affiliates under this Agreement.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement to be
effective as set forth above, upon the later of the execution date below or
approval of Distributor's registration by all appropriate state securities
commissions.
6
<PAGE>
BROKER-DEALER HARTFORD SECURITIES DISTRIBUTION
COMPANY INC.
By: By:
Title: Title:
Date: Date:
AFFILIATE (IF APPLICABLE) HARTFORD LIFE INSURANCE COMPANY
By: By:
Title: Title:
Date: Date:
ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
By:
Title:
Date:
7
<PAGE>
EXHIBIT B
In accordance with Section V.(c) of the Broker-Dealer-Dealer Sales and
Supervision Agreement, no compensation is payable unless Broker-Dealer and
Registered Representative have first complied with all applicable state
insurance laws, rules and regulations. Distributor must ensure that any Broker-
Dealer with whom Distributor intends to enter into an Agreement and any
Registered Representatives meet the licensing and registration requirements of
the state(s) Broker-Dealer operates in and the NASD.
Companies are required by the Insurance Department in all 50 states to pay
compensation only to individuals and entities that are properly insurance
licensed and appointed. For registered products, Distributor must also comply
with NASD regulations that require Distributor to pay compensation to an NASD
registered Broker-Dealer. Distributor must comply with both state and NASD
requirements.
Distributor requires confirmation that Broker-Dealer holds current state
insurance licenses or markets insurance products through a contractual affiliate
or wholly owned life agency, which is properly insurance licensed. If Broker-
Dealer is properly state licensed then compensation may be paid to Broker-Dealer
in compliance with both state and NASD requirements.
If Broker-Dealer is not state insurance licensed and relies on the licensing of
a contractual affiliate or wholly owned life agency, the SEC has issued a number
of letters indicating that, under specific limited circumstances, it will take
"no action" against insurers (Distributor) paying compensation on registered
products to Broker-Dealer's contractual affiliate or wholly owned life agency.
At the request of Broker-Dealer, Distributor will provide copies of several of
these letters as well as a summary of their requirements.
If Broker-Dealer intends to rely on one of these "no-action" letters, legal
counsel for Broker-Dealer must confirm to Distributor in writing that all of the
circumstances of any one of the SEC no-action letters are applicable. Broker-
Dealer's counsel must summarize each point upon which the no-action relief was
granted and represent that Broker-Dealer's method of operation is identical or
meets the same criteria. Broker-Dealer's counsel must also confirm that, to the
best of counsel's knowledge, the SEC has not rescinded or modified its no-action
position since the letter was released.
The Broker-Dealer Sales and Supervision Agreement will not be finalized and no
new applications for registered products will be accepted or no new compensation
will be payable unless the appropriate proof of state licensing or no-action
relief is confirmed. In addition to a letter from Broker-Dealer's counsel,
copies of the following documentation is required:
-- life insurance licenses for all states in which Broker-Dealer holds
these licenses and intends to operate and/or;
-- life insurance licenses for any contractual affiliate or wholly owned
life agency; and
-- the SEC No-Action Letter that will be relied upon.
If you have any questions regarding these matters, please contact your Life
Licensing and Contracting representative.
8
<PAGE>
March 15, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: SEPARATE ACCOUNT TWO ("SEPARATE ACCOUNT")
HARTFORD LIFE INSURANCE COMPANY ("COMPANY")
FILE NO. 33-59541
Dear Sir/Madam:
In my capacity as Associate General Counsel of the Company, I have supervised
the establishment of the Separate Account by the Board of Directors of the
Company as a separate account for assets applicable to Contracts offered by the
Company pursuant to Connecticut law. I have participated in the preparation of
the registration statement for the Separate Account on Form N-4 under the
Securities Act of 1933 and the Investment Company Act of 1940 with respect to
the Contracts.
I am of the following opinion:
1. The Separate Account is a separate account of the Company validly existing
pursuant to Connecticut law and the regulations issued thereunder.
2. The assets held in the Separate Account are not chargeable with liabilities
arising out of any other business the Company may conduct.
3. The Contracts are legally issued and represent binding obligations of the
Company.
In arriving at the foregoing opinion, I have made such examination of the law
and examined such records and other documents as in my opinion as are necessary
or appropriate.
I hereby consent to the filing of this opinion as an exhibit to the registration
statement under the Securities Act of 1933.
Sincerely,
/s/ Lynda Godkin
Lynda Godkin
Associate General Counsel & Secretary
<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
Registration Statement File No. 33-59541 for Hartford Life Insurance Company
Separate Account Two (DC Variable Account II) on Form N-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 24, 1996
<PAGE>
EXHIBIT 26
PERSONS CONTROLLED BY OR UNDER COMMON
CONTROL WITH THE DEPOSITOR OR REGISTRANT
ITT Hartford Group, Inc..
(Delaware)
|
Hartford Fire Insurance Company
(Connecticut)
|
Hartford Accident and Indemnity Company
(Connecticut)
|
Hartford Life and Accident Insurance Company
(Connecticut)
|
|
|
|
|
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alpine Life Hartford Financial Hartford Life American Maturity
Insurance Company Services Life Insurance Company Life Insurance
(New Jersey) Insurance Co. (Connecticut) Company
(Connecticut) | (Connecticut)
|
|
|
|
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
ITT Hartford ITT Hartford The Hartford Hartford Hartford Securities
Life and Annuity International Life Investment Equity Sales Distribution
Insurance Company Reassurance Corp Management Co. Company, Inc. Company, Inc.
(Connecticut) (Connecticut) (Connecticut) (Connecticut) (Connecticut)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 4,711,275,534
<INVESTMENTS-AT-VALUE> 5,644,881,814
<RECEIVABLES> 58,894,426
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,703,576,240
<PAYABLE-FOR-SECURITIES> 58,684,625
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 58,684,625
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 5,644,881,615
<DIVIDEND-INCOME> 137,515,595
<INTEREST-INCOME> 0
<OTHER-INCOME> 85,404,491
<EXPENSES-NET> 59,303,381
<NET-INVESTMENT-INCOME> 88,212,304
<REALIZED-GAINS-CURRENT> 6,207,978
<APPREC-INCREASE-CURRENT> 885,550,110
<NET-CHANGE-FROM-OPS> 1,085,374,881
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,522,379,148
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.000
<PER-SHARE-NII> 0.000
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.000
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<PER-SHARE-NAV-END> 0.000
<EXPENSE-RATIO> 0.000
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
